<PAGE>
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):
August 13, 1998 (July 15, 1998)
----------------------
GRANITE BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-19728 13-3458782
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
<PAGE>
Item 1. Changes in Control of Registrant
----------------------------------------
Not Applicable
Item 2. Acquisition and Disposition of Assets
---------------------------------------------
On July 20, 1998, Granite Broadcasting Corporation (together with its
consolidated subsidiaries, the "Company") acquired 100% of the outstanding
stock of Pacific FM Incorporated, a California corporation ("Pacific"),
the owner of KOFY-TV ("KOFY"), the WB affiliated station serving the
San Francisco-Oakland-San Jose, California television market (the "KOFY
Acquisition"). The terms and conditions of the KOFY Acquisition were
determined based upon arms length negotiations between the Company and each
of James J. Gabbert, Michael P. Lincoln, The Michael Lincoln Charitable
Remainder Unitrust and The James J. Gabbert Charitable Remainder Unitrust and
are set forth in (i) that certain Stock Purchase Agreement, dated as of
October 3, 1997, and amended as of July 20, 1998, by and among the Company,
Pacific, James J. Gabbert and Michael P. Lincoln (the "Stock Purchase
Agreement"); (ii) that certain Stock Purchase Agreement, dated as of June 26,
1998, between the Company and The Michael Lincoln Charitable Remainder
Unitrust (the "Lincoln Unitrust Stock Purchase Agreement") and (iii) that
certain Stock Purchase Agreement, dated as of June 26, 1998, between the
Company and The James J. Gabbert Charitable Remainder Unitrust (the "Gabbert
Unitrust Stock Purchase Agreement" and, collectively with the Stock Purchase
Agreement and the Lincoln Unitrust Stock Purchase Agreement, the
"Agreements").
In consideration for the purchase of all the stock of Pacific, the
Company paid $143.8 million in cash, subject to certain adjustments as set forth
in the Agreements. In addition, the Company paid $30.0 million to the principal
shareholders of Pacific for a covenant not to compete in the San
Francisco-Oakland-San Jose television market for a period of five years from the
closing of the KOFY Acquisition.
Upon the closing of the KOFY Acquisition, the Company acquired control
of all of the assets of Pacific, including, but not limited to, all real
property owned or held by Pacific in connection with the business and operations
of KOFY and all broadcasting and other equipment, office furniture, fixtures,
tapes, machinery, office materials and supplies, spare parts, tubes and other
tangible personal property owned, leased or held by Pacific in connection with
the business and operations of KOFY. The Company intends to continue to use
these assets in the manner that such assets were used prior to the KOFY
Acquisition.
The consummation of the KOFY Acquisition was contingent on, among other
things, approval by the Federal Communications Commission ("FCC") and other
customary closing conditions.
2
<PAGE>
In approving the KOFY Acquisition, the FCC granted the Company a nine-month
waiver of its current duopoly rule, enabling the Company to continue to
operate KNTV for nine months after the closing of the KOFY Acquisition. The
Company has filed a petition for reconsideration of this ruling, requesting a
permanent waiver of the duopoly rule or, alternatively, an interim duopoly
waiver conditioned upon the outcome of the FCC's pending television ownership
rulemaking proceeding. Chronicle Publishing Company, licensee of KRON-TV, San
Francisco, California, has filed an opposition to the Company's petition for
reconsideration.
The Stock Purchase Agreement, filed as Exhibit 1 to the Company's
Current Report on Form 8-K, dated and filed with the Securities and Exchange
Commission (the "Commission") on October 17, 1997, and the Lincoln Unitrust
Stock Purchase Agreement and the Gabbert Unitrust Stock Purchase Agreement,
filed as Exhibits 2.3 and 2.4, respectively, to the Company's Current Report on
Form 8-K, dated and filed with the Commission on July 1, 1998, are hereby
incorporated by reference herein. The First Amendment to the Stock Purchase
Agreement, dated as of July 20, 1998, is attached hereto as Exhibit 2.5 and is
hereby incorporated by reference herein.
On July 15, 1998, the Company sold the assets of WWMT-TV, the CBS
affiliated station serving the Grand Rapids-Kalamazoo-Battle Creek, Michigan
television market ("WWMT"), to Freedom Communications, Inc. ("Freedom") for a
purchase price of approximately $150.6 million, subject to certain
adjustments. The terms and conditions of such disposition were negotiated on
an arms length basis and were set forth in that certain Purchase and Sale
Agreement, dated as of February 18, 1998 (the "WWMT Sale Agreement"), and
amended by that certain Purchase and Sale Agreement, dated as of July 15,
1998 (the "July Sale Agreement"), among the Company, certain of the Company's
subsidiaries and Freedom. The assets sold by the Company included, without
limitation, all real property owned or held by the Company and certain of its
subsidiaries in connection with the business and operations of WWMT and all
broadcasting and other equipment, office furniture, fixtures, tapes,
machinery, office materials and supplies, spare parts, tubes and other
tangible personal property owned or held by the Company and its subsidiaries
in connection with the business and operations of WWMT.
Pursuant to the terms and conditions set forth in the July Sale
Agreement, the Company intends to sell substantially all of the assets of
WLAJ-TV, the ABC affiliated station serving the Lansing, Michigan television
market ("WLAJ"), to Freedom for a purchase price of $18.9 million, subject to
certain adjustments. The Company currently operates WLAJ pursuant to a Time
Brokerage Agreement and has an agreement to purchase substantially all of the
assets of WLAJ. The concurrent acquisition and disposition of substantially all
of the assets of WLAJ by the Company is expected to be completed in the third
quarter of 1998.
The WWMT Sale Agreement, filed as Exhibit 1 to the Company's Current
Report on Form 8-K, dated and filed with the Commission on March 2, 1998, is
hereby incorporated by
3
<PAGE>
reference herein. The July Sale Agreement is attached hereto as Exhibit 2.6 and
is hereby incorporated by reference herein.
The Company financed the KOFY Acquisition with proceeds from the sale
of WWMT and approximately $18,000,000 in borrowings under the Company's
Fourth Amended and Restated Credit Agreement, dated as of June 10, 1998, among
the Company, as Borrower, the Lenders listed therein, Bankers Trust Company, as
Administrative Agent, The Bank of New York, as Documentation Agent, and Goldman
Sachs Credit Partners L.P., Union Bank of California, N.A. and ABN AMRO Bank
N.V., as Co-Agents (together with its predecessor, the "Credit Agreement").
The Credit Agreement, filed as Exhibit 4.35 to the Company's Current
Report on Form 8-K, dated and filed with the Commission on July 1, 1998, is
hereby incorporated by reference herein.
Item 3. Bankruptcy or Receivership
----------------------------------
Not Applicable
Item 4. Changes in Registrant's Certifying Accountants
------------------------------------------------------
Not Applicable
Item 5. Other Events
--------------------
Not Applicable
Item 6. Resignation of Registrant's Directors
---------------------------------------------
Not Applicable
Item 7. Financial Statements and Exhibits
-----------------------------------------
A. Financial Statements of Business Acquired.
------------------------------------------
(See following pages)
4
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
KOFY-TV (A Division of Pacific FM Incorporated)
Report of Independent Auditors................................................................. 6
Balance Sheets as of June 30, 1997 and 1996 and March 31, 1998 (unaudited)..................... 7
Statements of Operations for the Years Ended June 30, 1997 and 1996 and
Nine Months Ended March 31, 1998 and 1997 (unaudited)........................................ 8
Statements of Cash Flows for the Years Ended June 30, 1997 and 1996 and
Nine Months Ended March 31, 1998 and 1997 (unaudited)........................................ 9
Notes to Financial Statements.................................................................. 10
</TABLE>
5
<PAGE>
Report of Independent Auditors
The Board of Directors
Pacific FM Incorporated
We have audited the accompanying balance sheets of KOFY-TV, a Division of
Pacific FM Incorporated as of June 30, 1997 and 1996, and the related statements
of operations and accumulated deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company'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 financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KOFY-TV at June 30, 1997 and
1996, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
December 19, 1997
New York, New York
6
<PAGE>
KOFY-TV
(A Division of Pacific FM Incorporated)
Balance Sheets
<TABLE>
<CAPTION>
March 31,
June 30, 1998
1997 1996 (unaudited)
---------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 17,575 $ 33,667 $ 267,000
Accounts receivable, net of allowance for doubtful
accounts 4,248,264 3,416,250 3,762,000
($150,800 in 1997 and $150,000 in 1996)
Due from affiliates 10,895,401 11,154,416 -
Programming rights, including $1,911,243 and $500,725 of
barter in 1997 and 1996, respectively 2,825,746 1,654,576 914,000
Deferred income taxes 318,054 257,041 318,000
Prepaid expenses and other current assets 162,845 279,003 966,000
---------------------------------------------------
Total current assets 18,467,885 16,794,953 6,227,000
Property and equipment, net 1,323,116 1,483,660 1,106,000
Programming rights, less current portion 839,070 1,170,111 2,731,000
Goodwill, net of accumulated amortization of $5,479,902
in 1997 and $5,155,902 in 1996 4,179,891 4,503,891 3,937,000
Other assets 363,371 448,512 86,000
---------------------------------------------------
---------------------------------------------------
Total assets $ 25,173,333 $ 24,401,127 $ 14,087,000
---------------------------------------------------
---------------------------------------------------
Liabilities and shareholders' equity (deficit)
Current liabilities:
Accounts payable $ 726,782 $ 1,434,964 $ 596,000
Accrued expenses 1,156,426 736,075 869,000
Deferred barter income 1,005,302 726,285 1,005,000
Income taxes payable 1,015,731 847,839 1,772,000
Obligations for program rights, including $1,911,243 and
$500,725 of barter in 1997 and 1996, respectively 15,340,602 8,246,966 2,372,000
Due to affiliates - - 1,015,000
Current portion of long-term debt 1,224,642 1,056,385 1,195,000
---------------------------------------------------
Total current liabilities 20,469,485 13,048,514 8,824,000
Obligations for program rights 1,692,956 7,354,934 6,115,000
Long-term debt 9,699,730 10,240,644 6,796,000
Shareholders' equity (deficit):
Common stock, $10 par value: 12,000 shares authorized
1,530 shares issued and outstanding 15,300 15,300 15,000
Capital in excess of par value 112,546 112,546 113,000
Accumulated deficit (6,816,684) (6,370,811) (7,776,000)
---------------------------------------------------
Total shareholders' deficit (6,688,838) (6,242,965) (7,648,000)
---------------------------------------------------
---------------------------------------------------
Total liabilities and shareholders' deficit $ 25,173,333 $ 24,401,127 $ 14,087,000
---------------------------------------------------
---------------------------------------------------
</TABLE>
See accompanying notes.
7
<PAGE>
KOFY-TV
(A Division of Pacific FM Incorporated)
Statements of Operation and Accumulated Deficit
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
Years ended June 30, (unaudited)
1997 1996 1998 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 17,749,319 $ 18,094,242 $ 13,304,000 $ 11,521,000
Barter revenue 2,791,983 3,274,429 2,094,000 2,456,000
------------------------------------------------------------------------
Total revenue 20,541,302 21,368,671 15,398,000 13,977,000
Station operating expense 18,884,079 17,689,185 13,612,000 12,530,000
Amortization--goodwill and other 465,041 451,654 270,000 270,000
Depreciation 269,347 277,462 270,000 270,000
------------------------------------------------------------------------
Total operating expenses 19,618,467 18,418,301 14,152,000 13,070,000
Operating income 922,835 2,950,370 1,246,000 907,000
Other income (expense):
Net interest expense (1,353,643) (1,239,283) (879,000) (1,008,000)
Other income (expense) 237,885 56,442 1,230,000 --
------------------------------------------------------------------------
(1,115,758) (1,182,841) 351,000 (1,008,000)
------------------------------------------------------------------------
Income (loss) before income taxes (192,923) 1,767,529 1,597,000 (101,000)
Income tax expense 252,950 664,570 756,000 77,000
------------------------------------------------------------------------
Net income (loss) (445,873) 1,102,959 841,000 (178,000)
Accumulated deficit, beginning of
period (6,370,811) (7,473,770) (6,817,000) (7,474,000)
Purchase of equity interest -- -- (1,800,000) --
------------------------------------------------------------------------
Accumulated deficit, end of period $ (6,816,684) $ (6,370,811) $ (7,776,000) $ (7,652,000)
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
See accompanying notes.
8
<PAGE>
KOFY-TV
(A Division of Pacific FM Incorporated)
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended March 31,
Year ended June 30, (unaudited)
1997 1996 1998 1997
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (445,873) $ 1,102,959 $ 841,000 $ (178,000)
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation and amortization expense 734,388 729,116 540,000 540,000
Provision for doubtful accounts 800 -- -- --
Deferred income taxes (61,014) (257,041) -- --
(Increase) decrease in assets:
Programming rights and obligations 591,529 (1,789,887) (8,527,000) (176,000)
Accounts receivable (832,814) (92,206) 486,000 (91,000)
Prepaid expense and other assets 116,158 (82,518) (526,000) (388,000)
Increase (decrease) in liabilities:
Accounts payable (708,181) 475,829 (131,000) 484,000
Accrued liabilities 420,350 178,507 (287,000) (404,000)
Income taxes payable 167,892 763,610 757,000 603,000
Deferred barter income 279,017 63,731 84,000 --
-------------------------------------------------------------------------
Net cash provided by (used in) operating
activities 262,252 1,092,100 (6,763,000) 390,000
Cash flows from investing activities
Purchase of investment -- (22,500) -- --
Purchase of fixed assets (144,802) (53,525) (81,000) (4,000)
Disposal of assets 36,000 225,329 -- --
-------------------------------------------------------------------------
Net cash provided by (used in) investing (108,802) 149,304 (81,000) (4,000)
activities
Cash flows from financing activities
Decrease (increase) in notes receivable 259,015 (2,949,840) 11,826,000 (31,000)
due from related parties
Proceeds from note payable due bank 267,000 3,300,000 -- --
Repayment of note payable due bank (639,657) (1,511,481) (2,933,000) (275,000)
Payment for equity interest -- -- (1,800,000) --
Deferred financing costs (55,900) (98,000) -- --
-------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (169,542) (1,259,321) 7,093,000 (306,000)
-------------------------------------------------------------------------
Net increase (decrease) in cash (16,092) (17,917) 249,000 80,000
Cash at beginning of year 33,667 51,584 18,000 34,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash at end of year $ 17,575 $ 33,667 $ 267,000 $ 114,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 1,365,451 $ 1,244,820 $ 880,000 $ 1,010,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Taxes $ 21,392 $ 196,476 -- --
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</TABLE>
See accompanying notes.
9
<PAGE>
KOFY-TV
(A Division of Pacific FM Incorporated)
Notes to Financial Statements
June 30, 1997
1. Summary of Significant Accounting Policies
a. Nature of Business
KOFY-TV (the "Company") is a division of Pacific FM Incorporated ("Pacific
FM"). The Company was acquired in 1980 through a tax free exchange
involving three stations owned and operated by Pacific FM. Pacific FM also
owns and operates two radio stations, KOFY-AM and KDIA-FM, through its
radio division ("Radio Division"), and an airplane through its wholly-owned
subsidiary Next Century Aviation, Inc. ("Air Subsidiary"). The Company
broadcasts commercial television programming in the metropolitan San
Francisco television market on UHF station 20. Commercial time is sold and
credit is granted to customers who are predominately advertising agencies.
Collateral is not required for credit granted. Consequently, the Company's
ability to collect amounts due from customers is affected by economic
fluctuations in the advertising industry and the metropolitan San Francisco
television market. However, credit risk with respect to uncollected
receivables is limited due to the large number of customers comprising the
customer base and their dispersion across different industries and
geographical locations.
In October 1997, the stockholders of Pacific FM agreed in principle to sell
51% of Pacific FM's outstanding common stock to Granite Broadcasting
Corporation ("Granite"). At the closing of the sale, it is contemplated
that Granite will acquire the remaining 49% of Pacific FM. The total price
of all the stock of Pacific FM is $143,750,000 in cash. In addition,
Granite will pay $30,000,000 to the principal shareholders of Pacific FM
for a covenant not to compete in the San Francisco television market for a
period of five years from the closing. Consummation of the sale is
contingent on, among other things, FCC approval and satisfaction of certain
other conditions. Prior to the closing of the sale, Pacific FM will sell or
otherwise dispose of its Radio Division and Air Subsidiary as Granite's
purchase of the outstanding stock of Pacific FM is based solely on the
results of the Company. Thus, the accompanying financial statements do not
include the accounts of the Radio Division and the Air Subsidiary.
b. Program Rights
Program rights represent the cost of broadcast license agreements for
television programming. In accordance with the provisions of Financial
Accounting Standards Board Statement No. 63, "Financial Reporting by
Broadcasters," the Company records assets and liabilities for broadcast
license agreements at the gross amount of the rights acquired and
obligations incurred under these license agreements when the license period
has begun, the cost of the program is known and the program has been
accepted and is available for its first telecast.
Barter programming transactions are accounted for at the fair market value
of programming received. Accordingly, the fair value of the programming
received is capitalized and amortized to expense as used. The related
liability for these barter programming transactions is also recorded at the
fair value of the programming received and is amortized to income as
commercial time is aired.
Amortization of program rights is computed for financial statement purposes
using a sliding-scale method based upon the total available runs for a
program and the number of times shown. The sliding-scale method results in
a higher amortization expense for the first time a program is broadcast and
a smaller amortization expense for each successive broadcast of the same
title. Management estimates that amounts included in current assets will be
charged to operations in the next fiscal year. Program rights are valued at
the lower of unamortized cost or net realizable value.
10
<PAGE>
1. Summary of Significant Accounting Policies (continued)
c. Revenue Recognition
Revenue from the sale of advertising is recognized at the time the
advertisements are aired.
d. Property and Equipment
Property and equipment are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives as follows:
<TABLE>
<CAPTION>
<S> <C>
Leasehold improvements 5 to 30 years
Equipment 3 to 7 years
Transportation 3 to 7 years
Furniture and fixtures 3 to 7 years
</TABLE>
e. Goodwill
The Company was acquired in 1980 in a business combination accounted for
using the purchase method. Goodwill of $9,659,793 represents the excess of
the purchase price over the fair value of the net assets acquired. Goodwill
is being amortized on a straight-line method over 30 years. Accumulated
amortization for the years ended June 30, 1997 and 1996 was $5,479,902 and
$5,155,902 respectively.
f. Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense for
the years ended June 30, 1997 and 1996 was $172,502 and $226,320,
respectively.
g. Income Taxes
The Company is included in the consolidated federal income tax return of
Pacific FM. For financial reporting purposes, the Company has provided for
federal income taxes as if it filed a separate income tax return. Deferred
income taxes reflect net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.
The provision for income taxes for the years ended June 30, consists of the
following:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------
<S> <C> <C>
Current taxes
Federal $ 244,289 $ 708,073
State 69,674 213,538
-----------------------------------
Total current taxes 313,963 921,611
-----------------------------------
Deferred taxes (61,013) (257,041)
-----------------------------------
Provision for income taxes $ 252,950 $ 664,570
-----------------------------------
-----------------------------------
</TABLE>
11
<PAGE>
1. Summary of Significant Accounting Policies (continued)
The significant components of the Company's deferred tax assets at June 30
are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------
<S> <C> <C>
Property, plant and equipment basis differences $ 862 $ (16,266)
Allowance for bad debts 60,320 60,000
Other 256,872 213,307
-------------------------------------
-------------------------------------
Deferred taxes $ 318,054 $ 257,041
-------------------------------------
-------------------------------------
</TABLE>
The income tax provisions differ from the amount computed by applying
the U.S. statutory rate due to the following:
<TABLE>
<CAPTION>
For the Year Ended June 30,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
Provision at federal statutory rate 34% 34%
State taxes, net of federal benefit 20 8
Goodwill 57 6
Decrease in valuation allowance -- (11)
Other 20 1
-------------------------------------
-------------------------------------
Total 131% 38%
-------------------------------------
-------------------------------------
</TABLE>
The Company has not reflected a tax benefit associated with net operating
loss carryforwards recorded at Pacific FM.
h. 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 amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
2. Radio Time Brokerage Agreement
The Company operates KAZA-AM, the Radio Fiesta Corporation ("broker") affiliate
serving San Jose, California, pursuant to a five-year time brokerage agreement
that commenced on August 1, 1995. The terms of the agreement require the Company
to pay a monthly fee and to reimburse the broker for operating expenses. The
Company is also required to pay additional payments if certain gross revenue
figures are attained. In exchange for such payments, the broker makes available
substantially all of its air time for broadcast or programming produced by the
Company. Time Brokerage fees for the years ended June 30, 1997 and 1996, were
$147,500 and $110,000 respectively.
3. Property and Equipment
The major classifications of property and equipment at June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------
<S> <C> <C>
Transportation $ 349,958 $ 275,284
Leasehold improvements 415,234 415,234
Equipment 4,033,684 4,003,045
Furniture and fixtures 136,318 132,828
-----------------------------------
4,935,194 4,826,391
Less accumulated depreciation 3,612,078 3,342,731
-----------------------------------
-----------------------------------
Net property and equipment $ 1,323,116 $ 1,483,660
-----------------------------------
-----------------------------------
</TABLE>
12
<PAGE>
4. Assets Held Under Capital Leases
The Company's net assets recorded under capital leases by major class at June 30
are as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------
<S> <C> <C>
Equipment $ 192,736 $ 192,736
Less accumulated depreciation 192,736 192,736
-------------------------------------
-------------------------------------
Assets held under capital leases, net $ -- $ --
-------------------------------------
-------------------------------------
</TABLE>
At June 30, 1997, the Company had no capitalized lease obligations.
5. Long-Term Debt
<TABLE>
<CAPTION>
June 30,
--------------------------------------
1997 1996
--------------------------------------
<S> <C> <C>
Note payable in 48 monthly installments, including a
balloon payment of $6,617,810 due August 1, 2000
bearing interest at the Citibank N.A. base rate plus 2.5%
(11% at June 30, 1997) ("Finova Loan") $ 10,281,808 $ 10,514,806
Other long-term debt, due in monthly installments ranging
from $6,278--$15,000. The notes bear interest rates
ranging from 10%--12.25% 642,564 782,223
--------------------------------------
Total long-term debt 10,924,372 11,297,029
Less current portion 1,224,642 1,056,385
--------------------------------------
Long-term debt, less current portion $ 9,699,730 $ 10,240,644
--------------------------------------
--------------------------------------
</TABLE>
Principal maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending June 30:
1999 $ 1,351,426
2000 1,431,463
2001 6,774,977
2002 36,183
Thereafter 105,681
-----------------
-----------------
Total $ 9,699,730
-----------------
-----------------
</TABLE>
13
<PAGE>
6. Obligations for Program Rights
The approximate obligations for recorded cash program rights for the years
subsequent to June 30, 1997, are as follows:
<TABLE>
<S> <C>
1998 $ 10,918,989
1999 2,984,822
2000 2,479,404
2001 632,309
2002 18,034
-----------------
-----------------
$ 17,033,558
-----------------
-----------------
</TABLE>
7. Commitments and Contingencies
a. Broadcasting Agreements
At June 30, 1997, the Company is committed to acquire additional broadcast
programming rights which have not been recorded on its balance sheet at a
total cost of approximately $5,106,749.
b. Lease Agreements
The Company is committed under (noncancelable) long-term operating lease
for facilities rent of its offices and television transmitter sites. The
leases require payments of various expenses incidental to the use of the
properties and consumer price index escalation clauses. Rent expense during
the years ended June 30, 1997 and 1996 was $367,687 and $406,193,
respectively.
The future operating lease commitments for the next five years are
estimated as follows:
<TABLE>
<S> <C>
1998 $ 379,826
1999 379,826
2000 373,776
2001 373,776
2002 373,776
Thereafter 649,536
-----------------
-----------------
$2,530,516
-----------------
-----------------
</TABLE>
8. Related Party Transactions
The Company has receivables from related entities KOFY-AM, KDIA-AM and Next
Century Air of $7,328,151, $3,156,738 and $410,512 in 1997, and $7,778,006,
$3,295,631 and $80,779 in 1996, respectively.
During the years ended June 30, 1997 and 1996, the Company paid salary and rent
expenses on behalf of KDIA-AM and KOFY-AM totaling $276,000 and $271,800
respectively, which were charged to intercompany receivables.
The Company leases a transmitter site from a related party, a holding company
whose stock is owned by Pacific FM. The Company is responsible for the
maintenance of the property but is entitled to any income derived from the
property. These costs are reflected above in the operating lease commitments.
The Company leases certain space for the parking of company vehicles on a
month-to-month basis from a partnership, whose partners are stockholders or
officers of Pacific FM. The lease expense for the years ended 1997 and 1996 was
$5,664.
14
<PAGE>
9. Retirement Plan
Pacific FM has an employee 401(k) retirement plan (the "Plan") covering all
eligible employees. The contributions to the Plan are based upon elective salary
deferrals by Plan participants. An officer of the Company is the trustee of the
Plan. The Company did not make any contributions to the Plan during the years
ended June 30, 1997 and 1996.
10. Network Affiliation
In February 1994, the Company entered into a television affiliation agreement
with Warner Brothers ("WB") Communications for carriage of WB television
programming commencing January 11, 1995, and terminating on January 11, 1998. WB
has the option at its sole discretion to terminate or extend the agreement for
additional successive years in two year increments for an unlimited period of
time. Generally, WB Communications is obligated to pay the costs of providing
the Company's network programming, and the Company has agreed to pay varying
amounts of compensation and airtime to WB Communications based on the station's
television market ratings of the broadcasting programs. Revenue, at various
rates, is derived from the sale to advertisers of time in network programs for
commercial announcements and is dependent on the quantitative and qualitative
audience that the Company can deliver to prospective advertisers with WB network
programs. The Company paid network affiliation fees of $748,500 and $468,272 for
the years ended June 30, 1997 and 1996 respectively.
11. Financial Instruments
The Company maintains its cash balances in one financial institution located in
the metropolitan San Francisco area. The balances are insured by the Federal
Deposit Insurance Corporation up to $100,000.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of customers comprising the Company's customer
base and their dispersion across different industries and geographical
locations.
12. Subsequent Events
a. Option Purchase
On July 8, 1997, the Company paid $10,000 for an option to purchase
participation rights previously granted to a former shareholder. The
rights, the term of which is the life of the Company's majority shareholder
plus 21 years, entitled the former shareholder to 10% of the proceeds on
any sale of the Company's outstanding shares, or a 10% interest in property
acquired in any exchange of the Company's shares.
On September 17, 1997 the company exercised its option to purchase the
rights for $200,000 and a $1,800,000 interest bearing note due on January
2, 1998.
b. Third Amendment to Finova Loan
In exchange for Finova to modify certain loan covenants, the Company
entered into a third amendment to the amended and restated loan in October
1997. The Company incurred an additional loan fee of $200,000 to be paid at
the earlier of either prepayment of the loan balance or the loan maturity
date. The third amendment is for a term of 46 months, and is collateralized
by the Company's assets and the personal guarantee of the principal
stockholder.
c. Restructured Syndicator Debts
The Company negotiated with four distributors to revise the restructured
payment terms. In October 1997, the four distributors agreed to allow
varying amount of discounts on license fees due to them, resulting in a
gain of approximately $1,200,000 on the debt forgiveness.
d. Radio Time Brokerage Agreement
The Company has terminated its time brokerage agreement with Radio Fiesta
Corporation, licensor of KAZA-AM radio. Arbitration is scheduled for May
1998 to determine the amount of liquidating damages, if any.
15
<PAGE>
B. Pro Forma Financial Information.
--------------------------------
(See following pages)
16
<PAGE>
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The pro forma condensed consolidated financial statements presented below
are based on the historical financial statements of the Company. The pro forma
condensed consolidated statements of operations for the year ended December 31,
1997 and for the three months ended March 31, 1998 give effect to (i) the
acquisition of WDWB, the Company's WB affiliated station in Detroit, Michigan,
which was acquired by the Company on January 31, 1997, (ii) the sale on May 11,
1998 of the Company's 8 7/8% Series A Senior Subordinated Notes due May 15, 2008
(the "Notes") and the application of the proceeds therefrom, (iii) the KOFY
Acquisition and the related borrowings under the Credit Agreement, (iv) the
dispositions of WWMT and WLAJ and (v) the refinancing of certain outstanding
debentures with borrowings under the Credit Agreement, as if all such
transactions occurred at January 1, 1997. The pro forma condensed consolidated
balance sheet as of March 31, 1998 gives effect to (i) the sale of the Notes and
application of the proceeds therefrom, (ii) the KOFY Acquisition and the related
borrowings under the Credit Agreement and (iii) the disposition of WWMT and
WLAJ, as if all such transactions occurred on March 31, 1998.
The pro forma condensed consolidated financial statements give effect to
the acquisitions of WDWB and KOFY under the purchase method of accounting and
are based upon the assumptions and adjustments (including the preliminary
allocation of the purchase price for the KOFY Acquisition) described in the
accompanying notes. These pro forma condensed consolidated financial
statements should be read in conjunction with the Financial Statements of
KOFY appearing elsewhere in this Current Report on Form 8-K. The pro forma
information is not necessarily indicative of the results that would have been
reported had such events actually occurred on the dates specified, nor is it
indicative of the Company's future results.
17
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Less
Granite Add: Combined
Broadcasting WDWB Pro forma Add: WWMT and
Corporation One month Adjustments KOFY-TV WLAJ
Year ended Ended for WDWB Year ended Year Ended
December 31, January 31, and December 31, December 31, Pro forma
1997 1997 the offering As adjusted 1997 1997 Adjustments Pro forma
----------- ----------- ------------ ----------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue ...................... $ 153,512 $ 901 22 (a) $ 154,435 $ 20,406 $ 23,338 $151,503
Station operating expenses ....... 83,729 618 (57)(b) 84,290 19,419 13,507 (3,063)(g) 87,139
Time brokerage agreement fees .... 600 600 600 --
Depreciation expense ............. 5,718 6 14 (c) 5,738 273 1,123 (162)(h) 4,726
Amortization expense ............. 13,824 367 (d) 14,191 360 2,229 13,687 (i) 26,009
Corporate expense ................ 6,639 6,639 6,639
Non-cash compensation ............ 986 986 986
-------- ------- ----- -------- ------- ------- ------ --------
Operating income (loss) .......... 42,016 277 41,991 354 5,879 26,004
Equity in net loss of Investee ... 1,531 1,531 1,531
Interest expense (income), net ... 38,986 289 (e) 39,275 1,223 865 229 (j) 39,862
Non-cash interest expense ........ 2,182 (180)(f) 2,002 2,002
Other expense (income) ........... 1,167 (17) 1,150 (1,230) 105 (185)
-------- ------- ----- -------- ------- ------- ------ --------
Income (loss) before income taxes
and extraordinary item ......... (1,850) 294 (1,967) 361 4,909 (17,206)
(Provision) benefit for income tax (1,616) (19) (1,635) 588 -- 701 (r) (346)
-------- ------- ----- -------- ------- ------- ------ --------
Income (loss) before
extraordinary item(1) .......... $ (3,466) $ 275 $ (3,602) $ 949 $ 4,909 $(17,552)
-------- ------- -------- ------- ------- --------
-------- ------- -------- ------- ------- --------
</TABLE>
- ------------------
(1) Does not reflect an anticipated pre-tax gain for financial reporting
purposes of approximately $49 million from the disposition of WWMT and WLAJ.
18
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1998
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Less:
Granite Combined
Broadcasting Add: WWMT and
Corporation KOFY-TV WLAJ
Three Months Pro forma Three Months Three Months
Ended Adjustments Ended Ended
March 31, for the As March 31, March 31, Pro forma
1998 offering adjusted 1998 1998 Adjustments Pro forma
-------- -------- -------- ------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenue ..................... $ 36,724 $ 36,724 $ 4,734 $ 6,156 $ 35,302
Station operating expenses ...... 22,315 22,315 4,177 3,550 (334)(g) 22,608
Time brokerage agreement fees ... 150 150 150 0
Depreciation expense ............ 1,365 1,365 90 162 (62)(h) 1,231
Amortization expense ............ 3,584 3,584 90 557 3,422 (i) 6,539
Corporate expense ............... 2,017 2,017 2,017
Non-cash compensation ........... 333 333 333
------- ------- ------ ------- --------
Operating income (loss) ......... 6,960 6,960 377 1,737 2,574
Equity in net loss of investee .. 487 487 487
Interest expense (income), net .. 9,209 307 (e) 9,516 257 194 106 (j) 9,685
Non-cash interest expense ....... 475 (45)(f) 430 430
Other expense (income) .......... 242 242 26 216
------- ------- ------ ------- --------
Income (loss) before income taxes
and extraordinary item ........ (3,453) (3,715) 120 1,517 (8,244)
Provision for income tax ........ (496) (496) (87) 0 428 (r) (155)
-------- -------- ------ ------- ---------
Income (loss) before
extraordinary item(1) ......... $ (3,949) $ (4,211) $ 33 $ 1,517 $ (8,399)
-------- -------- ------ ------- ---------
-------- -------- ------ ------- ---------
</TABLE>
- ----------------
(1) Does not reflect an anticipated pre-tax gain for financial reporting
purposes of approximately $49 million from the disposition of WWMT and WLAJ.
19
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1998
(Unaudited)
(in Thousands)
<TABLE>
<CAPTION>
Granite Less:
Broadcasting Pro Forma Combined WWMT
Corporation Adjustments for Add: KOFY-TV and WLAJ
March 31, 1998 the Offering As Adjusted March 31, 1998 March 31, 1998
-------------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash $ 3,945 10,046(k) $13,991 $ $
Accounts receivable, net............ 28,833 28,833
Film contract rights and other
assets.............................. 21,742 21,742 2,199 1,708
-------- -------- -------- --------
Total current assets........... 54,520 64,566 2,199 1,708
Property and equipment, net......... 35,507 35,507 1,106 6,907
Other noncurrent assets............. 16,149 5,482(l) 18,744 2,817 515
(2,887)(l)
Intangible assets................... 518,266 518,266 82,912
-------- -------- -------- --------
Total assets................... $ 624,442 $ 637,083 $ 6,122 $ 92,042
-------- -------- -------- --------
-------- -------- -------- --------
Liabilities
Accounts payable.................... $ 3,319 $ 3,319 $ 596 $
223
Accrued liabilities................. 17,609 17,609 1,874 475
Film contract rights and other
current liabilities................. 11,096 11,096 2,372 1,130
-------- -------- -------- --------
Total current liabilities...... 32,024 32,024 4,842 1,828
Long-term debt...................... 385,790 15,521(m) 401,311
Other noncurrent liabilities........ 5,964 1,327(k) 7,291 6,115 427
Deferred income taxes............... 30,500 30,500
Redeemable Preferred Stock.......... 209,421 209,421
Stockholders' equity (deficit)
Common stock........................ 97 97
Additional paid in capital.......... 22,668 22,668
Accumulated deficit................. (58,359) (2,887)(l) (62,566) (11,504)
(1,320)(1)
Less: Unearned compensation........ (2,729) (2,729)
Note receivable from officer... (887) (887)
Treasury stock................. (47) (47)
-------- -------- -------- --------
Total stockholders' equity (deficit) (39,257) (43,464) (11,504)
Net assets to be acquired and (4,835) 101,291
-------- -------- -------- --------
disposed............................
Total liabilities and stockholders'
equity (deficit).................... $ 624,442 $ 637,083 $ 6,122 $ 92,042
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Adjustments Pro Forma
----------- ---------
<S> <C> <C>
Cash $ 13,991
Accounts receivable, net............ 28,833
Film contract rights and other (393)(n) 16,840
assets.............................. (5,000)(n)
-------------
Total current assets........... 59,664
Property and equipment, net......... 29,706
Other noncurrent assets............. (1,668)(n) 19,378
Intangible assets................... 257,195(n) 692,549
-------------
Total assets................... $ 801,297
-------------
-------------
Liabilities
Accounts payable.................... $ 3,692
Accrued liabilities................. 18,735(o) 40,143
2,400(r)
Film contract rights and other
current liabilities................. 12,338
-------------
Total current liabilities...... 56,173
Long-term debt...................... 18,150(p) 419,461
Other noncurrent liabilities........ (780)(n) 25,036
12,837(o)
Deferred income taxes............... 45,757(n) 76,257
Redeemable Preferred Stock.......... 209,421
Stockholders' equity (deficit)
Common stock........................ 97
Additional paid in capital.......... 22,668
Accumulated deficit................. 49,309(q) (4,153)
(2,400)(r)
Less: Unearned compensation........ (2,729)
Note receivable from officer... (887)
Treasury stock................. (47)
-------------
Total stockholders' equity (deficit) 14,949
Net assets to be acquired and 106,126(q)
-------------
disposed............................
Total liabilities and stockholders'
equity (deficit).................... $ 801,297
-------------
</TABLE>
20
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Adjustments reflected in the pro forma financial statements are
explained as follows:
(a) To adjust net revenue to reflect reduced national representative commissions
at WDWB.
(b) To adjust station operating expenses at WDWB as follows:
<TABLE>
<S> <C>
To reduce amortization of film contract rights to reflect the net assets
acquired based on the allocation of the purchase price $35,000
To eliminate a management fee paid to a related party of WDWB 22,000
--------
$57,000
--------
</TABLE>
(c) To record additional depreciation expense at WDWB based on the allocation of
the purchase price.
(d) To record amortization of the excess cost of the purchase price over the net
assets acquired.
(e) To adjust interest expense as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
------------- ---------------
<S> <C> <C>
To record interest expense on the Notes
at the effective rate(1) $ 15,451,000 $3,863,000
To reflect savings resulting from the
redemption of the Company's 12.75%
Senior Subordinated Debentures due September 1, 2002
in September 1997 which was replaced with bank debt (1,900,000) -
To eliminate interest expense on $22,961,000
principal amount of the Company's 10 3/8% Senior
Subordinated Notes due May 15, 2005 (2,382,000) (596,000)
To eliminate interest expense on
Credit Agreement (10,880,000) (2,960,000)
------------- -----------
$ 289,000 $ 307,000
------------- ------------
------------- ------------
</TABLE>
--------------
(1) In anticipation of the offering of the Notes, the Company
entered into an interest rate forward contract with one of the
initial purchasers of the Notes. The Company received
$1,327,000 on the settlement of the forward contract. This
amount will be recorded as a noncurrent liability and will be
recognized as a reduction to interest expense over the term of
the Notes.
(f) To record amortization of deferred financing costs associated with the
sale of the Notes net of reduced amortization from the write-off of
deferred financing costs associated with the Credit Agreement and the
write-off of a pro rata portion of deferred financing costs associated
with the repurchase of $22,961,000 principal amount of 10 3/8% Senior
Subordinated Notes due May 15, 2005 ("10 3/8% Notes").
21
<PAGE>
(g) To adjust station operating expenses at KOFY as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
----------------- --------------
<S> <C> <C>
To eliminate the cost of contracts and other
operating assets excluded from the purchase of
KOFY under the terms of the purchase and sale
agreement $1,053,000 $ 21,000
To reduce amortization of film contract rights to
reflect the net assets acquired based on a preliminary
allocation of the purchase price 1,300,000 325,000
To eliminate legal expenses in connection with the
sale of radio stations owned by the owner of KOFY 355,000 -
To reduce salary expense and related benefit costs
associated with the controlling shareholder of
Pacific 179,000 45,000
To adjust sales expense to reflect reduced national
representative commissions 176,000 (57,000)
---------- ---------
$3,063,000 $334,000
---------- ---------
---------- ---------
</TABLE>
The Company expects to realize approximately $1,100,000 of annualized
net cost savings at KOFY resulting from the elimination of duplicative staffing
and redundant operating expenses and new rates associated with revised vendor
contracts, which cost savings have not been reflected in the adjustments. Had
such adjustments been made, EBITDA on a pro forma basis would have been
approximately $58,825,000 for the year ended December 31, 1997 and $11,777,000
for the three months ended March 31, 1998. While management believes that such
cost savings are achievable, the Company's ability to fully achieve such costs
savings is subject to numerous factors, some of which may be beyond the
Company's control.
(h) To reduce depreciation expense to reflect the net assets of KOFY
acquired based on a preliminary allocation of the purchase price.
(i) To reflect increased amortization expense as follows:
<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Ended
1997 March 31, 1998
----------------- --------------
<S> <C> <C>
(i) Amortization of the excess cost of the purchase
price over the net assets acquired $14,047,000 $3,512,000
(ii) Elimination of historical amortization expense
in the financial statements of KOFY (360,000) (90,000)
------------- -----------
$13,687,000 $3,422,000
------------- -----------
------------- -----------
</TABLE>
(j) To record interest expense on additional borrowings under the Credit
Agreement at an assumed rate of 8% and to eliminate historical interest
expense in the financial statements of KOFY.
(k) To record the excess proceeds from the sale of the Notes and proceeds
from the settlement of the interest rate forward contract.
22
<PAGE>
(l) To reflect the incurrence of deferred financing costs associated with
the issuance of the Notes and to write-off deferred financing costs
associated with the Credit Agreement and a pro rata portion of deferred
financing costs associated with the Company's 10 3/8% Notes.
In connection with the repayment of borrowings under the Credit
Agreement on May 11, 1998, the Company recorded an extraordinary loss
of approximately $2,364,000, reflecting a write-off of deferred
financing fees. In connection with the repurchase of the 10 3/8% Notes,
the Company recorded an extraordinary loss of $1,843,000, consisting of
the premium paid on the repurchase of the 10 3/8% Notes of $1,320,000
and a write-off of a pro rata portion of the related deferred financing
fees of approximately $523,000.
(m) To adjust long-term debt as follows:
<TABLE>
<CAPTION>
<S> <C>
(i) Issuance of the Notes, net of discount $ 174,482,000
(ii) Repurchase of 103/8% Notes (22,961,000)
(iii) Repayment of outstanding bank debt (136,000,000)
-------------
$ 15,521,000
-------------
-------------
</TABLE>
(n) To record the preliminary allocation of the purchase price of KOFY as
follows:
<TABLE>
<CAPTION>
Historical Carrying
Value as Reported Estimated Market
KOFY-TV Value of Assets Pro Forma
Caption March 31, 1998 Purchased Adjustment
------- -------------- --------- ----------
<S> <C> <C> <C>
Film contract rights and other assets $ 2,199,000 $ 1,806,000 $ (393,000)
Property and equipment 1,106,000 1,106,000 -
Film contract rights and other 2,817,000 1,149,000 (1,668,000)
noncurrent assets
Intangible assets - 257,195,000 257,195,000
Accounts payable (596,000) (596,000) -
Accrued liabilities (1,874,000) (1,874,000) -
Film contract rights and other current (2,372,000) (2,372,000) -
liabilities
Deferred tax liability - (45,757,000) (45,757,000)
Other noncurrent liabilities (6,115,000) (5,335,000) 780,000
------------ --------------- ---------------
Net assets $ (4,835,000) $205,322,000 $210,157,000
------------ --------------- ---------------
------------ --------------- ---------------
</TABLE>
In addition, the Company made a $5,000,000 deposit on the KOFY
Acquisition which has been reclassed from current assets to intangible assets.
(o) The WB network agreed to enter into a ten-year affiliation agreement
with Pacific and the Company instead of another television station
in the San Francisco market in return for total consideration of
$31,572,000. On September 1, 1998, the Company will pay $14,500,000
to the WB Network and the remaining $17,072,000 is to be paid over
a 5 year period. The Company will amortize the total consideration
paid over ten years. Of the $31,572,000, $18,735,000 has been
reflected as a current liability and the remaining $12,837,000 has
been reflected as noncurrent.
(p) To record additional borrowings under the Credit Agreement.
(q) To eliminate the historical carrying value of the net assets acquired
and disposed and to record the gain on the assets disposed.
(r) To recognize taxes on the sale of WWMT and WLAJ and to adjust the tax
provision to reflect the KOFY Acquisition.
C. Exhibits.
---------
2.5 First Amendment to Purchase and Sale Agreement, dated as of July
20, 1998, among Granite Broadcasting Corporation, Pacific FM
Incorporated, James J. Gabbert and Michael P. Lincoln.
2.6 Purchase and Sale Agreement, dated as of July 15, 1998, among
Granite Broadcasting Corporation, WLAJ, Inc., WLAJ License, Inc.,
WWMT-TV, Inc. and WWMT-TV License, Inc.
23.1 Consent of Independent Auditors (Ernst & Young LLP).
Item 8. Change in Financial Year
--------------------------------
Not Applicable
Item 9. Sales of Equity Securities Pursuant to Regulation S
-----------------------------------------------------------
Not Applicable
23
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRANITE BROADCASTING CORPORATION
Dated: August 13, 1998 By: /s/ Lawrence I. Wills
-----------------------------------------
Name: Lawrence I. Wills
Its: Vice President - Finance and Controller
24
<PAGE>
EXHIBIT INDEX
-------------
2.5 First Amendment to Purchase and Sale Agreement, dated as of July
20, 1998, among Granite Broadcasting Corporation, Pacific FM
Incorporated, James J. Gabbert and Michael P. Lincoln.
2.6 Purchase and Sale Agreement, dated as of July 15, 1998, among
Granite Broadcasting Corporation, WLAJ, Inc., WLAJ License, Inc.,
WWMT-TV, Inc. and WWMT-TV License, Inc.
23.1 Consent of Independent Auditors (Ernst & Young LLP).
<PAGE>
Exhibit 2.5
FIRST AMENDMENT TO
PURCHASE AND SALE AGREEMENT
FIRST AMENDMENT, dated as of July 20, 1998, among Granite Broadcasting
Corporation (the "Buyer"), Pacific FM Incorporated, ("Pacific"), and James J.
Gabbert and Michael P. Lincoln (collectively, "Stockholders"), to the Purchase
and Sale Agreement, dated as of October 3, 1997, among Buyer, Pacific and
Stockholders (the "Agreement").
The parties hereto agree that the Agreement is hereby amended as follows:
1. Section 1.1 of the Agreement is hereby amended as follows:
(a) The definition of "Accrued Pacific Taxes" is hereby amended and
restated in its entirety as follows:
"Accrued Pacific Taxes" means all Taxes of Pacific and its Subsidiaries
accruing during any tax period ending on or prior to the Closing Date,
including but not limited to Taxes attributable to: (i) the direct or
indirect transfer and assignment of the Excluded Pacific Assets from
Pacific and its Subsidiaries to Stockholder Co. and the assumption by
Stockholder Co. of the Excluded Pacific Liabilities; and (ii) the
distribution of the stock of Next Century Aviation, Inc., a California
company, from Pacific to the Stockholders or Stockholder Co.
(b) The definition of "Stockholder Co." is hereby amended and
restated in its entirety as follows:
"Stockholder Co." means Next Century Enterprises, a California company
wholly-owned by Stockholders, that shall be assigned all the Excluded
Pacific Assets and assume all of the Excluded Pacific Liabilities (other
than those released by Next Century Aviation) prior to the Closing.
(c) The following new definitions are hereby added to Section 1.1 of
the Agreement:
(i) "Closing Escrow Agreement" means the Escrow Agreement, dated as
of the date hereof, among Buyer, Pacific, James J. Gabbert,
individually and as Agent, and the Escrow Agent.
(ii) "Escrow Agent" means Citibank, N.A.
<PAGE>
(iii) "Finova Loans" means the loans made by Finova Capital
Corporation pursuant to the Amended and Restated Loan Agreement, dated
as of August 17, 1995, among Pacific, Finova Capital Corporation
("Finova") (formally known as Greyhound Financial Corporation) in its
individual capacity and as agent for all Lenders, as amended as of
September 29, 1995 and as further amended on October 17, 1996, the
aggregate principal amount thereof plus accrued interest thereon is
$5,450,588.89 as of the date hereof.
(iv) "Finova Payment Obligation" means Pacific's interest and
principal obligations under the Finova Loans.
(v) "Past Due Programmer Contracts" means those programming
contracts listed on Schedule 1-G hereto.
(vi) "Past Due Programming Payment Obligations" means Pacific cash
payment obligations under the Past Due Programming Contracts, evidenced
by the Note listed on Schedule 1-G not to exceed the amounts listed
adjacent to the Note on Schedule 1-G.
(vii) "Sony Contract" means the Purchase Money Security Agreement,
dated March 21, 1994, by and between Sony Electronics, Inc. and Pacific
FM Incorporated (d/b/a KOFY-TV) and the Purchase Money Security
Agreement, dated May 8, 1995, by and between Sony Electronics, Inc. and
Pacific FM Incorporated (d/b/a/ KOFY-TV).
(viii) "401(k) Plan" has the meaning set forth in Section 10.3.2
hereof.
2. Section 2.2.1 of the Agreement is hereby amended and restated in its
entirety as follows:
"2.2.1 Purchase Price. The Purchase Price for the shares of Pacific's
Common Stock to be sold and transferred pursuant to this Agreement shall be
$73,312,500, less (i) $5,540,588.89, the amount of Finova Payment
Obligation, and less (ii) $698,973.00, the amount of the Past Due Program
Obligations, subject to adjustment pursuant to Sections 2.2.2 and 2.2.3
below. At the Closing, Buyer will pay: (a) to Agent, the Purchase Price, as
adjusted pursuant to Sections 2.2.2 and 2.2.3 below, less the amount of the
Deposit and $1,000,000; and (b) to the Escrow Agent $1,000,000 to be held
in escrow by the Escrow Agent pursuant to the Closing Escrow Agreement."
2
<PAGE>
3. Section 2.2.4 (a) of the Agreement is hereby amended and restated in its
entirety as follows:
(a) "Payment of Estimated Purchase Price at Closing." The Purchase
Price, adjusted by the estimated Closing adjustments pursuant to Section
2.2.3(b), is referred to as the "Estimated Purchase Price." The Estimated
Purchase Price shall be paid as follows: (a) to Agent and Agent's designees
(as designated in Agent's written instruction to Buyer prior to Closing),
at Closing, by wire transfer, in immediately available funds, the Estimated
Purchase Price less the amount of the Deposit and $1,000,000; and (b) to
the Escrow Agent $1,000,000 to be held by the Escrow Agent pursuant to the
terms and conditions of the Closing Escrow Agreement.
4. Section 2.4.2 of the Agreement is hereby amended and restated in its
entirety to read as follows:
"2.4.2 Retained Obligations Relating to KOFY." Subject to the provisions
of Sections 2.4.3 below, the following obligations shall be the only
obligations or other Liabilities of Pacific and/or its Affiliates not
assumed by Stockholder Co. (or retained by Next Century Aviation, Inc.,
which shall be spun off to the Stockholders in accordance with Section
7.1.23 hereof) immediately prior to Closing (collectively, the "Included
Pacific Obligations"): (a) the obligations of Pacific arising subsequent
to, and relating solely to, the operations of KOFY after the Effective
Time, under (i) all Contracts, commitments and leases of Pacific included
in the Broadcasting Assets, and set forth on Schedules 1-A, 1-B and 1-C, in
effect as of October 3, 1997, (ii) the Sony Contract (up to an amount not
to exceed $250,000) and the 401(k) Plan and (iii) all Contracts,
commitments, leases and amendments, renewals and other modifications
thereof that are entered into by Pacific in connection with KOFY between
October 3, 1997 and the Closing Date as expressly permitted by and subject
to the terms of this Agreement; (b) any other Prorated Obligations which
accrued prior to the Effective Time to the extent that the Purchase Price
has been reduced therefor in accordance with Section 2.2 hereof; (c) any
other Prorated Obligations which accrue after the Effective Time; (d)
Finova Payment Obligations up to an amount not to exceed $5,540,588.89 and
(e) Past Due Programming Payment Obligations up to an amount not to exceed
$698,973.00. It is understood and agreed that Included Pacific Obligations
shall not included trade or other accounts payable, accrued payroll,
employee sales commissions, payroll taxes, or unemployment taxes, that are
not Prorated Obligations,
3
<PAGE>
any obligations relating to any funded or other indebtedness (other then
Finova Payment Obligations up to an amount not to exceed $5,540,588.89 and
Past Due Programming Payment Obligations not to exceed $698,973.00) or
under any Employee Benefit Plans, collective bargaining agreements, Accrued
Pacific Taxes or any other Excluded Pacific Liabilities.
5. Section 4.4.3 of the Agreement is hereby amended and restated in its
entirety as follows:
"4.4.3 No Commitments. There are no outstanding contractual obligations
of Pacific or any Affiliate of Pacific to repurchase, redeem, otherwise
acquire, or otherwise make any payment with respect to any shares of
Pacific Common Stock or any beneficial or other ownership interest of any
Subsidiary of Pacific or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any Subsidiary
of Pacific or any other Person."
6. Section 7.1.23 of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) 7.1.23 Excluded Pacific Assets and Excluded Pacific Liabilities.
Immediately prior to the Closing, Pacific shall assign all of the Excluded
Pacific Assets (other than the 401(k) Plan), including all capital stock of
Next Century Aviation, Inc., to Stockholder Co. (the Securities of which at
all times since its incorporation have been, and will continue through the
Closing to be, wholly-owned by Stockholders), and shall have no Liability,
responsibility or obligation, whether direct or indirect, absolute,
accrued, contingent or otherwise, or due or to become due, asserted or
unasserted, matured or unmatured, for any of the Excluded Pacific
Liabilities (which shall be assumed by Stockholder Co. or, in the case of
Liabilities of Next Century Aviation, retained in Next Century Aviation).
7. Section 9.2.2 of the Agreement is hereby amended and restated in its
entirety as follows:
"9.2.2 Pacific's Subsidiaries and Shareholder Co.'s Articles of
Incorporation. A copy of each of Pacific's Subsidiaries' articles of
incorporation certified by the Secretary of State of California and any
other formation documents together with a certificate from the Secretary or
any Assistant Secretary of each of Pacific's Subsidiaries and Stockholder
Co. certifying such Subsidiary's and Stockholder Co.'s bylaws,
respectively."
4
<PAGE>
8. Section 9.2.3 of the Agreement is hereby amended and restated in its
entirety as follows:
"9.2.3 Good Standing Certificates. Certificates of good standing or
subsistence, dated no earlier than seven days prior to the Closing and tax
certificates dated as of the closest practicable date prior to the Closing
Date as to Pacific, each of its Subsidiaries and Stockholder Co. from the
Secretary of State of its state of incorporation and each other
jurisdiction where such entity owns any material assets."
9. Section 10.3.2 of the Agreement is hereby amended and restated as
follows:
"10.3.2 Assumption of Plan Liability by Stockholder Co. Effective as of
the Closing Date, Stockholder Co. shall assume the Pacific Benefit Plans
(other than the Pacific FM, Inc. Retirement Plan (the "401(k) Plan") and
honor or cause its insurance carriers to honor, in accordance with the
terms of such plans, all claims for benefits incurred by any employees (or
their dependents or beneficiaries) under such plans."
10. The Agreement is hereby amended to add the following Sections 21.22 and
21.23:
"21.22 Release.
21.22.1 Satisfaction of Commitments. Stockholders represent, warrant and
covenant that: (a) the contract set forth on Schedule 21.22(a) hereto (the
"Release") remains in full force and effect, enforceable against the
parties thereto and no party thereto has breached the Release in any
respect; (b) Pacific has satisfied all of its payment obligations under the
Release in full on or prior to the time periods such payments were
required, including the payment (i) of $200,000 made on September 17, 1997,
and (ii) of $1,842,213.70, made on January 2, 1998, evidenced by the
receipt, attached hereto as Schedule 22.22(b).
21.22.2 Assumption of Liabilities. Notwithstanding anything to the
contrary contained herein, Stockholders, jointly and severally, hereby
assume all Liabilities and other obligations of Pacific, Stockholders and
any of their Affiliates under the Release and each document referenced
therein, or contemplated thereby.
21.23 Pre-Closing Taxes.
5
<PAGE>
21.23.1 Pacific represents, warrants and covenants that:
(a) Attached hereto as Schedule 21.23.1 are true, correct and complete
copies of the calculations of Pacific's Tax Liabilities for all periods
beginning on or after July 1, 1997 and ending on or prior to the Closing;
(b) After payment of the taxes listed on Schedule 21.22.3, Pacific
shall have no further Tax Liabilities for the periods included on Schedule
21.23.1."
6
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed and delivered in its name and on its behalf, all as of the date and
year first above written.
GRANITE BROADCASTING CORPORATION
By: /s/ Lawrence I. Wills
-----------------------------------------
Name: Lawrence I. Wills
----------------------------------------
Title: Vice President--Finance and Controller
--------------------------------------
PACIFIC FM INCORPORATED
By: /s/ James J. Gabbert
-----------------------------------
Name: James J. Gabbert
---------------------------------
Title: President
--------------------------------
/s/ James J. Gabbert
--------------------------------------
James J. Gabbert
/s/ Michael P. Lincoln
--------------------------------------
Michael P. Lincoln
7
<PAGE>
Exhibit 2.6
EXECUTION COPY
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
among
FREEDOM COMMUNICATIONS, INC.,
GRANITE BROADCASTING CORPORATION,
WLAJ, INC.
WLAJ LICENSE, INC.
WWMT-TV, INC.
AND
WWMT-TV LICENSE, INC.
dated as of
July 15, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions..............................................................2
1.1 Defined Terms.......................................................2
1.2 Accounting Terms...................................................18
1.3 Other Definition Provisions........................................18
2. Purchase of Broadcasting Assets, Purchase Price and
Method of Payment.......................................................22
2.1 Purchase of Broadcasting Assets....................................22
2.2 Consideration; Adjustment; Allocation
of Purchase Price..................................................23
2.2.1 Purchase Price..........................................23
2.2.2 Prorations..............................................23
2.2.3 Manner of Determining Prorations........................25
2.2.4 Allocation of Purchase Price............................28
2.3 Accounts Receivable................................................30
2.4 Assumption of Liabilities..........................................31
2.4.1 Limitation on Assumption of Obligations.................31
2.4.2 Assumed Obligations Relating to WLAJ....................32
2.4.3 Substitution Where Not Transferable.....................33
2.5 Acquisition of WLAJ................................................34
3. FCC Consent.............................................................37
3.1 Application and Request............................................37
3.2 Final FCC Order....................................................38
4. Representations and Warranties of Granite...............................39
4.1 Organization and Standing..........................................39
4.2 Authorization and Binding Obligations..............................40
4.3 No Contravention; Consents.........................................41
4.3.1 No Contravention........................................41
4.3.2 Consents................................................42
4.4 Title to Assets....................................................42
4.4.1 Real Property...........................................42
4.4.2 Tangible Personal Property..............................45
4.4.3 Assets Sufficient.......................................45
4.5 Condition of Assets................................................45
4.6 Licenses and Authorizations........................................47
4.6.1 Licenses................................................47
4.6.2 Authorizations..........................................47
4.7 Contracts..........................................................48
(i)
<PAGE>
Page
----
4.8 Franchises, Trademarks and Trade Names.............................50
4.9 Employee Agreements and Plans; ERISA...............................51
4.9.1 Station Plans...........................................52
4.9.2 Compliance With Laws....................................52
4.9.3 Multiemployer Plans.....................................53
4.9.4 Group Health Plan.......................................53
4.9.5 Post-Employment Obligations.............................53
4.9.6 Delivery................................................54
4.10 Financial Statements; Liabilities..............................54
4.10.1 Financial Statements...................................54
4.10.2 Liabilities............................................55
4.11 Litigation; Compliance.........................................56
4.11.1 Litigation.............................................57
4.11.2 Violations.............................................58
4.12 Cable Carriage.................................................58
4.13 Labor..........................................................59
4.14 Affiliated and Recent Transactions.............................59
4.14.1 Affiliated Transactions................................59
4.14.2 Recent Transactions....................................61
4.15 Taxes..........................................................61
4.15.1 Filing of Tax Returns..................................62
4.15.2 Tax Liens..............................................62
4.15.3 Parachute Payments.....................................62
4.16 Environmental Matters..........................................62
4.16.1 Compliance.............................................63
4.16.2 Property Use...........................................63
4.16.3 USTs...................................................64
4.16.4 Claims.................................................64
4.16.5 Hazardous Materials....................................65
4.16.6 Relevant Property......................................65
4.17 Miscellaneous..................................................65
5. Representations and Warranties of Buyer.................................65
5.1 Organization and Standing..........................................66
5.2 Authorization and Binding Obligations..............................66
5.3 No Contravention...................................................67
5.4 Litigation.........................................................67
5.5 Absence of Knowledge as to Certain Facts...........................68
5.6 Miscellaneous......................................................68
6. Conduct of Business.....................................................68
6.1 Conduct of Business to Closing.....................................68
6.1.1 Conduct of Business.....................................69
6.1.2 Assets..................................................69
(ii)
<PAGE>
Page
----
6.1.3 Inventory...............................................69
6.1.4 Employee Compensation and Benefits......................70
6.1.5 Organization, Etc.......................................70
6.1.6 Insurance...............................................71
6.1.7 Transfer of Broadcasting Assets.........................71
6.1.8 Financial Statements; Pacing Reports....................71
6.1.9 Encumbrances............................................72
6.1.10 Litigation..............................................72
6.1.11 Agreements..............................................73
6.1.12 Consents and Approvals..................................74
6.1.13 Network Affiliation Agreements..........................74
6.1.14 Licenses................................................74
6.2 Offers to Purchase.................................................75
6.3 No Breach of Representations and Warranties........................75
6.4 Employee Notification Requirements.................................75
6.4.1 Notice..................................................75
6.4.2 Organizing Activity.....................................76
6.5 Access and Information.............................................76
6.7 Buyer's Covenants..................................................78
6.7.1 Litigation..............................................78
6.7.2 No Breach of Representations and Warranties.............78
7. Conditions Precedent to the Obligations of the Parties..................78
7.1 Conditions Precedent to the Obligation of Buyer....................78
7.1.1 FCC Consent.............................................78
7.1.2 Accuracy of Representations and Warranties..............79
7.1.3 Compliance with Agreement...............................79
7.1.4 No Obstructive Proceeding...............................79
7.1.5 Adverse Change..........................................81
7.1.6 Consents................................................82
7.1.7 Officers' Certificates..................................83
7.1.8 Authorization...........................................83
7.1.9 Opinions of Counsel.....................................83
7.1.10 Certifications..........................................84
7.1.11 Copies of Documents.....................................84
7.1.12 FIRPTA Affidavits.......................................84
7.1.13 Film Contracts..........................................85
7.1.14 Title Insurance Policies................................85
7.1.15 Proceedings.............................................86
7.1.16 Removal of Encumbrances.................................86
7.1.17 Delivery of Instruments of Conveyance
and Transfer............................................86
7.2 Conditions to Obligations of Granite Group.........................86
7.2.1 FCC Consent.............................................87
7.2.2 Accuracy of Representations and Warranties..............87
(iii)
<PAGE>
Page
----
7.2.3 Compliance with Agreement...............................87
7.2.4 Delivery of Instruments of Assumption...................87
7.2.5 No Obstructive Proceeding...............................87
7.2.6 Proceedings.............................................89
7.2.7 Opinion of Counsel......................................90
7.2.8 WLAJ Documents..........................................90
7.2.9 Authorizations..........................................90
8. Instruments of Conveyance and Transfer..................................91
8.1 Instruments of Conveyance and Transfer
of Real Property...................................................91
8.1.1 Real Property...........................................91
8.2 Instruments of Conveyance and Transfer
of Personal Property...............................................91
8.2.1 Assignment of Leases....................................92
8.2.2 Bills of Sale...........................................92
8.2.3 Assignments of Licenses.................................92
8.2.4 Assignments of Contracts................................92
9. Employees...............................................................92
9.1 Buyer to Hire......................................................92
9.2 Cooperation........................................................93
9.3 No Liability for Employee Plans....................................94
9.4 Indemnity..........................................................95
10. Risk of Loss; Failure of Broadcast Transmission.........................95
10.1 Risk of Loss...................................................96
10.2 Failure of Broadcast Transmission..............................96
11. Books and Records.......................................................98
12. Possession and Control of WLAJ..........................................99
13. Brokers.................................................................99
14. Survival; Indemnification..............................................100
14.1 Survival......................................................100
14.2 Granite Group Indemnification - Breach........................102
14.3 Granite Group Indemnification - Liabilities...................102
14.4 Buyer's Indemnification.......................................103
(iv)
<PAGE>
Page
----
14.4.1 Buyer's Indemnification - Breach......................103
14.4.2 Buyer's Indemnification - Liabilities.................104
14.5 Granite Group's Obligations...................................104
14.6 Taxes.........................................................105
14.7 Indemnification Claim.........................................105
14.8 Notice of Claim...............................................106
14.9 Indemnitor's Obligations......................................108
14.10 Date of Notice of Claim.......................................108
14.11 Consent of Indemnification....................................108
14.12 Subrogation...................................................108
14.13 Limitation on Liability.......................................109
15. Hart-Scott-Rodino Filings..............................................109
16. Reserved...............................................................109
17. Termination............................................................109
17.1 Events of Termination.........................................109
17.1.1 Buyer..................................................109
17.1.2 Granite................................................109
17.1.3 Mutual Consent.........................................109
17.1.4 By Granite on Breach...................................109
17.1.5 By Buyer on Breach.....................................109
17.1.6 Granite or Buyer.......................................109
17.2 Effect of Termination.........................................109
17.2.1 Effect.................................................110
17.2.2 Generally..............................................110
18. Covenant Against Competition; Confidentiality..........................112
18.1 Non-Competition...............................................112
18.2 Confidentiality...............................................113
18.3 Specific Performance..........................................113
19. Miscellaneous..........................................................114
19.1 General.......................................................114
19.2 Costs, Expenses, Etc..........................................115
19.3 Further Assurances............................................115
19.4 Notice of Proceedings.........................................116
19.5 Notices.......................................................116
19.6 Headings and Entire Agreement; Amendment......................118
19.7 Waiver........................................................118
(v)
<PAGE>
Page
----
19.8 Binding Effect and Assignment.................................119
19.9 Counterparts..................................................119
19.10 Schedules and Attachments.....................................119
19.11 Rights Cumulative.............................................120
19.12 Governing Law.................................................120
19.13 Severability..................................................120
19.14 Third Party Rights............................................120
19.15 Time of Essence...............................................121
19.16 Press Releases................................................121
19.17 Specific Performance..........................................121
19.18 Confidentiality...............................................121
20. Amendment/Modification of February Purchase Agreement..................123
20.1 Generally........................................................124
20.2 Specific Amendments..............................................124
21. Operation of WLAJ......................................................125
(vi)
<PAGE>
EXHIBITS
Exhibit A-1 - Opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
Exhibit A-2 - Opinion of Reid and Reid
Exhibit B - Title Insurance Policy Commitments
Exhibit C-1 - Opinion of Glenn E. Fuller
Exhibit D - Transfer Documents
EXHIBIT E-1 - Consents
EXHIBIT E-2 - Indemnification Letter
SCHEDULES
Schedule A-1 - Owned and Leased Real Property of WLAJ
Schedule B-1 - Owned and Leased Tangible Personal Property
of WLAJ
Schedule C-1 - Other Operating Contracts of WLAJ
Schedule D-1 - Franchises, Trademarks and Tradenames of WLAJ
Schedule E-1 - WLAJ Licenses
Schedule F - Excluded Contracts
Schedule G - Loan Agreement
Schedule 2.2.2 - Trade Agreements
Schedule 4.3.1 - Consents and Waivers
Schedule 4.5 - Condition of Assets
Schedule 4.5.2 - Capital Expenditures
Schedule 4.9 - Station Plans
Schedule 4.10.1 - Financial Statements
Schedule 4.10.2 - Liabilities
Schedule 4.11 - Litigation
Schedule 4.12 - Cable Carriage
Schedule 4.14.1 - Affiliated Transactions
Schedule 4.14.2 - Recent Transactions
Schedule 4.16.1 - Environmental Matters - Compliance
Schedule 4.16.2 - Environmental Matters - Hazardous Materials
Schedule 4.16.3 - Environmental Matters - USTs
Schedule 4.16.4 - Environmental Matters - Claims
Schedule 6.1.4 - Employee Compensation and Benefits
Schedule 6.1.5 - Business Organization
Schedule 6.1.6 - Insurance Policies
Schedule 7.1.6 - Closing Consents
(vi)
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated as of July 15, 1998, among FREEDOM COMMUNICATIONS,
INC., a California corporation ("Buyer"), GRANITE BROADCASTING CORPORATION, a
Delaware corporation ("Granite"), WLAJ, INC., a Delaware corporation ("WLAJ,
Inc." and collectively with Granite, "Sellers"), WLAJ LICENSE, INC., a Delaware
corporation ("WLAJ License, Inc."), WWMT-TV, INC., a Delaware corporation
("WWMT-TV, Inc."), and WWMT-TV LICENSE, INC., a Delaware corporation ("WWMT-TV
License, Inc.").
WITNESSETH:
WHEREAS, WLAJ, Inc. is a wholly owned subsidiary of Granite, and WLAJ
License, Inc. is a wholly owned subsidiary of WLAJ, Inc.;
WHEREAS, Lansing (as hereinafter defined) is the licensee of the WLAJ
Licenses (as hereinafter defined) and owns the WLAJ Lansing Assets (as
hereinafter defined);
WHEREAS, Granite owns all of the WLAJ Granite Assets (as hereinafter
defined), has entered into the WLAJ Purchase Agreement (as hereinafter defined)
to purchase the WLAJ Lansing Assets (as hereinafter defined) from Lansing and to
have Lansing assign to Granite the WLAJ Licenses, and currently operates WLAJ
pursuant to the Time Brokerage Agreement (as hereinafter defined);
1
<PAGE>
WHEREAS, Buyer, Sellers, WWMT-TV, Inc. and WWMT-TV License, Inc. have
entered into a Purchase Agreement, dated as of February 18, 1998 (the "February
Purchase Agreement");
WHEREAS, as an inducement to consummate the sale of the WWMT Assets to
Buyer on the date hereof, in lieu of (i) Sellers transferring the WLAJ Granite
Assets and (ii) Granite assigning all of its rights and interests in, and
delegation of the obligations under, the WLAJ Documents, to Buyer (collectively,
the "TBA Transaction") on the date hereof as permitted by the terms of the
February Purchase Agreement, the parties hereto desire to amend the February
Purchase Agreement and to consummate the transfer of the Broadcasting Assets (as
hereinafter defined) to Buyer in accordance with the terms and conditions set
forth herein;
WHEREAS, immediately subsequent to the execution and delivery of this
Agreement, the parties are closing the transactions contemplated by the February
Purchase Agreement (as amended by this Agreement);
NOW, THEREFORE, in consideration of the mutual premises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
2
<PAGE>
1. Definitions. As used herein, the following terms shall have the
following meanings:
1.1 Defined Terms.
"Accounts Receivable" means all trade accounts receivable and all notes,
bonds and other evidences of indebtedness of and rights to receive payments
arising out of sales occurring in the conduct of the business of WLAJ prior to
the Closing Date, including any rights of Sellers with respect to any third
party collection procedures or any other actions or proceedings that have been
commenced in connection therewith.
"Affiliate" (and, with a correlative meaning, "Affiliated") shall mean,
with respect to any Person (as hereinafter defined), any other Person that
directly, or through one or more intermediaries, controls or is controlled by or
is under common control with such first Person, and, if such a Person is an
individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power to direct or
cause
3
<PAGE>
the direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise).
"Agreement" means this Purchase and Sale Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Assistance" has the meaning set forth in Section 21 hereof.
"Assumed Obligations" has the meaning set forth in Section 2.4.2 hereof.
"Base Price" has the meaning set forth in Section 2.2.1 hereof.
"Broadcasting Assets" means the WLAJ Granite Assets and the WLAJ Lansing
Assets.
"Business Employees" has the meaning set forth in Section 9.1 hereof.
"Buyer" has the meaning set forth in the recitals hereto.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section. 9601 - 9675, and the
regulations thereunder, as in effect from time to time.
4
<PAGE>
"Claims" means any of the following that arise from Environmental
Conditions and pertain to WLAJ or relate to the Broadcasting Assets: pending
demands, suits or causes of action for damages, including but not limited to,
those alleged to result from exposure to or injury from Environmental Conditions
by any Person, personal injury or property damage of any kind; actual or
threatened damages to natural resources; pending or threatened recovery of
response costs (as defined in Section 104 of CERCLA and applicable state law),
or administrative or judicial orders directing the performance of investigations
or response, removal or remedial actions, as defined under CERCLA or analogous
concepts under applicable state law; claims for restitution, contribution or
equitable indemnity from third parties or any Governmental Authority; fines,
penalties or Encumbrances against property; injunctive relief; or other notices
of violation from federal, state or local Governmental Authorities.
"Closing" means the consummation of the transactions contemplated
hereby.
"Closing Date" means a time and business date to be selected by Buyer
and Granite, which date shall not be less than one (1) nor more than ten (10)
business days after the date on which the conditions specified in Section 7
hereof shall have
5
<PAGE>
been met or waived by the beneficiary thereof, unless otherwise provided for
herein or if Buyer and Granite mutually agree to a different time and date.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, as in effect from time to time.
"Commitments" has the meaning set forth in Section 7.1.13 hereof.
"Communications Act" means the Communications Act of 1934, as amended,
and the rules, regulations and policies promulgated thereunder, as in effect
from time to time.
"Contracts" has the meaning set forth in Section 4.7 hereof.
"Controlled Group" means Granite, any other member of the Granite Group
and any Person (whether or not incorporated) that is under common control (as
defined in section 414(c) of the Code) with Granite, any member of an affiliated
service group (as defined in section 414(m) of the Code) that includes Granite,
and any entity that is treated as being under common control with Granite under
section 414(o) of the Code.
"Controlled Group Plan" means an Employee Plan that, at any time, has
been entered into, maintained or sponsored by one or more members of the
Controlled Group, or to which one or more
6
<PAGE>
members of the Controlled Group has or may have had an obligation to contribute.
"Date of Notice of Claim" has the meaning set forth in Section 14.10
hereof.
"Employee Plan" means any employee benefit plan, as defined in section
3(3) of ERISA (as hereinafter defined), and any other compensation or benefit
plan, agreement, program, policy or arrangement, whether or not subject to
ERISA, whether written or oral, whether maintained for current employees, former
employees, or retirees, and whether currently in effect or terminated or frozen,
including, without limitation, defined benefit pension plans, defined
contribution pension plans, medical and other welfare plans and any retirement,
deferred compensation, medical, dental, cafeteria, stock purchase, stock option,
savings, severance, bonus, incentive, vacation, or sick pay plan, agreement,
program, policy or arrangement; excluding in all instances employment
agreements.
"Encumbrances" has the meaning set forth in Section 4.4.1 hereof.
"Environmental Conditions" means conditions of the environment arising
from or relating to the presence or storage of Hazardous Materials (as
hereinafter defined) in or on the flora, fauna, surface, soil, surface water,
groundwater, drinking
7
<PAGE>
water, subsurface strata, or ambient air on, under, in, about, or adjacent to
the assets listed on Schedule A-1 or referred to in Section 4.16 hereof.
"Environmental Laws" means any applicable statute, enactment, ordinance,
rule, regulation, decision, judgment, decree, permit or license, whether local,
state, territorial or national, in force or effect as of the Closing Date:
(a) relating to emissions, discharges, spills, releases or
threatened releases of Hazardous Materials into air, water, or land;
(b) relating to the use, treatment, storage, disposal, handling,
manufacturing or shipment of Hazardous Material;
(c) relating to the regulation of storage tanks; or
(d) otherwise relating to pollution or protection of human health
and the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder, as in effect from time to time.
"Excluded Assets" means: (a) cash or cash equivalents on hand and in
bank accounts; (b) WLAJ, Inc.'s and/or Granite's prepaid business (including,
liability, business interruption and
8
<PAGE>
the like) and group insurance premiums; (c) any prepaid expenses for which WLAJ
and/or the Broadcasting Assets will not receive a benefit after the Closing; (d)
prior to the acquisition thereof by Granite on the Closing Date, the WLAJ
Lansing Assets; (e) Excluded WLAJ Assets; (f) Accounts Receivable; (g) assets of
Granite and its Affiliates not located in or about Lansing, Michigan and any
intellectual property rights used by Granite or its Affiliates for stations
other than WLAJ, provided, however, that any such assets or intellectual
property rights are not used principally in the operations of WLAJ; and (h) the
Contracts and other agreements set forth on Schedules F or 4.9 hereto.
"Excluded WLAJ Assets" means Excluded WLAJ Assets as defined in the WLAJ
Purchase Agreement.
"FCC" has the meaning set forth in the recitals hereto.
"FCC Application" has the meaning set forth in Section 3.1 hereof.
"February Purchase Agreement" has the meaning set forth in the recitals
hereto.
"Final Order" means an order of the FCC granting its consent to the
applications referred to in Section 3.1 hereof, which order has become final.
For purposes of this Agreement, "final" shall mean action by the FCC: (a) which
has not been vacated, reversed, stayed, set aside, annulled or suspended; (b)
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with respect to which no timely appeal, timely request for stay, or timely
petition for rehearing, reconsideration or review by any Person or governmental
entity or by the FCC on its motion, is pending; (c) as to which the time for
filing any such timely appeal, timely request, timely petition or for the
reconsideration or review by the FCC on its own motion, has expired; and (d)
under which the transfer of WLAJ Licenses from WLAJ License Inc. to Freedom
Broadcasting of Michigan may, at the time of transfer, be transferred without
violating or contravening the Communications Act.
"Financial Information" has the meaning set forth in Section 4.10
hereof.
"Financial Statements" has the meaning set forth in Section 4.10 hereof.
"First Union" means First Union National Bank of North Carolina.
"Freedom Broadcasting of Michigan" means Freedom Broadcasting of
Michigan, Inc., a Delaware corporation and indirect wholly-owned subsidiary of
Buyer.
"GAAP" means generally accepted accounting principles in effect in the
United States of America at the time of determination, and which are
consistently applied.
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"Governmental Authority" means any court or federal, state, municipal or
other governmental authority, department, commission, board, agency or
instrumentality, foreign or domestic, or any employee or agent thereof.
"Granite" has the meaning set forth in the recitals hereto.
"Granite Group" means Granite, WLAJ, Inc., WLAJ License, Inc., WWMT-TV,
Inc. and WWMT-TV License, Inc.
"Guaranty" means the Guaranty and Note Purchase Agreement dated October
17, 1996 among Granite, First Union and Lansing.
"Hazardous Materials" means hazardous or toxic wastes, chemicals,
substances, constituents, pollutants or related material, whether solids,
liquids, or gases, defined or regulated under Section 101(14) of CERCLA;
RCRA; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 -2671; the
Safe Drinking Water Act, 42 U.S.C. Sections 300f - 300j-ll; the Clean Air
Act, as amended, 42 U.S.C. Sections 7401 - 7671q; the Federal Water Pollution
Control Act, 33 U.S.C. Sections 1251 - 1387; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 - 11050; or any
similar federal or state laws.
11
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"HSRA" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the regulations thereunder, as in effect from time to time.
"Indemnitee" has the meaning set forth in Section 14.7 hereof.
"Indemnitor" has the meaning set forth in Section 14.7 hereof.
"Information" has the meaning set forth in Section 19.18 hereof.
"Initial Order" has the meaning set forth in Section 3.2(a) hereof.
"Knowledge" means, whenever a phrase herein is qualified by a party's
knowledge or a similar phrase, the knowledge of a responsible corporate officer
or management personnel after reasonable inquiry and investigation; "actual
knowledge" means, whenever a phrase herein is qualified by a party's actual
knowledge or a similar phrase, the actual knowledge, without inquiry or
investigation, of a responsible corporate officer or management personnel.
"Lansing" means Lansing 53, Inc., a Michigan corporation.
"Liabilities" means all liabilities, obligations,
indebtedness, commitments, and any other items constituting
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"liabilities" under GAAP, whether direct or indirect, absolute, accrued,
contingent, liquidated or unliquidated, or otherwise, asserted or unasserted,
including without limitation trade accounts payable; accrued liabilities for
payroll or other compensation or benefits and related expenses; obligations or
liabilities for Taxes; obligations or liabilities for violations of any law,
rule, regulation, order or conditions of permits or licenses; liabilities or
obligations relating to claims of libel, slander or other defamation or
violations of rights of privacy, rights to protect a likeness or other similar
rights; obligations or liabilities relating to infringement of any tradename,
trademark, copyright, trade secret or other proprietary or intellectual property
right; obligations or liabilities for Environmental Conditions; obligations or
liabilities for borrowed money or for the deferred purchase price of property or
services; obligations secured by any Encumbrance on or with respect to any
property or assets owned by a Person or acquired by a Person subject thereto
(whether or not the obligation secured thereby shall have been assumed);
obligations under direct or indirect guarantees, and other obligations
(contingent or otherwise) to purchase, to provide funds for payment or otherwise
acquire property or to assure a creditor against loss, obligations to reimburse
the issuer with respect to letters of credit;
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liabilities in respect of unfunded accrued vested benefits under any Employee
Plan; and any capitalized lease obligations.
"Loan" means a $12.0 million senior secured loan made by First Union to
Lansing and guaranteed by Lansing's stockholder and Granite, pursuant to the
terms and conditions of the Loan Agreement.
"Loan Agreement" means the Credit Agreement, dated October 17, 1996, as
amended by that certain First Amendment dated as of October 10, 1997, among
First Union and Lansing, and the following documents entered into in connection
therewith listed on Schedule G hereto.
"Network" means CBS, Fox Broadcasting Company, the National Broadcasting
Company or the American Broadcasting Company.
"Notice of Claim" has the meaning set forth in Section 14.7 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA.
"Permitted Encumbrances" has the meaning set forth in Section 4.4.1
hereof.
"Person" shall mean any natural person, corporation,
partnership, limited liability company, firm, joint venture,
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joint-stock company, trust, association, unincorporated entity of any kind,
trust, governmental or regulatory body or other entity.
"Pre-Closing Incurred Obligations" has the meaning set forth in Section
2.2.3(a) hereof.
"Pre-Closing Paid Obligations" has the meaning set forth in Section
2.2.3(a) hereof.
"Proceeds" has the meaning set forth in Section 10.1 hereof. "Prohibited
Business" has the meaning set forth in Section 18.1 hereof.
"Prohibited Business" has the meaning set forth in Section 18.1
hereof.
"Prohibited Transaction" has the meaning specified in Sections 406
through 408 of ERISA and Section 4975 of the Code.
"Prorated Obligations" has the meaning set forth in Section 2.2.3(a)
hereof.
"Proration Statement" has the meaning set forth in Section 2.2.3(a)
hereof.
"Purchase Price" has the meaning set forth in Section 2.2.1 hereof.
"RCRA" means the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Sections 6901 - 6992k, and the regulations thereunder, as in effect from
time to time.
"Retained Liabilities" means all Liabilities and other obligations of
any member of the Granite Group which are not
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Assumed Obligations or "Assumed Obligations" under the February Purchase
Agreement, including but not limited to (except to the extent of Prorated
Obligations): (a) any intercompany debts, obligations or Liabilities or any
debts, obligations or Liabilities owing from any member of the Granite Group to
any of their respective Affiliates; (b) federal, state, local and other
Liabilities for Taxes; (c) amounts payable for business (including casualty,
liability, business interruption and the like) or group insurance premiums; (d)
Liabilities or other obligations under any Employee Plan of any member of the
Granite Group or any of their respective Affiliates; (e) any funded indebtedness
or other obligations or Liabilities relating to borrowed money; (f) trade or
other accounts payable, accrued payroll or other compensation or benefits, and
employee sales commissions; (g) credit balances for deferred income Taxes; (h)
any Liabilities incurred by the Granite Group with respect to the ownership or
operation of WLAJ or the Broadcasting Assets prior to the Closing Date; (i) any
Liability or obligation for any breach or default by Sellers under the WLAJ
Documents; and (j) any Liability or other obligation which is otherwise
specifically retained by Sellers pursuant hereto.
"Sellers" has the meaning set forth in the recitals hereto.
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"Station Plan" has the meaning set forth in Section 4.9.1 hereof.
"Tax" or "Taxes" means all federal, state, local, foreign and other
taxes, including income, franchise, estimated income, gross receipts,
employment, license, payroll, excise, stamp, social security, unemployment, real
property, commercial rent, occupancy, personal property, sales, use, transfer
and withholding taxes, including interest, penalties and additions in connection
therewith, whether disputed or not.
"TBA Transaction" shall have the meaning set forth in the recitals
hereto.
"Time Brokerage Agreement" means the Time Brokerage Agreement, dated as
of October 17, 1996, as amended by that certain First Amendment to Time
Brokerage Agreement dated as of September 1997, among Lansing, Lansing's
stockholder and Granite.
"Title Policies" has the meaning set forth in Section 7.1.13(a) hereof.
"WLAJ" means television station WLAJ-TV, Channel 53, Lansing, Michigan.
"WLAJ Granite Assets" means all real, personal and mixed assets, both
tangible and intangible, of every kind, nature and description whether or not
carried or reflected on the books of Granite or any Affiliate of Granite, owned
or held and used by
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or held for use by any member of the Granite Group in connection with its
operation of WLAJ under the Time Brokerage Agreement, other than the Excluded
Assets, which are expressly excluded from the definition of WLAJ Granite Assets,
and, except as otherwise provided in this Agreement, WLAJ Granite Assets shall
include all such assets existing on the date of this Agreement and all such
assets acquired between the date hereof and the Closing Date, including, without
limitation (other than Excluded Assets):
(a) all real property, leasehold interests, estates and improvements
of every kind and description, together with all buildings, structures and
improvements of every nature located thereon, owned or held and used by or held
for use by any member of the Granite Group in connection with its operation of
WLAJ under the Time Brokerage Agreement as of the date hereof (including without
limitation those that are set forth in Schedule A-1 hereto) and acquired between
the date hereof and the Closing Date;
(b) all broadcasting and other equipment, office furniture,
fixtures, tapes, machinery, office materials and supplies, spare parts, tubes
and other tangible personal property of every kind and description owned or held
and used by or held for use by any member of the Granite Group in connection
with its operation of WLAJ under the Time Brokerage Agreement on the date
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hereof, including without limitation those set forth on Schedule B-1 hereto, and
any additions, improvements and replacements thereto between the date hereof and
the Closing Date, together with all warranties, rights and claims relating to
the assets listed in this paragraph (b);
(c) all Contracts and commitments relating to the business and
operations of WLAJ to which any member of the Granite Group is a party, other
than those listed on Schedules F or 4.9 hereto, on the date hereof, including
without limitation those contracts, agreements and commitments set forth on
Schedules A-1 (Owned and Leased Real Property of WLAJ), B-1 (Owned and Leased
Tangible Personal Property of WLAJ) and C-1 (Other Operating Contracts of WLAJ)
hereto (which Schedules shall also specify those contracts the assignment of
which requires third-party consent), together with all contracts, agreements and
commitments, that have been entered into between the date hereof and the Closing
as expressly permitted by this Agreement;
(d) the books and records relating to the operation of WLAJ by any
member of the Granite Group under the Time Brokerage Agreement;
(e) all franchises, trademarks, patents, tradenames, service marks,
promotional materials, slogans, intellectual property rights and interests, call
letters,
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copyrights in literary property of any kind, know-how jingles and privileges, if
any, owned or held and used by or held for use by any member of the Granite
Group in connection with its operation of WLAJ under the Time Brokerage
Agreement as of the date hereof, including, without limitation, those set forth
in Schedule D-1 hereto, and those acquired between the date hereof and the
Closing;
(f) all of Granite's and WLAJ's prepaid expenses useful by Buyer in
connection with its operation of WLAJ under the Time Brokerage Agreement after
the Closing; and
(g) as of the acquisition thereof by Granite on the Closing Date,
the WLAJ Lansing Assets.
"WLAJ Documents" means the WLAJ Purchase Agreement, the Time Brokerage
Agreement, the Loan Agreement and the Guaranty.
"WLAJ Employees" has the meaning set forth in Section 4.13 hereof.
"WLAJ, Inc." means WLAJ, Inc., a Delaware corporation and wholly owned
subsidiary of Granite.
"WLAJ Lansing Assets" means the "Broadcasting Assets" as defined in the
WLAJ Purchase Agreement, except to the extent the same have been replaced by
WLAJ Granite Assets or to the extent such assets are no longer needed in the
operation of WLAJ.
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"WLAJ Licenses" means all licenses, permits and authorizations issued or
granted by the FCC for the ownership and operation of WLAJ and all applications
therefor, all of which are listed on Schedule E-1 hereto, together with any
renewals, extensions or modifications thereof and additions thereto between the
date hereof and the Closing.
"WLAJ Purchase Agreement" means the Purchase and Sale Agreement, between
Granite, Lansing and Lansing's stockholder dated as of October 17, 1996, as
amended by that certain First Amendment to Purchase and Sale Agreement dated as
of September 1997.
"WLAJ Transaction Matters" has the meaning set forth in Section 20.1
hereto.
"WWMT" means the CBS affiliate serving the Grand Rapids-Kalamazoo-Battle
Creek, Michigan television market.
"WWMT Assets" has the meaning set forth in the February Purchase
Agreement.
"WWMT-TV License, Inc." has the meaning set forth in the recitals
hereto.
1.2 Accounting Terms. All terms of an accounting nature not specifically
defined herein shall have the respective meanings given to them under GAAP.
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1.3 Other Definition Provisions. The masculine form of words includes
the feminine and the neuter and vice versa, and, unless the context otherwise
requires, the singular form of words includes the plural and vice versa. The
words "herein," "hereof," "hereunder" and other words of similar import when
used in this Agreement refer to this Agreement as a whole, and not to any
particular section or subsection.
2. Purchase of Broadcasting Assets, Purchase Price and Method of Payment.
2.1 Purchase of Broadcasting Assets Subject to the terms and upon
satisfaction of the conditions contained in this Agreement, at the Closing:
(a) The members of the Granite Group shall sell, assign, transfer,
convey and deliver to Buyer, and Buyer shall purchase from the members of the
Granite Group, all of their respective rights, title and interests in the
Broadcasting Assets (excluding the WLAJ Licenses);
(b) WLAJ License, Inc. shall assign and deliver to Buyer, and Buyer
shall accept assignment from WLAJ License, Inc. of, the WLAJ Licenses;
(c) Sellers and WLAJ License, Inc. shall transfer and deliver to
Buyer, and Buyer shall assume, the Assumed Obligations in accordance with
Section 2.4 hereof.
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The Closing shall take place at the offices of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400, Washington, D.C.
20036, or such other place as Buyer and Granite may agree.
2.2 Consideration; Adjustment; Allocation of Purchase Price.
2.2.1 Purchase Price. For and in full consideration of the assignments,
conveyances, and transfers described herein Buyer shall pay to Granite an amount
equal to the sum of Eighteen Million and Nine Hundred Thousand Dollars
($18,900,000.00)(the "Base Price"), adjusted as provided in Sections 2.2.2 and
2.2.3 below (the "Purchase Price").
2.2.2 Prorations. The Base Price shall be increased or decreased as
required to effectuate the proration as of the Closing Date of operating
expenses incurred in the ordinary course of business and arising from the
operations of WLAJ by the Granite Group. Such expenses shall include tower
rental, business and license fees, utility charges, real and personal property
taxes and assessments levied against the Broadcasting Assets, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, employee compensation and related Taxes, and similar prepaid and
deferred items, shall be prorated between Buyer and Granite in accordance
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with the principle that Granite shall be responsible for all expenses, costs and
Liabilities allocable to the operation or ownership of WLAJ by any member of the
Granite Group for the period prior to the Closing Date, and Buyer shall be
responsible for all expenses, costs and Liabilities allocable to the operation
of WLAJ by Buyer for the period after and including the Closing Date as
determined in accordance with Section 2.2.3 below, subject to the following:
(a) Payments due under film or programming license agreements for
the month in which the Closing occurs shall be prorated based on the number of
days in such month on or before the Closing Date and the number of days in such
month after and including the Closing Date.
(b) There shall be no adjustment for any difference between the
value of the goods or services to be received by any member of the Granite Group
as of the Closing under trade or barter agreements relating to WLAJ and the
value of any advertising time remaining to be run by any member of the Granite
Group as of the Closing under trade or barter agreements relating to WLAJ,
provided such agreements and the remaining advertising obligations thereunder
are in all material respects disclosed to Buyer on Schedule 2.2.2.
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(c) Real and personal property taxes shall be prorated based upon
the latest available tax information from the applicable Governmental
Authorities according to the fiscal years of the respective Governmental
Authorities for which the taxes are collected.
(d) No intercompany expenses shall constitute Prorated Obligations.
2.2.3 Manner of Determining Prorations. The Purchase Price, taking into
account the adjustments and prorations outlined in Section 2.2.2, shall be
determined in accordance with the following procedures:
(a) Prorated Obligations. Granite shall, no later than five (5)
business days prior to the Closing Date, prepare a document (the "Proration
Statement"), a copy of the form of which is to be delivered by Granite not less
than five days prior to the Closing for Buyer's review and approval, listing by
item, all of the expenses, costs, obligations and other Liabilities of WLAJ of
the type identified in Section 2.2.2 that are attributable solely to the
operation of WLAJ, either in whole or in part, during the period on or after the
Closing Date ("Prorated Obligations") but either payable in advance prior to the
Closing Date or in arrears after the Closing Date. For each Prorated Obligation,
there shall be listed (i) the estimated
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aggregate amount thereof remaining to be paid on or after the Closing Date, (ii)
the amount of such Prorated Obligation incurred by Sellers, attributable to
operation of WLAJ prior to the Closing Date ("Pre-Closing Incurred Obligations")
and (iii) the actual amount paid by Sellers with respect to such Prorated
Obligation prior to Closing ("Pre-Closing Paid Obligations").
(b) Closing Adjustment. The Purchase Price paid to Granite shall be
adjusted on an estimated basis at Closing based upon the Proration Statement to
the extent agreed to by the parties (with a final adjustment to be completed in
accordance with Section 2.2.3(c) below): (i) upward dollar-for-dollar by the
amount, if any, by which Pre-Closing Paid Obligations exceed Pre-Closing
Incurred Obligations; or (ii) downward dollar-for-dollar by the amount, if any,
by which, Pre-Closing Incurred Obligations exceed Pre-Closing Paid Obligations.
To the extent of any disagreements by the parties as to Prorated Obligations,
such disputes shall be resolved as part of the Post-Closing Adjustment under
Section 2.2.3(c).
(c) Post-Closing Adjustment.
(i) As promptly as possible after the Closing, but in any event
not later than sixty (60) days after the Closing Date, Buyer shall deliver to
Granite a statement setting forth Buyer's determination of the Purchase
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Price and the calculation thereof pursuant to Section 2.2.3(b). Buyer's
statement shall contain all information reasonably necessary to determine the
adjustments to the Purchase Price under Section 2.2.3(b), and such other
information as may be reasonably requested by Granite. If Granite disputes the
amount of the Purchase Price determined by Buyer, it shall deliver to Buyer
within thirty (30) days after their receipt of Buyer's statement a statement
setting forth its determination of the amount of the Purchase Price. If Granite
notifies Buyer of its acceptance of Buyer's statement, or if Granite fails to
deliver its statement within the thirty-day period specified in the preceding
sentence, Buyer's determination of the Purchase Price shall be conclusive and
binding on the parties as of the last day of the thirty-day period. To the
extent a Purchase Price adjustment payment by one party to the other is not in
dispute, such payment shall be made within five (5) business days after the
determination of the amount due by wire transfer to an account designated by the
receiving party.
(ii) Buyer and Granite shall use good faith efforts to resolve
any dispute involving the determination of the Purchase Price. If the parties
are unable to resolve the dispute within thirty (30) days following the delivery
of Granite's statement pursuant to Section 2.2.3(c)(i),
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Buyer and Granite shall jointly designate an independent public accounting firm
of national stature acceptable to Granite and Buyer, which firm shall be
knowledgeable and experienced in the operation of television broadcasting
stations, to resolve the dispute. The accounting firm's resolution of the
dispute shall be final and binding on the parties, and a judgment may be entered
thereon in any court of competent jurisdiction. Any Purchase Price adjustment
payment by one party to the other determined under this Section
2.2.3(c)(ii)shall be made within five (5) business days after the determination
of the amount by the independent public accounting firm by wire transfer to an
account designated by the receiving party. Any fees of this firm shall be split
equally between Buyer and Granite.
2.2.4 Allocation of Purchase Price. The parties hereby agree that,
except as otherwise specifically provided herein, for tax purposes they shall
allocate the Purchase Price among the Broadcasting Assets in accordance with
their respective fair market values, and that they will comply with the
applicable information reporting requirements of Section 1060 of the Code and
the regulations promulgated thereunder. Buyer and Granite shall report the
allocations consistently, to the extent permitted by law, on Internal Revenue
Form 8594, which the parties shall cooperate in preparing and which the parties
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will timely file with the Internal Revenue Service. Within thirty (30) days
after the Closing Date, Granite shall deliver to Buyer an initial schedule
setting forth a complete listing of the Broadcasting Assets delivered to Buyer
at the Closing, the book values and accumulated tax and book depreciation for
such assets as of December 31, 1997 and as of the Closing Date and an allocation
of Purchase Price among such Broadcasting Assets. Such allocation shall be final
and binding upon Sellers and Buyer unless within 20 business days of receipt
thereof Buyer gives written notice to Granite that it does not consent to such
allocation. If Buyer notifies Granite within such 20-day period that it is
withholding its consent, Granite and Buyer will use good faith efforts to
resolve any disagreements. If Granite and Buyer cannot thereafter reach
agreement on an allocation within 30 days, Buyer and Granite shall cause an
appraisal of the Broadcasting Assets to be performed and completed by Harrison,
Bond & Picarro or such other appraisal firm as Granite and Buyer shall mutually
designate, with expenses in connection with such appraisal to be borne equally
by Granite and Buyer. Such appraisal shall comply in all respects with the
applicable requirements of Section 1060 of the Code and the regulations
promulgated thereunder and shall be binding on the parties for the purpose of
allocating the Purchase Price among the
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Broadcasting Assets. Each of the parties shall be entitled to discuss the
methods and procedures to be used by and to review the working papers of such
appraisal firm.
2.3 Accounts Receivable. On the Closing Date, Granite shall deliver a
statement listing all Accounts Receivable. During the period commencing with the
Closing Date and ending the 180th calendar day after the Closing Date, Buyer
shall use commercially reasonable collection efforts to collect the Accounts
Receivable consistent with its practices for collection of its accounts
receivable; provided, however, that Buyer shall not be obligated to institute
any litigation or engage any collection agents or services, or incur any
out-of-pocket expenses (outside the ordinary course of business), in connection
with the collection of the Accounts Receivable. Buyer shall account to Granite
and remit to Granite all amounts collected by Buyer with respect to the Accounts
Receivable in accordance with the following schedule: (a) on or before the
twentieth (20th) day of the first complete calendar month after the Closing
Date, remit all amounts collected up to the end of the previous month and the
Persons from whom such amounts were collected; and (b) on or before the
twentieth (20th) day of each succeeding month, remit all amounts collected
during the month previous thereto and the Persons from whom such amounts were
collected. With each remittance, Buyer shall furnish a
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statement of the amounts collected and the Persons from whom such amounts were
collected. In the absence of a specific remittance advice accompanying payment
identifying the receivable to which a payment relates, collections from an
Accounts Receivable debtor shall be allocated to the oldest outstanding Accounts
Receivable of such debtor before applying any of such amounts to pay any other
obligation of such debtor to Buyer.
Buyer's obligation to collect the Accounts Receivable shall expire as of
midnight on the 180th day following the Closing Date. Within fifteen (15)
business days thereafter, Buyer shall remit to Granite all amounts collected
from the Closing Date until the date thereof to the extent not previously
remitted to Granite. Upon expiration of the Buyer's collection obligation under
this Section 2.3, Buyer shall turn over to Granite all documents and records
evidencing the Accounts Receivable which were paid to Granite hereunder and
which remain uncollected and Granite shall assume responsibility for collection
of any remaining Accounts Receivable for its own account.
2.4 Assumption of Liabilities.
2.4.1 Limitation on Assumption of Obligations. Except as set forth
in Section 2.4.2 below, Buyer expressly does not, and shall not, assume or be
deemed to have assumed under this Agreement or by reason of any transactions
contemplated
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hereunder any Liabilities or obligations of any member of the Granite Group,
WLAJ or Lansing of any nature whatsoever.
2.4.2 Assumed Obligations Relating to WLAJ. Subject to the
provisions of Section 2.4.3 below, at the Closing, Buyer shall assume and timely
pay or perform the following obligations (collectively the "Assumed
Obligations"): (a) excluding any Liabilities for defaults or breaches by any
member of the Granite Group, WLAJ or Lansing thereunder prior to the Closing or
any default or breach by any member of the Granite Group, WLAJ or Lansing
arising as a result of the consummation of the transactions contemplated hereby,
the obligations of any member of the Granite Group arising subsequent to, and
relating solely to, the operations of WLAJ on or after the Closing Date, under
(i) all contracts, agreements, commitments and leases of any member of the
Granite Group or Lansing or by which a member of the Granite Group or Lansing is
bound, in effect as of the date hereof which are included in the Broadcasting
Assets and set forth on Schedules A-1, B-1 and C-1, (ii) all contracts,
agreements, commitments, leases and amendments, renewals and other modifications
thereof which are entered into by any member of the Granite Group in connection
with the operations of WLAJ between the date hereof and the Closing as permitted
by and subject to the terms of this Agreement and (iii) all contracts,
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agreements and commitments of the members of the Granite Group or by which a
member of the Granite Group or Lansing is bound, not required by the terms of
Section 4.7 hereof to be listed on Schedules A-1, B-1 or C-1; (b) any
Liabilities incurred with respect to the operation of WLAJ on or after the
Closing Date; and (c) any Prorated Obligations allocated to Buyer. It is
understood and agreed that Assumed Obligations shall not include any Retained
Liabilities.
2.4.3 Substitution Where Not Transferable. If the members of the
Granite Group shall be unable, on or prior to the Closing, to obtain a consent
necessary for the assignment of its title to, interest in and rights under any
Contract to be assigned hereunder, then Granite and Buyer will cooperate to
enter into a reasonable arrangement designed to enable the applicable member of
the Granite Group (as applicable) to perform its obligations thereunder, and to
provide for the assumption and recognition by Buyer of the benefits, risks and
burdens of, any such Contract, including, if requested by Buyer, enforcement at
the cost and for the account of Buyer of any and all rights of the applicable
member of the Granite Group against the other party thereto arising out of the
future cancellation thereof after the Closing by such other party; provided,
that, Buyer shall not be required to enter into, or to accept as a substitute
for
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performance by any member of the Granite Group hereunder, any arrangement which
would impose any additional material cost, expense or Liability on Buyer, or
would deprive Buyer of any material benefits or profits contemplated under such
Contract. As and when after the Closing Date, title to, interest in and rights
under any such Contract become transferable, the assignment to Buyer by the
applicable member of the Granite Group of any title to, interest in and rights
under such Contract shall be deemed effective at the time such consent or
approval is effective, without any further action by Buyer or any member of the
Granite Group.
2.5 Acquisition of WLAJ.
2.5.1 Acquisition. It is the intent and desire of the parties hereto
that, immediately prior to the Closing, Granite shall close the transactions
contemplated by the WLAJ Purchase Agreement and that Buyer shall then acquire
the WLAJ Lansing Assets, including the WLAJ Licenses, from Granite. Granite
shall use commercially reasonable efforts to obtain the FCC's Final Order to the
assignment of the WLAJ Licenses to Granite from Lansing and to close the
transactions contemplated by the WLAJ Purchase Agreement on or prior to the
Closing.
2.5.2 TBA Transfer. Notwithstanding anything to the contrary
contained herein or in the February Purchase
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Agreement other than Section 2.5.3(b) hereof, in the event Granite has not
acquired the WLAJ Lansing Assets, including the WLAJ Licenses, prior to August
4, 1998 and all conditions to Closing in Section 7.1 hereof shall have been met
or waived by Buyer (other than obtaining a Final Order, and other than any other
conditions, representations, warranties, covenants and agreements that will not
be satisfied or accurate, by reason of the fact that the TBA Transaction will
occur in lieu of Granite acquiring the WLAJ Lansing Assets and subsequently
transferring the WLAJ Lansing Assets and WLAJ Licenses to Freedom), with the TBA
Transaction being deemed the transactions contemplated hereby for purpose of
satisfaction of such closing condition, Granite shall be entitled (if Buyer has
not prior thereto, by written notice to Granite, waived the Closing condition
that a Final Order be obtained as permitted by this Agreement), upon two (2)
business days' written notice (which notice may not be given prior to August 5,
1998 without the written consent of Buyer), to require the parties to consummate
the TBA Transaction, in lieu of the transfer of the Broadcasting Assets. In such
event, this Agreement shall be deemed amended to reflect the foregoing, with
such changes that shall be agreed upon by the parties and that are reasonable
under the circumstances, and the parties shall enter into a formal written
amendment of this Agreement to
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reflect the foregoing. Such amendment shall include the following:
(i) The Base Price shall be Negative Five Hundred Thousand Dollars
(-$500,000.00) and Granite shall pay to Freedom $500,000, subject to adjustment
as provided in 2.2.3 hereof; and
(ii) The representations, warranties, agreements, conditions and
covenants of the Granite Group shall be modified in a manner to reflect that
Granite will not own the WLAJ Lansing Assets at the time of Closing, but will
transfer the WLAJ Granite Assets to Buyer and consummate the TBA Transaction.
2.5.3 Signal Modification.
(a) The parties acknowledge that: (i) a condition required to
implement the Initial Order is that the broadcast signal of WLAJ be modified in
accordance with outstanding construction Permit File No. BPCT-960528KG (the
"Facilities Modification"); and (ii) as of the date hereof, the signal has yet
to be so modified. The parties agree to use commercially reasonable efforts
(with the costs therefore to be incurred by Granite) to obtain the Facilities
Modification or, if the Facilities Modification is no longer technologically
feasible, to obtain an appropriate modification to the facilities
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of WLAJ resulting in signal coverage substantially similar to that which would
result from the Facilities Modification (an "Alternative Modification") and that
enables the assignment of the WLAJ Licenses to Freedom Broadcasting of Michigan
(the "License Transfer") to occur. In no event shall failure to obtain the
Signal Modification or the Alternative Modification be deemed a breach of this
Agreement by any party hereto, if such party is using commercially reasonable
efforts to obtain the Signal Modification or an Alternative Modification.
(b) In the event the License Transfer can not be accomplished
because it is prohibited under the Communications Act or inconsistent with the
Final Order due solely to the inability to accomplish the Facilities
Modification or an Alternative Modification, then, until December 15, 1998,
Granite shall be prohibited from exercising its right, under Section 2.5.2 of
the Agreement, to effect the TBA Transaction.
3. FCC Consent.
3.1 Application and Request. The parties acknowledge that they have
filed with the FCC a complete and accurate application requesting the consent of
the FCC to the assignment of the WLAJ Licenses to Freedom Broadcasting of
Michigan (as amended, the "FCC Application"). Each party shall notify the other
parties hereto in the event it becomes aware of any other
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facts, actions, communications, or occurrences that might directly or indirectly
affect the parties' intent or ability to effect prompt FCC final approval of the
transactions contemplated by this Agreement. The parties hereto shall with
respect to WLAJ diligently take, or cooperate in the taking of, all necessary,
desirable and proper actions, provide any additional information reasonably
required or requested by the FCC, and otherwise use their commercially
reasonable efforts to obtain promptly the requested consent and approval of the
applications by the FCC. Buyer, Granite and WLAJ, Inc. shall oppose any
petitions to deny or other objections filed with respect to the FCC Application;
provided, however, that neither Buyer, Granite nor WLAJ, Inc. shall have any
obligation to participate in an evidentiary hearing on the FCC Applications. At
any party's option, Buyer, Granite, WLAJ License, Inc. and WLAJ, Inc. shall
appeal or otherwise seek review of any action of the FCC denying the FCC
Application, by filing an appropriate request for appeal or review with the FCC
or a court of competent jurisdiction, as the case may be.
3.2 Final FCC Order. The parties: (a) acknowledge that the FCC has
granted an order consenting to the assignment of the WLAJ Licenses to Freedom
Broadcasting of Michigan which is satisfactory to the parties (the "Initial
Order"); and
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(b) agree that said order having become a Final Order shall be a condition to
closing of the transactions contemplated hereby; provided that Buyer may waive
the condition to closing contained in Section 3.2(b) if the transfer of the WLAJ
Licenses to Freedom Broadcasting of Michigan may be consummated without
violating or contravening the Communications Act.
4. Representations and Warranties of Granite. Each member of the Granite
Group, jointly and severally with the other members of the Granite Group,
represent and warrant to Buyer that:
4.1 Organization and Standing. Each member of the Granite Group: (a) is
duly organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware; (b) has the requisite corporate power
and authority to enter into and perform this Agreement, and to own, lease and
operate its business and assets (including the Broadcasting Assets) and to carry
on its business as now being conducted under its existing agreements and to
perform the obligations required to be performed by it hereunder to consummate
the transactions contemplated hereby; (c) is duly qualified to do business in
every jurisdiction in which the nature of the business of WLAJ conducted by any
member of the Granite Group under the Time Brokerage Agreement requires such
qualification, except where the
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failure to so qualify would not materially adversely affect WLAJ or the
Broadcasting Assets; (d) owns none of the WLAJ Granite Assets and conducts none
of the business or operations of WLAJ under the Time Brokerage Agreement through
any Person other than Granite, WLAJ License, Inc. and WLAJ, Inc.; and (e) at the
Closing, will not own any of the WLAJ Lansing Assets and will not conduct the
business or operations of WLAJ under the Time Brokerage Agreement through any
Person other than Granite, WLAJ License, Inc. and WLAJ, Inc. All of the issued
and outstanding capital stock of WWMT-TV, Inc. and WLAJ, Inc., respectively, is
owned by Granite, and all of the issued and outstanding capital stock of WWMT-TV
License, Inc. and WLAJ License, Inc., respectively are owned by WWMT-TV, Inc.
and WLAJ, Inc., respectively. Since its inception, WLAJ, Inc.'s sole business
and operations have consisted of certain operations related to WLAJ.
4.2 Authorization and Binding Obligations. The execution, delivery and
performance of this Agreement by each member of the Granite Group are within the
corporate powers of each such member and have been duly and validly authorized
by all necessary corporate action on the part of each member of the Granite
Group. This Agreement has been duly executed and delivered by each member of the
Granite Group and constitutes a
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valid and binding agreement of each member of the Granite Group enforceable
against each member in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or affecting creditors rights generally and the exercise of judicial discretion
in accordance with general equitable principles.
4.3 No Contravention; Consents.
4.3.1 No Contravention. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
compliance with the provisions hereof by each member of the Granite Group do not
and will not, after the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of the terms of or contravene, the
Certificate of Incorporation or Bylaws of any member of the Granite Group or any
other document relating to a member of the Granite Group's governance; (b)
result in the breach of, or constitute a default under, conflict with or result
in the termination of any material agreement or other instrument to which any
member of the Granite Group is a party or by which the property of any member of
the Granite Group is bound or materially affected or result in the creation of
any Encumbrance upon any of the Broadcasting Assets or the WLAJ Licenses (after
giving effect to any consents and waivers set forth in Schedule
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4.3.1); or (c) violate or conflict with in any material manner any laws,
regulations, orders or judgments applicable to any member of the Granite Group
or any of their respective assets, including the Communications Act.
4.3.2 Consents. Except as set forth in Schedule 4.3.1 or as required
under the Communications Act or HSRA, no member of the Granite Group is required
to submit any notice, report or other filing with, or obtain any consent,
approval, authorization or waiver from, any Government Authority or other Person
(other than with respect to agreements not required to be listed on Schedule 4.7
hereto) in connection with the execution, delivery or performance by each member
of the Granite Group of this Agreement or any of the transactions contemplated
hereby.
4.4 Title to Assets.
4.4.1 Real Property.
(a) On the Closing Date, a member of the Granite Group will have and
will convey to Buyer marketable fee or leasehold title as applicable to all the
real property to be transferred by it hereunder (which conveyances,
collectively, will include all right, title and interest of the members of the
Granite Group in all real property included in the Broadcasting Assets), free
and clear of all mortgages, security interests,
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pledges, claims, liens, charges, covenants, easements, rights of way,
restrictions, encroachments, leases, or any other encumbrances (collectively,
"Encumbrances"), except for and subject only to: (i) liens for current real
estate and other Taxes (A) not yet due and payable and which are Prorated
Obligations, or (B) that the taxpayer is contesting in good faith through
appropriate proceedings and which constitute Retained Liabilities or Prorated
Obligations; (ii) liens created by statute securing the claims of materialmen,
landlords and like Persons incurred in the ordinary course of business and
provided payment is not yet delinquent and the underlying Liabilities or
obligations with respect to such liens constitute Retained Liabilities or
Prorated Obligations; (iii) covenants, conditions, restrictions, easements or
other minor imperfections (other than any such covenant, condition, restriction
or imperfection that could be satisfied by its terms solely by the payment of
money) that individually or in the aggregate do not materially detract from, or
materially interfere with the present use or present value of the properties or
assets subject thereto or affected thereby or otherwise materially impair the
assets, business or financial condition of WLAJ or the Broadcasting Assets or
affect the marketability of the properties subject thereto in any material
respect; (iv) those matters set forth on Schedule A-1,
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including the leases listed thereon (whether as lessor or lessee) or the
Commitments; and (v) Encumbrances to be released in satisfaction of Section
7.1.14 hereof (collectively, "Permitted Encumbrances").
(b) Schedule A-1 sets forth: (i) all real estate owned or leased by
any member of the Granite Group or used by a member of the Granite Group under
the Time Brokerage Agreement which is used in the operations of WLAJ or is
included in the Broadcasting Assets; and (ii) the nature of the right, title or
interest each member of the Granite Group has in such real estate as of the date
hereof. Except as disclosed in Schedule A-1, none of the buildings, structures
or improvements located on any real estate owned or leased by any member of the
Granite Group which relates to the operations of WLAJ encroaches on any
adjoining real estate, nor, to the knowledge of any member of the Granite Group,
does any adjoining real estate encroach on real estate owned or leased by any
member of the Granite Group. There is no condemnation action or proceeding
pending or, to the actual knowledge of any member of the Granite Group,
threatened, with respect to real estate identified on Schedule A-1 or any such
building, structure or improvement. Such real estate has available to it all
parking, utilities and access and all zoning permits and other use approvals
required for the operation of the
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business of WLAJ, as applicable, and activities thereon as presently conducted.
4.4.2 Tangible Personal Property. On the Closing Date, a member of the
Granite Group will have and will convey to Buyer marketable title to all the
tangible personal property to be transferred by it hereunder (which transfers,
collectively, will include all right, title and interest of the members of the
Granite Group in all tangible personal property included in the Broadcasting
Assets) , in each case free and clear of all Encumbrances, except for and
subject only to Permitted Encumbrances.
4.4.3 Assets Sufficient. The Broadcasting Assets include all assets
(other than Excluded Assets and WWMT Assets) that are used in the conduct of the
business and operations of WLAJ as presently conducted, and the Broadcasting
Assets include all assets necessary to the conduct of the business and
operations of WLAJ as presently conducted.
4.5 Condition of Assets. The Broadcasting Assets described in paragraphs
(a) and (b) of the definition of "WLAJ Granite Assets" and the real and tangible
personal property included in the WLAJ Lansing Assets, are in the possession of
Granite, WLAJ, Inc. or Lansing and in good operating condition and repair,
ordinary wear and tear excepted (except as set forth
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in Schedule 4.5), are suitable for the uses and purposes for which they are
being used or intended, and are used, located, constructed and occupied in
material compliance with all applicable federal, state and local statutes,
ordinances and regulations, but excluding the rules and regulations of the FCC
(which are the subject of Section 4.6 hereof) and Environmental Laws (which are
the subject of Section 4.16 hereof). No member of the Granite Group has any
actual knowledge or has received any notice that such properties and/or assets
or the present use thereof by the Granite Group are in violation in any material
respect of applicable statutes, ordinances and regulations.
No member of the Granite Group has actual knowledge of any defect or any
condition relating to any transmission tower owned, operated, used or leased by
any member of the Granite Group relating to WLAJ that would or may materially
and adversely affect the proper anchoring or securing thereof, the structural
soundness thereof, or the conformance thereof in all material respects with
generally accepted engineering standards of the television broadcasting industry
applicable to transmission towers.
The summary of the capital expenditures incurred by members of the Granite
Group for WLAJ for calendar years 1996 and 1997,
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as set forth in Schedule 4.5.2 is true and complete in all material respects.
4.6 Licenses and Authorizations.
4.6.1 Licenses. Schedule E-1 hereto contain a true and complete list
of all WLAJ Licenses and all other material licenses, permits and authorizations
under federal (including the Communications Act), state or local law and all
other rights, franchises, privileges, immunities, approvals, licenses, permits
and authorizations required by the Granite Group to carry on the operation of
the business of WLAJ as now conducted. Lansing, WLAJ, Inc., WLAJ License, Inc.
or Granite is the authorized and legal holder of all of the foregoing.
4.6.2 Authorizations. The WLAJ Licenses and all other items
identified in Section 4.6.1 are valid and in full force and effect, and have
been complied with in all material respects. To the knowledge of each member of
the Granite Group, there is no investigation, notice of investigation,
violation, order, complaint, action or other proceeding pending or, to their
actual knowledge, threatened before the FCC or any other governmental authority
to vacate, revoke, refuse to renew or modify such licenses or other
authorizations of WLAJ or which could in any manner materially threaten or
adversely affect the WLAJ Licenses or the operations of WLAJ as presently
conducted.
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To the actual knowledge of each member of the Granite Group, no event has
occurred which permits, or after notice or lapse of time would permit, the
revocation or termination of any WLAJ License or the imposition of any
restriction thereon of such a nature as may materially limit the business or
operations of WLAJ as now conducted. No member of the Granite Group has actual
knowledge of any event or proceeding arising from or concerning the operation of
WLAJ that would cause the FCC not to renew any WLAJ License if such license were
expiring on the date hereof.
4.7 Contracts. Schedules A-1, B-1 and C-1 contain a true and
complete list of all contracts, leases, national and local advertising
representation agreements, employment agreements and other agreements and
commitments of every nature in full force and effect as of the date of execution
of this Agreement to which any member of the Granite Group or, to our knowledge,
Lansing is a party or is bound, written or otherwise, constituting part of the
Broadcasting Assets or the Assumed Obligations (collectively, the "Contracts"),
except (a) contracts entered into by any member of the Granite Group or Lansing
in the ordinary course of its business for the provision of immaterial
incidental services to WLAJ (such as cleaning, landscaping, copier and similar
contracts) that are terminable by a member of the Granite Group on thirty (30)
days' notice and without
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material obligations, (b) contracts entered into by any member of the Granite
Group, or by Lansing of which no member of the Granite Group is aware, in the
ordinary course of business of WLAJ providing for aggregate payments of less
than $5,000 over the remaining term thereof and (iii) contracts entered into in
accordance with the terms of Section 6.1.11 hereof. No member of the Granite
Group, nor, to the actual knowledge of each member of the Granite Group, any
other party to the Contracts, is in material default under any of the Contracts,
and to the actual knowledge of each member of the Granite Group, no event,
occurrence or condition exists which with the giving of notice, would become a
material default thereunder. No member of the Granite Group has released or
waived (by action or inaction) any material rights under any of the Contracts.
All such Contracts are in full force and effect and valid and binding and
enforceable against the members of the Granite Group (as applicable) and, to the
actual knowledge of each member of the Granite Group, the other parties thereto
in accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws relating to or affecting
creditors' rights generally. As of the Closing Date, no member of the Granite
Group will have assigned any of its rights under any of the Contracts and,
subject to the
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qualification contained in the preceding sentence, will in no way be restricted
from enforcing its material rights thereunder. True and complete copies of all
Contracts and all amendments and modifications thereto listed in the Schedules
hereto have been delivered or made available to Buyer. Granite or WLAJ, Inc.,
with respect to WLAJ, has the right to the quiet enjoyment of all of its leased
real and personal property relating to WLAJ in accordance with the terms of the
lease agreements governing such leased real or personal property.
4.8 Franchises, Trademarks and Trade Names. All material
franchises, trademarks, patents, tradenames, intellectual property, service
marks, promotional materials, slogans, know-how, call letters, telephone
numbers, copyrights in literary property of any kind, jingles, privileges and
other intellectual property rights held by any member of the Granite Group
or, to our knowledge, Lansing with respect to WLAJ which are included in the
Broadcasting Assets are set forth on Schedule D-1 hereto, are owned by a
member of the Granite Group or Lansing or are licensed for their use. No
other franchises, trademarks, patents, tradenames, intellectual property,
service marks, brand names, copyrights, privileges or other intellectual
property rights material to the operations of the business of WLAJ are
necessary for the operation of the business of WLAJ as presently
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conducted. To the actual knowledge of each member of the Granite Group, the
operations of WLAJ by any member of the Granite Group under the Time Brokerage
Agreement and their properties utilized in connection with the business of WLAJ,
as presently owned and operated, do not infringe in any material respect upon or
conflict in any material respect with any franchise, patent, trademark,
tradename, service mark, brand name, copyright, trade secret or other
intellectual property rights of any other Person and, to the actual knowledge of
each member of the Granite Group, no other Person is infringing in any material
respect upon any such rights with respect to WLAJ.
4.9 Employee Plans; ERISA.
4.9.1 Station Plans. Each Employee Plan (a) in which or to which, at
any time, any employee or former employee of Granite (as to WLAJ Employees),
WWMT-TV, Inc. (as to WLAJ Employees), WWMT-TV License, Inc. (as to WLAJ
Employees) or any other member of the Granite Group has participated or been a
party or bound and (b) (i) which has at any time been sponsored or maintained by
any member of the Granite Group, any other member of the Controlled Group, (ii)
to which any member of the Granite Group or any other member of the Controlled
Group has at any time contributed or had or may have had an obligation to
contribute or (iii) to which any member of the Granite Group or
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any other member of the Controlled Group has been a party or bound (each such
plan described in (a) or (b) is referred to individually as a "Station Plan" and
collectively as the "Station Plans") is listed on Schedule 4.9.
4.9.2 Compliance With Laws. All Station Plans have been administered
in accordance with their terms and are in compliance with ERISA, the Code and
all other applicable laws, rules and regulations in all material respects. No
member of the Granite Group and no member of the Controlled Group has
maintained, contributed to or had an obligation to contribute to any Employee
Plan, nor any similar predecessor plan, that is subject to Title IV of ERISA. No
"reportable event" (as such term is used in Section 4043 of ERISA), "prohibited
transaction" (as such term is used in Section 406 of ERISA or Section 4975 of
the Code) or "accumulated funding deficiency" (as such term is used in Section
412 or Section 4971 of the Code) has heretofore occurred with respect to any
Station Plan. No litigation or administrative or other proceedings involving a
Station Plan is pending or, to the actual knowledge of each member of the
Granite Group, threatened. Neither the consummation of the transactions
contemplated by this Agreement nor the employment by Buyer of any Business
Employee will result in any liability to Buyer or the
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Broadcasting Assets for Taxes, penalties, interest or any other Liability or
obligation resulting from any Station Plan.
4.9.3 Multiemployer Plans. No member of the Granite Group and no
member of the Controlled Group has maintained or contributed to any Station
Plan, or any similar predecessor plan, which is a multiemployer plan, as defined
in Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code,
which covers, is maintained for the benefit of or relates to any of the
employees of Granite (as to the WLAJ Employees) or of any other member of the
Granite Group.
4.9.4 Group Health Plan. Each Station Plan which is a group health
plan (as such term is defined in Code Section 4980B(g)) complies and has
complied in all material respects with the applicable requirements of Code
Section 4980B, Title XXII of the Public Health Service Act and the Social
Security Act.
4.9.5 Post-Employment Obligations. Except as described in Schedule
4.9 or as required pursuant to Code Section 4980B, no member of the Granite
Group nor any Affiliate thereof provides and has any obligation to provide
continuing health, life, or other insurance coverage to former employees of
Granite (with respect to the WLAJ Employees),any other member of the Granite
Group or WLAJ following their termination or retirement.
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4.9.6 Delivery. True and complete copies of all Station Plans and
all amendments and modifications thereto have been delivered to Buyer, and all
summaries, descriptions and other materials furnished to Buyer in respect of
such Employee Plan are accurate in all material respects and, in the case of
summaries and descriptions, cover all material terms of the Employee Plan to
which they relate.
4.10 Financial Statements; Liabilities.
4.10.1 Financial Statements. The: (a) compiled unaudited balance
sheet and the related statements of operations: (i) of WLAJ, Inc. and Granite
(with respect to WLAJ) as of and for the fiscal year ended December 31, 1997 and
as of and for the six month period ended June 30, 1998; (ii) of WLAJ, Inc. as of
and for the fiscal year ended December 31, 1996; and (iii) of Granite (with
respect to WLAJ) as of and for the three month period ended December 31, 1996;
and (b) the interim unaudited financial statements of WLAJ, Inc. delivered and
to be delivered pursuant to Section 6.1.8 hereof (the statements referred to in
(a) and (b) above being collectively, the "Financial Statements") in each
instance were (or will be in the case of a future delivery) prepared in
accordance with GAAP, other than the lack of footnotes, allocations with respect
to services performed by Affiliates and, in the case of interim financials, year
end
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adjustments. The Financial Statements referred to in the preceding sentence of
this Section 4.10 (hereinafter, collectively referred to as the "Financial
Information") are attached hereto as Schedule 4.10.1 (to the extent prepared as
of the date hereof) and are and will be (to the extent to be prepared and
delivered in the future pursuant to Section 6.1.8), true and correct in all
material respects, fairly present the financial condition and results of
operations of WLAJ, Inc., WLAJ License, Inc. and Granite (with respect to WLAJ)
as of the dates and for the periods indicated and have been and will be
certified by a responsible financial officer of Granite as to the foregoing
requirements. From December 31, 1997 until the date hereof, there have been no
material adverse changes in the business, operations or condition, financial or
otherwise, of WLAJ, Inc., WLAJ, the WLAJ Granite Assets or the WLAJ Lansing
Assets, taken as a whole.
4.10.2 Liabilities. Except as set forth in Schedule 4.10.2, as
reflected or reserved against in the balance sheets included in the Financial
Information or liabilities incurred in the ordinary course of business since the
date of the latest balance sheet included in the Financial Information, there
are no Liabilities of the Granite Group relating to WLAJ of a
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nature required to be reflected in financial statements prepared in accordance
with GAAP.
4.11 Litigation; Compliance.
4.11.1 Litigation. Except for administrative rulemaking,
legislation or other proceedings of applicability to the broadcast industry
generally or any segment thereof in which any member of the Granite Group
operates and except as set forth on Schedule 4.11: (a) there is no civil,
criminal or administrative action, notice of apparent violation, notice of
apparent liability, suit, demand, claim, complaint, hearing, litigation,
action, proceeding or investigation of any nature pending and, to the actual
knowledge of each member of the Granite Group, no such matter is threatened,
against any member of the Granite Group or the WLAJ Granite Assets, or, to
the actual knowledge of each member of the Granite Group, Lansing, the WLAJ
Lansing Assets or affecting the same, which: (i) might reasonably result in a
material adverse effect upon the business or operations or condition,
financial or otherwise, of WWMT, WLAJ or the Broadcasting Assets, taken as a
whole, (ii) seeks to enjoin, prohibit or otherwise challenge, or would affect
any member of the Granite Group's or, to the actual knowledge of each member
of the Granite Group, Lansing's ability to consummate, the transactions
contemplated hereby or (iii) might reasonably result
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in a material adverse effect on the enjoyment and use by Buyer of the
Broadcasting Assets; and (b) no writ, injunction, judgment, award, order or
decree has been rendered affecting any member of the Granite Group, WLAJ or the
Broadcasting Assets (or, to the actual knowledge of each member of the Granite
Group, Lansing), which might reasonably result in a material adverse effect upon
the business or operations or condition, financial or otherwise, of any member
of the Granite Group (which shall include Granite only with respect WWMT and
WLAJ), WWMT, WLAJ, the WLAJ Licenses or the Broadcasting Assets, taken as a
whole.
4.11.2 Violations. Neither any member of the Granite Group nor,
to the actual knowledge of any member of the Granite Group, Lansing, has
violated or is in default under any order, law, rule, regulation, ordinance,
policy, judgment, writ or decree of the FCC or any other Governmental
Authority in any respect which might materially adversely affect the business
or operations or condition, financial or otherwise, of any member of the
Granite Group (which shall include Granite only with respect WWMT and WLAJ)
WWMT, WLAJ, the WLAJ Licenses, or the Broadcasting Assets, taken as a whole.
All returns, notices, reports, statements or other filings currently required
to be filed by any member of the Granite Group with the FCC and all material
returns, notices, reports, statements or other filings currently
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required to be filed by any member of the Granite Group with any other federal,
state, or local Governmental Authority, with respect to WLAJ or the Broadcasting
Assets, have been filed and complied with in all material respects. All such
reports, returns and statements are materially complete and correct as filed.
4.12 Cable Carriage. Except as set forth on Schedule 4.12, the signal of
WLAJ is being carried on all cable television systems located within the Lansing
DMA (Designated Market Area), as designated by the FCC either pursuant to the
mandatory carriage requirements specified in Section 614 of the Communications
Act or pursuant to retransmission consent agreements entered into in accordance
with Section 325(b) of the Communications Act, subject to current administrative
proceedings and any litigation pertaining to mandatory carriage and consent.
4.13 Labor. There are no strikes, work stoppages, grievance proceedings,
or union organization efforts pending or, to the actual knowledge of any member
of the Granite Group, threatened between Granite (with respect to the employees
of WLAJ employed by Granite or any other member of the Granite Group (the "WLAJ
Employees")) and any of their employees or agents or any union or collective
bargaining unit. To the knowledge of each member of the Granite Group, each
member of the Granite Group has
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complied in all material respects with all laws and regulations relating to the
employment of labor with respect to WLAJ. Except as set forth on Schedule C-1,
there are no collective bargaining agreements or employment agreements between
any member of the Granite Group and any employees or any union covering any
employees of Granite (as to the WLAJ Employees) or any other member of the
Granite Group.
4.14 Affiliated and Recent Transactions.
4.14.1 Affiliated Transactions. Except as described on Schedule
4.14.1, no member of the Granite Group is a party to any transaction with
respect to WLAJ or the Broadcasting Assets with any of their officers,
directors, employees (except in the ordinary course of business), or Affiliates,
including, without limitation, the extension of credit or the commitment to
extend credit to any such Persons or entities.
4.14.2 Recent Transactions. Except as described on Schedule
4.14.2, since December 31, 1997, no member of the Granite Group has: (a)
entered into any transactions, or conducted business, relating to WLAJ in any
manner inconsistent in any material respect with its historical practices;
(b) mortgaged or subjected to any Encumbrance (other than Permitted
Encumbrances) any of the Broadcasting Assets; (c) other than pursuant to this
Agreement, sold, leased or transferred or agreed
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to sell, lease or transfer, any of the Broadcasting Assets, except in the
ordinary course of business; (d) increased the rate of compensation payable
or to become payable to any of the employees of Granite (as to the WLAJ
Employees), any other member of the Granite Group or WLAJ or made any
increase in any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement or other Employee Plan or payment or
arrangement made to, for or with any such employees, except in the ordinary
course of business and in light of prevailing inflationary trends; (e) except
as expressly permitted herein, adopted, or amended, any collective
bargaining, bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation or other Employee Plan, agreement, trust,
fund or arrangement for the benefit of employees of Granite (as to the WLAJ
Employees), any other member of the Granite Group or WLAJ; (f) sustained or
incurred any uninsured loss or damage on account of fire, flood, accident or
other calamity which has materially interfered with or affected, or may
materially interfere with or affect, the operation of WLAJ under the Time
Brokerage Agreement as presently conducted by members of the Granite Group;
(g) changed any accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates);
(h) failed to pay any payments
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on film rights and agreements with respect to WLAJ on a current basis, except to
the extent Granite or WLAJ, Inc. has a valid dispute with respect to any such
payment; (i) canceled or compromised any debt or claim or waived or released any
rights with respect to WLAJ except in the ordinary course of business; (j)
except in the ordinary course of business and consistent with past practice,
transferred, granted, licensed, assigned, terminated or otherwise disposed of,
modified, changed or canceled any rights or obligations with respect to any of
the intellectual property rights included in the Broadcasting Assets; (k) made
any material change in the conduct or nature of any aspect of the business of
WLAJ; or (l) has agreed to take any action referred to in the foregoing.
4.15 Taxes.
4.15.1 Filing of Tax Returns. Each member of the Granite Group has
timely filed with the appropriate taxing authorities all returns (including,
without limitation, information returns and other material information) required
to be filed through the date hereof for which any member of the Granite Group
would have a Liability for Taxes. The applicable members of the Granite Group
have paid, will pay in a timely manner or have made appropriate provision for
the payment of all
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Taxes shown as due and payable by the tax returns described in the preceding
sentence.
4.15.2 Tax Liens. There are no liens for Taxes upon any of the WLAJ
Granite Assets (other than the WLAJ Lansing Assets), and to the actual knowledge
(after review of the Commitments and search of applicable UCC filings) of each
member of the Granite Group, upon any of the WLAJ Lansing Assets, other than for
Taxes the payment of which is either: (a) not yet due and which constitute
Prorated Obligations; or (b) that are being contested by the taxpayer in good
faith through appropriate proceedings and which contested Taxes constitute
Retained Liabilities or Prorated Obligations.
4.15.3 Parachute Payments. In connection with the assumption of the
Assumed Obligations, Buyer will not become obligated to make any "parachute
payment" as defined in section 280G of the Code.
4.16 Environmental Matters.
4.16.1 Compliance. Except as set forth on Schedule 4.16.1, each
member of the Granite Group is, at present, complying and have complied in all
material respects with all Environmental Laws insofar as such laws relate to the
operation of WLAJ under the Time Brokerage Agreement; and no member of the
Granite Group has received any notification in the last two years
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of any Claims, the existence of any Environmental Conditions or alleged
violations of Environmental Laws.
4.16.2 Property Use. Except as set forth on Schedule 4.16.2, there
has been no storage, generation, manufacture, refinement, transportation,
production, treatment or disposal of Hazardous Materials by any member of the
Granite Group (or, to the knowledge of any member of the Granite Group, by any
other Person) on, under, in, adjacent to (but only to the actual knowledge of
each member of the Granite Group), or about any of the real property or
equipment owned, leased, occupied, controlled or used by WLAJ during the
operation of WLAJ by any member of the Granite Group in material violation of
any applicable law, rule, regulation, order or permit, no member of the Granite
Group has actual knowledge of any such storage, generation, manufacture,
refinement, transportation, production, treatment or disposal of Hazardous
Materials prior to the operation of WLAJ by any member of the Granite Group.
4.16.3 USTs. Except as described on Schedule 4.16.3, to the
knowledge of each member of the Granite Group, no underground storage tanks, as
defined in ss. 6991(l) of RCRA or applicable state law, exist on, under, in or
about any of the real property owned, leased, occupied or used by WLAJ.
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4.16.4 Claims. Except as set forth on Schedule 4.16.4, to the
knowledge of each member of the Granite Group, there has been no release (as
defined under ss. 101(22) of CERCLA) of any Hazardous Materials on, under, in,
adjacent to (but only as to the actual knowledge of each member of the Granite
Group), or about any of the real property owned, leased, occupied, controlled or
used by WLAJ during the ownership or operation of WLAJ by any member of the
Granite Group that could create any Environmental Conditions which could give
rise to any Claims, and no member of the Granite Group has actual knowledge of
any such release prior to the operation of WLAJ by any member of the Granite
Group.
4.16.5 Hazardous Materials. Except as set forth on Schedule 4.16.2:
(a) to the knowledge of each member of the Granite Group, there are no Hazardous
Materials on, under, in, adjacent to (but only as to the actual knowledge of
each member of the Granite Group), or about any of the real property or
equipment owned, leased, occupied, controlled or used by WLAJ or by any member
of the Granite Group in its operation of WLAJ in material violation of
Environmental Laws; and (b) no member of the Granite Group is aware of any
pending or threatened investigation, litigation or proceedings before any
government agency or instrumentality in which any Person or entity has
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alleged the release or threat of release of Hazardous Materials at, under, in,
adjacent to (but only as to the actual knowledge of each member of the Granite
Group), or about any of the real property or equipment owned, leased, occupied,
controlled or used by any member of the Granite Group in its operation of WLAJ,
or the unlawful generation, emission, discharge, transportation, storage,
treatment or disposal of any Hazardous Materials thereat or any personal injury
arising therefrom.
4.16.6 Relevant Property. For purposes of this Section 4.16, real
property or equipment owned, leased, occupied, controlled or used by WLAJ shall
include real property and equipment owned, leased, occupied, controlled or used
by WLAJ and all real property and equipment formerly owned by WLAJ, if any, at
the time such property was owned, leased, occupied, controlled or used by any
member of the Granite Group.
4.17 Miscellaneous. No representation or warranty made by any member
of the Granite Group in this Agreement contains any untrue statement of a
material fact or knowingly omits or fails to state any material fact or
information necessary to make such representation or warranty, in light of the
circumstances under which it is made, not materially misleading.
5. Representations and Warranties of Buyer. Buyer represents and warrants
to Granite and WLAJ, Inc. that:
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5.1 Organization and Standing. Buyer: (a) is a corporation duly
organized, validly existing and in good standing under the law of the State of
California; (b) has full corporate power and authority to own its properties and
to transact the business in which it is currently engaged and to perform the
obligations required to be performed by it hereunder and to consummate the
transactions contemplated hereby; and (c) is duly qualified to do business and
in good standing as a foreign corporation in every jurisdiction in which the
nature of the business to be conducted by it requires such qualification, except
where the failure to so qualify would not materially adversely affect Buyer or
the transactions contemplated hereby.
5.2 Authorization and Binding Obligations. The execution, delivery and
performance of this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and binding agreement of
Buyer, enforceable in accordance with its term except as such enforceability may
be limited by bankruptcy, insolvency, moratorium or other laws relating to or
affecting creditors' rights generally and the exercise of judicial discretion in
accordance with general equitable principles.
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5.3 No Contravention. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
compliance with the provisions hereof by Buyer does not and will not, after the
giving of notice, or the lapse of time, or otherwise: (a) conflict with or
violate any provisions of the Certificate of Incorporation of Bylaws of Buyer;
(b) result in the breach of, conflict with, require any consent under, or
constitute a default under, the provisions of any agreement or other instrument
to which Buyer is a party or by which the property of Buyer is bound or
affected; or (c) violate or conflict with any material laws, regulations, orders
or judgments applicable to Buyer or its assets.
5.4 Litigation. Except for administrative rulemaking or other
proceedings of general applicability to the broadcast industry, there is no
civil, criminal or administrative action, notice of apparent violation,
notice of apparent liability, suit, demand, claim, complaint, hearing,
litigation, action, proceeding or investigation of any nature pending or, to
Buyer's actual knowledge, threatened against or affecting it that would
affect its ability to consummate the transactions contemplated in this
Agreement.
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5.5 Absence of Knowledge as to Certain Facts. Buyer has no knowledge of
any fact that would, under existing law (including the Communications Act) and
existing rules, regulations and practices of the FCC, disqualify Buyer as an
assignee of the WLAJ Licenses or the WLAJ Documents, or an operator of WLAJ
under the Time Brokerage Agreement. Buyer will not take any action that it knows
or has reason to know would cause such disqualification and Buyer will not fail
to take any action if it knows or has reason to know that the failure to take
such action would cause such disqualification.
5.6 Miscellaneous. No representation or warranty made by Buyer in this
Agreement contains any untrue statement of a material fact or knowingly omits or
fails to state any material fact or information necessary to make such
representation or warranty, in light of the circumstances under which it is
made, not materially misleading.
6. Conduct of Business.
6.1 Conduct of Business to Closing. Each member of the Granite Group
covenants and agrees, with respect to WLAJ, that pending the Closing, except
with the prior written consent of Buyer (which shall not, in the case of Section
6.1.4 hereof, be unreasonably withheld or delayed):
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6.1.1 Conduct of Business. Subject to the provisions of this
Agreement, the members of the Granite Group shall conduct the business and
operations of WLAJ under the Time Brokerage Agreement in the normal and ordinary
course of business in substantially the same manner as heretofore conducted and
shall use all reasonable efforts consistent with normal business practices to
preserve and promote such business and operations and to avoid any act which
might have a material adverse effect upon the value of WLAJ as a going concern
or upon the Broadcasting Assets, taken as a whole. The members of the Granite
Group shall confer and consult with Buyer prior to making any programming
schedule changes.
6.1.2 Assets. Consistent with normal business practices, the members
of the Granite Group shall maintain the WLAJ Granite Assets and the WLAJ Lansing
Assets (to the extent any one of them operate, control or maintain the WLAJ
Lansing Assets) in the condition specified in Section 4.5 hereof, ordinary wear
and tear excepted in the case of the good operating condition and repair
condition.
6.1.3 Inventory. The members of the Granite Group shall maintain
their respective inventory levels (including office supplies, spare parts,
tubes, equipment and the like) at
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levels consistent with its normal and ordinary course of operation of WLAJ under
the Time Brokerage Agreement.
6.1.4 Employee Compensation and Benefits. No member of the Granite
Group shall materially increase the compensation, expense allowance or other
benefits (including any severance benefits) payable or to become payable to any
employee or agent of any member of the Granite Group (with respect to WLAJ) or
any WLAJ Employee or pay or arrange to pay any bonus payment to any such
employee unless disclosed on Schedule 6.1.4 or Item 2 of Schedule F, except in
conformance with existing normal patterns of adjustment and in light of
prevailing inflationary trends with respect to WLAJ. The members of the Granite
Group shall confer and consult with Buyer prior to making any changes in key
personnel at WLAJ or changes in talent scheduling.
6.1.5 Organization, Etc. Except as set forth on Schedule 6.1.5,
consistent with normal business practices, the members of the Granite Group
shall use their respective commercially reasonable efforts to: (a) preserve
intact the business organizations of WLAJ in all material respects; (b) keep
available to WLAJ all of the WLAJ Employees and make available for employment by
Buyer all present WLAJ Employees and employees on the payroll of any member of
the Granite Group (with respect
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to WLAJ-related employees); and (c) preserve for WLAJ the existing relationships
with suppliers, customers and their agencies and others having business with
WLAJ.
6.1.6 Insurance. Members of the Granite Group shall cause to be
maintained in effect until the Closing their existing property damage, liability
and other insurance with respect to the WLAJ Granite Assets and the WLAJ Lansing
Assets (to the extent such insurance on the WLAJ Lansing Assets is maintained
under the Time Brokerage Agreement), the list of the policies governing which
are set forth on Schedule 6.1.6.
6.1.7 Transfer of Broadcasting Assets. No member of the Granite
Group shall sell, assign, lease or otherwise transfer or dispose of any of the
Broadcasting Assets, except where such disposition is in the ordinary course of
business or the assets involved are either: (a) no longer used or useful; or (b)
replaced with a substantially equivalent asset of substantially equivalent kind,
condition and value.
6.1.8 Financial Statements; Pacing Reports. Granite shall furnish to
Buyer as soon as available, but in no event later than thirty (30) days after
the end of each calendar month: (a) an unaudited profit and loss statement of
WLAJ for such month and for the period of its fiscal year ended at the end of
such period; and (b) an unaudited balance sheet of WLAJ as of
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the end of such month. The financial statements to be delivered by Granite
hereunder shall be certified by a responsible financial officer of Granite as
complying with the requirements set forth in Section 4.10 and shall be prepared
on a comparative basis with the preceding fiscal year or corresponding period
thereof. In addition to the statements delivered to Buyer pursuant to this
Section 6.1.8, Granite shall deliver to Buyer on a weekly basis sales tracking
reports for the applicable fiscal period, which shall be certified as to the
accuracy thereof by a responsible manager of Granite and shall be correct in all
material respects.
6.1.9 Encumbrances. No member of the Granite Group shall create,
assume or permit to exist any Encumbrance (other than Permitted Encumbrances)
affecting any of the Broadcasting Assets (or their replacements).
6.1.10 Litigation. Granite shall notify Buyer of any litigation (a)
pending or, to the actual knowledge of any member of the Granite Group,
threatened, against any member of the Granite Group or the WLAJ Granite Assets
or, to each of their actual knowledge, pending or threatened against WLAJ, the
WLAJ Lansing Assets or Lansing (with respect to WLAJ) or (b) which challenges
the transactions contemplated hereby and of any material damage to or
destruction of the Broadcasting Assets.
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6.1.11 Agreements. Each member of the Granite Group shall perform
all material obligations (including, without limitation, all payment
obligations) required to be performed by them under all agreements, leases,
contracts and commitments binding upon them with respect to WLAJ or to which
WLAJ or the Broadcasting Assets are subject, including, without limitation the
WLAJ Purchase Agreement and the Time Brokerage Agreement, and shall not amend or
terminate, or waive or fail to enforce any material right under (i) any Contract
or series of related Contracts involving payments of over $50,000 or (ii) the
WLAJ Purchase Agreement or the Time Brokerage Agreement, or enter into any new
agreements or arrangements or series of related contracts or agreements
involving payments of over $50,000 in the aggregate, which might be binding on
or affect the Broadcasting Assets, WLAJ or Buyer; provided, however, that
Granite shall be permitted to enter into new programming contracts after
consultation with Buyer with respect thereto. No member of the Granite Group
shall enter into any new collective bargaining or employment agreement (other
than an employment agreement terminable at will) or other Employee Plan or any
amendment, extension or other modification of any existing employment agreement
or Employee Plan affecting the employees of any member
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of the Granite Group (with respect to WLAJ Employees) or the WLAJ Employees.
6.1.12 Consents and Approvals. Each member of the Granite Group
will, prior to the Closing Date, continue to use commercially reasonable efforts
to obtain or cause to be obtained consents to the assignment to Buyer of all
leases, contracts and agreements which require the consent of any third party by
reason of the transactions provided for in this Agreement. Each party shall
cooperate with the other to obtain any such consents or approvals.
6.1.13 Network Affiliation Agreement. Each member of the Granite
Group shall use commercially reasonable efforts to maintain in full force and
effect its current television Network affiliation agreement with American
Broadcasting Company ("ABC") applicable to WLAJ (the "ABC Affiliation
Agreement").
6.1.14 Licenses. No member of the Granite Group shall, by any act or
omission to act within their reasonable knowledge and power: (a) surrender,
modify, adversely affect or forfeit any of the WLAJ Licenses; or (b) cause the
FCC to institute any proceedings for the cancellation, non-renewal or
modification of any of the WLAJ Licenses.
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6.2 Offers to Purchase. No member of the Granite Group, nor any of their
respective officers, directors, employees, agents, representatives or Affiliates
shall, either directly or indirectly, entertain or conduct discussions or
negotiations with any Person with respect to any offer or proposal for the
purchase or sale of any material portion of the Broadcasting Assets or any
interests of WLAJ License, Inc., WLAJ, Inc., Lansing or WLAJ, or with respect to
any merger, acquisition, combination, consolidation or similar transaction
involving WLAJ License, Inc., WLAJ, Inc. or WLAJ or any material portion of the
Broadcasting Assets, or enter into any agreement or transaction relating to any
of the foregoing.
6.3 No Breach of Representations and Warranties. No member of the
Granite Group nor any of their Affiliates shall take any action or pursue any
other course of conduct, or fail to take any action, that would cause any of the
representations and warranties made by the members of the Granite Group in this
Agreement (or any document delivered in connection herewith) to be materially
untrue, incorrect or inaccurate.
6.4 Employee Notification Requirements.
6.4.1 Notice. Granite shall provide timely notice to the WLAJ
Employees pursuant to the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Section 2102-09, if
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applicable, and any similar provision of applicable state law. WLAJ, Inc. also
shall provide to the collective bargaining representatives, if any, of the WLAJ
Employees such notice as may be required for decision or effects bargaining
under the National Labor Relations Act, 29 U.S.C. ss. 151 et seq.
6.4.2 Organizing Activity. Granite shall promptly notify Buyer of
any activity by any labor organization or relating to the WLAJ Employees or any
activity by any labor organization directed at organizing the WLAJ Employees or
any groups thereof.
6.5 Access and Information. Each member of the Granite Group covenants
and agrees that, pending the Closing, each member of the Granite Group shall
give Buyer and its counsel, accountants, engineers, investment bankers,
potential lenders and other authorized representatives reasonable access, at
Buyer's risk and expense, during normal business hours throughout the period
prior to the Closing Date or the earlier termination of this Agreement, to all
of WLAJ's (to the extent in their possession), WLAJ License, Inc.'s, WLAJ,
Inc.'s, WWMT-TV, Inc.'s and Granite's (to the extent relating to its operation
of WLAJ under the Time Brokerage Agreement) books, records (including all
employee files), agreements, reports, and other documents and all of the
Broadcasting Assets to be acquired hereunder and shall
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furnish Buyer, its counsel, accountants, engineers, investment bankers,
potential lenders and other authorized representatives during such period with
copies of all information concerning the affairs of WLAJ, Inc., WLAJ License,
Inc., WWMT-TV, Inc. and Granite (to the extent relating to its operation of WLAJ
under the Time Brokerage Agreement, WLAJ License, Inc., WLAJ, Inc. or the
Broadcasting Assets, or employment of the WLAJ Employees) as they may reasonably
request in order to enable Buyer to make such examinations and investigations
thereof as it shall deem necessary, including, without limitation, all
contracts, agreements, and leases included in the Broadcasting Assets and any
amendments, renewals or other modifications thereof, and each
member of the Granite Group will make appropriate officers, employees,
attorneys, agents and accountants available to discuss with Buyer and its
representatives such aspects of the business and operations of WLAJ (under the
Time Brokerage Agreement) as Buyer may reasonably require (it being understood
that the foregoing shall include such access as Buyer may reasonably require to
the management of Granite to enable Buyer to obtain information about the WLAJ
Employees that Buyer will employ after it acquires the Broadcasting Assets);
provided, however, that in each instance mutually satisfactory arrangements
shall be made in
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advance in order to avoid interruption and to minimize interference with the
normal business and operations of or WLAJ.
6.6 Buyer's Covenants. Buyer covenants and agrees that prior to Closing:
6.6.1 Litigation. Buyer shall notify Granite of any litigation
pending or, to its actual knowledge threatened against or affecting Buyer or
which challenges or seeks any damages or other payments in connection with the
transactions contemplated hereby.
6.6.2 No Breach of Representations and Warranties. Neither Buyer,
nor any of its officers, directors, employees, agents representatives of
Affiliates shall take any action or pursue any other course of conduct, or fail
to take any action, that would cause any of the representations and warranties
made by Buyer in this Agreement (or any document delivered in connection
herewith) to be materially untrue, incorrect or inaccurate.
7. Conditions Precedent to the Obligations of the Parties.
7.1 Conditions Precedent to the Obligation of Buyer. The obligations
of the Buyer under this Agreement are subject, at the Buyer's option, to the
satisfaction on or prior to the Closing Date of each of the following express
conditions precedent:
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7.1.1 FCC Consent. Subject to Section 2.5(b) hereof, the
conditions specified in Section 3.2 hereof shall have been met.
7.1.2 Accuracy of Representations and Warranties. All
representations and warranties of the members of the Granite Group contained in
this Agreement (and in any document delivered in connection herewith) shall be
true and correct in all material respects at and as of the Closing Date as
though made at and as of that time, other than representations and warranties
specifically relating to the date hereof (without regard to any "materiality"
limiting or qualifying language stated therein).
7.1.3 Compliance with Agreement. Each member of the Granite Group
shall have performed and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date.
7.1.4 No Obstructive Proceeding.
(a) No Litigation. No action, suit, investigation, or
proceeding shall have been instituted and be pending against or affecting any of
the parties to this Agreement or Lansing or any of their respective Affiliates
before any Governmental Authority to restrain or prohibit, or to obtain
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substantial damages in respect of, this Agreement or the consummation of the
transactions contemplated hereby, which may reasonably be expected to result in
a preliminary or permanent injunction against consummating the transactions
contemplated hereby or, if the transactions contemplated hereby were
consummated, an order to nullify or render ineffective this Agreement or such
transactions, or the recovery against Buyer of material damages or otherwise
have a material adverse effect on Buyer or the business or operations of WWMT
and WLAJ in the aggregate taken as a whole;
(b) No Governmental Intervention. None of the parties to this
Agreement or their Affiliates shall have received written notice from any
Governmental Authority after the date hereof (or before the date hereof to the
extent not disclosed to Buyer in this Agreement and the Schedules hereto) of:
(i) its intention to institute any action or proceeding to restrain or enjoin or
nullify or render ineffective this Agreement or the transactions contemplated
hereby if consummated, or commence any investigation into the consummation of
this Agreement or the transactions contemplated hereby; or (ii) the actual
commencement of such an investigation; provided, that, in the event such a
notice of intention is received or such an investigation is commenced, this
Agreement may not be terminated
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by any of the parties for a period of thirty (30) days from the earlier of the
date such notice of intention is first received by any party to this Agreement
or notice of commencement of such an investigation is first received by any
party hereto (but consummation hereof shall be delayed during such period), but
may be terminated thereafter by any party to this Agreement if, in the
reasonable opinion of such party there is a reasonable probability that such an
investigation will result in an action or proceeding of the type described in
Section 7.1.4(a).
(c) No Order. No order, decree or judgment of any Governmental
Authority shall be subsisting against any of the parties which would render it
unlawful or materially restrain or limit Buyer's ability, as of the Closing
Date, to effect the transactions contemplated hereunder in accordance with the
terms hereof.
7.1.5 Adverse Change. No loss, destruction, impairment, confiscation
or condemnation of any of the Broadcasting Assets shall have occurred by reason
of fire, explosion, disaster, flood, accident, riot, insurrection, war, act of
God or other occurrence which individually or in the aggregate has a materially
adverse effect on the business, operations or condition, financial or otherwise,
of WWMT and WLAJ, in the aggregate taken as a whole. Since the date hereof,
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there shall have been no adverse change in the business, operations, condition,
financial or otherwise, of WLAJ that has had a material adverse effect on the
business operations or condition, financial or otherwise, of WLAJ and WWMT in
the aggregate taken as a whole.
7.1.6 Consents. All consents, approvals, and permits necessary for
the consummation of transactions contemplated hereby set forth on Schedule 7.1.6
hereto, including, without limitation, (i) the agreement of ABC that the ABC
Affiliation Agreement may be assigned to Buyer upon closing of the purchase by
Buyer of the Broadcasting Assets; and (ii) the consents of all lessors of all
tower and antennae site leases for the assignment of such leases to Buyer, shall
remain in full force and effect on terms substantially similar to those existing
on the date hereof and attached hereto as Exhibit E-1 or replaced by consents
reasonably satisfactory to Buyer and Granite. Notwithstanding anything to the
contrary contained in this Section 7.1, in the event that Buyer receives the
indemnification letter substantially in the form attached hereto as Exhibit E-2,
the failure to obtain the consent to the Lease, dated January 25, 1982, as
subsequently amended, between Tompkins, Inc. and Lansing 53, Inc., and any
consequences thereof, shall not permit Buyer to
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fail to consummate the transactions contemplated by this Agreement.
7.1.7 Officers' Certificates. Granite shall have delivered to Buyer
a certificate signed by its Chairman, President, Vice President, Secretary or
Treasurer dated the Closing Date to the effect that the conditions set forth in
Sections 7.1.2, 7.1.3, 7.1.4, 7.1.5, 7.1.6, 7.1.11, 7.1.13 and 7.1.16 have been
satisfied.
7.1.8 Authorization. Buyer shall have received certified copies of
all the respective actions taken by each member of the Granite Group authorizing
and approving the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereunder.
7.1.9 Opinions of Counsel. Buyer shall have received the written
opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the members of
the Granite Group and/or Reid and Reid (with respect to certain matters relating
to WLAJ), dated the Closing Date, substantially in the forms attached hereto as
Exhibits A-1 and A-2. In rendering their respective opinions, such counsel may
rely, to the extent appropriate, as to matters of fact, upon statements and
certificates of officers of the members of the Granite Group or Lansing, as the
case may be, and upon opinions attached to their
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opinion from local or special counsel with respect to matters appropriately
covered by such local or special counsel opinions.
7.1.10 Certifications. Granite shall have delivered to Buyer a
schedule showing in all material respects all Contracts or agreements or
amendments, renewals or other modifications thereof (other than those which
would not be subject to disclosure pursuant to Section 4.7 hereof) that any
member of the Granite Group has entered into with respect to WLAJ after the date
of this Agreement and which are to be assigned to Buyer hereunder.
7.1.11 Copies of Documents. The members of the Granite Group shall
have delivered to Buyer copies of all documents required to be delivered
pursuant to the Agreement, including but not limited to, all Contracts listed in
the schedule delivered pursuant to Section 7.1.10 hereof.
7.1.12 FIRPTA Affidavits. At the Closing, each member of the Granite
Group shall execute and deliver to Buyer affidavits pursuant to Section
1445(b)(2) of the Code in the form set forth in Treas. Reg. Sections
1.1445-2(b)(2)(iii)(B), and Buyer agrees that, except as otherwise provided in
Section 1445(b)(7) of the Code and the regulations promulgated thereunder, upon
the execution and delivery of such affidavits to Buyer, and in reliance thereon,
no deduction shall be made or claimed against
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the Purchase Price by reason of the requirements of Sections 897 and 1445 of the
Code.
7.1.13 Film Contracts. Granite shall have satisfied, in the case of
Liabilities of Granite (or caused to be satisfied by Lansing, in the case of
Liabilities of Lansing of which Granite is aware), in full any and all payment
and other obligations under all film and other programming contracts included in
the Granite Broadcasting Assets to which any member of the Granite Group or
Lansing is a party or to which any member of the Granite Group or Lansing is
bound, that have become or are due and payable at or prior to the Closing (other
than Prorated Obligations).
7.1.14 Title Insurance Policies. At the Closing, at Granite's
expense, Granite shall have delivered to Buyer, owner's or lessee's title
insurance policies, dated the Closing Date covering the real estate covered by
the commitments attached hereto as Exhibit B (the "Commitments"), issued by the
title insurance company which issued such commitments insuring the fee simple
title of Buyer in the real estate (or, in the case of leased real property,
Buyer's leasehold interest therein) substantially in the form attached hereto as
Exhibit B (collectively, "Title Policies").
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7.1.15 Proceedings. All proceedings to be taken in connection with
the consummation of the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Buyer and its counsel, and Buyer and its counsel shall have
received copies of such documents as Buyer or its counsel, as the case may be,
may reasonably request in connection with said transactions.
7.1.16 Removal of Encumbrances. All Encumbrances of any kind and
nature shall have been removed from the Broadcasting Assets, other than
Permitted Encumbrances. For purposes of this Section 7.1.15, the definition of
Permitted Encumbrances shall not include clause (v) thereof.
7.1.17 Delivery of Instruments of Conveyance and Transfer. Buyer
shall have received the instruments and other documents, required to be
delivered to it pursuant to Section 8 hereof, substantially in the forms
attached hereto as Exhibit D.
7.2 Conditions to Obligations of Granite Group. The obligations of the
members of the Granite Group under this Agreement are subject, at Granite's
option, to the satisfaction on or prior to the Closing of each of the following
express conditions precedent:
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7.2.1 FCC Consent. The conditions specified in Section 3.2 hereof
shall have been met (other than a Final Order if waived by Buyer in accordance
with Section 3.2 hereof).
7.2.2 Accuracy of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement (and any
document delivered in connection herewith) shall be true and complete in all
material respects at and as of the Closing Date (without regard to any
"materiality" limiting or qualifying language stated therein).
7.2.3 Compliance with Agreement. Buyer shall have performed and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
7.2.4 Delivery of Instruments of Assumption. Buyer shall have
delivered to the members of the Granite Group, in accordance with Section 2.4
hereof (in form and substance reasonably satisfactory to Granite's counsel),
instruments whereby Buyer assumes and agrees to perform the Assumed Obligations.
7.2.5 No Obstructive Proceeding.
(a) No Litigation. No action, suit, investigation, or
proceeding shall be instituted after the date
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hereof and pending against any of the parties to this Agreement or any of their
Affiliates before any court or any other Governmental Authority to restrain or
prohibit, or to obtain substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated hereby, which may reasonably be
expected to result in a preliminary or permanent injunction against consummating
the transactions contemplated hereby or, if the transactions contemplated hereby
were consummated, an order to nullify or render ineffective this Agreement or
such transactions, or the recovery against Granite of material damages or
otherwise have a material adverse effect on Granite, WLAJ, Inc. or WLAJ License,
Inc., taken as a whole.
(b) No Governmental Intervention. None of the parties to this
Agreement or their Affiliates shall have received written notice from any
Governmental Authority after the date hereof (or before the date hereof to the
extent not disclosed by the Granite Group to Buyer in this Agreement and the
Schedules attached hereto) of: (i) its intention to institute any action or
proceeding to restrain or enjoin or nullify or render ineffective this Agreement
or the transactions contemplated hereby if consummated, or commence any
investigation into the consummation of this Agreement and the transactions
contemplated hereby; or (ii) the actual commencement of such an investigation;
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provided, that, subject to the provisions of Section 3.2 hereof, in the event
such a notice of intention is received or such an investigation is commenced,
this Agreement may not be terminated by any of the parties for a period of
thirty (30) days from the earlier of the date such notice of intention is first
received by any party to this Agreement or notice of commencement of such an
investigation is first received by any party hereto (but consummation hereof
shall be delayed during such period), but may be terminated thereafter by any
party to this Agreement if, in the reasonable opinion of such party there is a
reasonable probability that such an investigation will result in an action or
proceeding of the type described in Section 7.2.5(a).
(c) No Order. No order, decree or judgment of any Governmental
Authority shall be subsisting against any of the parties which would render it
unlawful or materially restrain or limit a member of the Granite Group's
ability, as of the Closing Date, to effect the transactions contemplated
hereunder in accordance with the terms hereof.
7.2.6 Proceedings. All proceedings to be taken in connection
with the consummation of the transactions contemplated by this Agreement, and
all documents incident thereto, shall be reasonably satisfactory in form and
substance to Granite and its counsel, and Granite and its counsel shall
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have received copies of such documents as Granite or its counsel, as the case
may be, may reasonably request in connection with said transactions.
7.2.7 Opinion of Counsel. The Granite Group shall have received the
written opinion of Glenn E. Fuller, counsel for Buyer, dated the Closing Date,
substantially similar to the form attached hereto as Exhibit C-1. In rendering
his opinion, such counsel may rely, to the extent appropriate, as to matters of
fact, upon statements and certificates of officers of Buyer, and upon opinions
attached to his opinion from local or special counsel with respect to matters
appropriately covered by such local or special counsel opinions.
7.2.8 WLAJ Documents. If the closing of the transactions
contemplated by the WLAJ Documents has not occurred prior to the Closing,
Granite and its Affiliates shall have been released from all of, and have no
further obligations or Liabilities under or with respect to, the WLAJ Documents.
7.2.9 Authorizations. Granite shall have received certified copies
of all of the actions taken by Buyer authorizing and approving the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereunder.
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8. Instruments of Conveyance and Transfer.
8.1 Instruments of Conveyance and Transfer of Real Property. At the
Closing, to effect the transfers, conveyances or assignments from applicable
members of the Granite Group to Buyer, the applicable member of the Granite
Group shall deliver to Buyer, substantially in the form of Exhibit D hereto:
8.1.1 Real Property.
(a) Deeds, certificates, assignments and other instruments of
transfer assigning, transferring and conveying to Buyer marketable fee simple
and insurable title (at normal rates) to all of the owned real property included
in the Broadcasting Assets; and
(b) Certificates, assignments and other necessary instruments
in form reasonably satisfactory to Buyer, assigning to Buyer all right, title
and interest of the applicable member of the Granite Group in and under all
leases and all leasehold and option interests included in the Broadcasting
Assets.
8.2 Instruments of Conveyance and Transfer of Personal Property. At
the Closing, to effect the transfers, conveyances and assignments from
applicable members of the Granite Group to Buyer, the applicable member of the
Granite Group shall deliver to Buyer the following bills of sale, certificates,
assignments
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and other instruments of transfer assigning, transferring and conveying to Buyer
marketable title to all of the personal property included in the Broadcasting
Assets, free and clear of all Encumbrances of any kind other than Permitted
Encumbrances, substantially in the form of Exhibit D attached hereto:
8.2.1 Assignment of Leases. Assignments of all leases and leasehold
interests in personal property included in the Broadcasting Assets, including
all rights under the lease agreements referred to in Schedule B-1 hereto;
8.2.2 Bills of Sale. Bills of sale for all tangible personal
property included in the Broadcasting Assets;
8.2.3 Assignments of Licenses. Assignments of the WLAJ Licenses and
all other authorizations for WLAJ;
8.2.4 Assignments of Contracts. Assignments of all contracts and
other intangible assets included in the Broadcasting Assets to be transferred
pursuant to this Agreement.
9. Employees.
9.1 Buyer to Hire. On the Closing Date, Buyer shall offer employment to
all WLAJ Employees (collectively, "Business Employees"), who are in active full
or part-time employment with WLAJ on such date (other than those on long-term
disability) at such cash compensation and with such benefits as are comparable
to those received by other employees of Buyer (other than those
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employees with employment contracts set forth on Schedule C-1, as to which the
base compensation shall be as set forth in such employment contracts for the
remainder of the term of such contracts); provided, that, except as otherwise
provided herein or in the employment contracts set forth on Schedule C-1 and
assumed by Buyer pursuant to Section 2.4 hereof, nothing herein shall require
Buyer to continue the employment of any such person for any period of time
thereafter or to maintain any particular type or level of employee benefits.
Periods of employment with Granite or WLAJ, Inc. (or their predecessors,
including, without limitation, any current or former Affiliate of Granite) shall
be taken into account for purposes of determining, as applicable, eligibility
for participation, eligibility for early retirement and subsidies and vesting of
any Business Employee under any of Buyer's employee benefit plans, policies,
practices or arrangements, but no credit for past service for benefits shall be
recognized; provided, however, that Buyer shall not be required to take into
account periods of employment with predecessors of Granite or WLAJ, Inc. unless
Granite or WLAJ, Inc. granted such credit at the time the employees were
transferred to WLAJ, Inc. or Granite from such predecessors.
9.2 Cooperation. Each member of the Granite Group shall cooperate with
Buyer's attempts to obtain information
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relating to the Business Employees, including making available to Buyer
employees' personnel files and performance evaluations. Each member of the
Granite Group will make all reasonable efforts to assist Buyer in making a
smooth transition after Closing.
9.3 No Liability for Employee Plans. Buyer is not assuming any Station
Plan, any Employee Plan maintained by Lansing or any Liabilities with respect
thereto. Nothing herein shall obligate or be deemed to obligate Buyer to create,
adopt or maintain any employment agreement, Station Plan or other Employee Plan,
except to the extent of its obligations as to assumed employment contracts.
Notwithstanding the forgoing, Buyer's welfare plans for Business Employees hired
by Buyer at Closing shall provide adequate coverage as of the Closing, such that
neither Granite nor any of its Affiliates shall have any liability under Section
4980B of the Code with respect to such employees. Granite shall be solely liable
and responsible for providing continuation coverage under Code Section 4980B and
Part 6 of Title I of ERISA with respect to any qualifying event that occurs on
or prior to the date hereof, including any continuation coverage requirements
that arise as a result of the failure of an employee to accept employment
offered pursuant to Section 9.1 above. Any expenses and benefits with respect to
medical claims incurred by any current or former WLAJ Employees or their covered
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dependents on or before the date hereof shall be the responsibility of Granite.
9.4 Indemnity. The members of the Granite Group shall, jointly and
severally, indemnify, defend and hold Buyer and its Affiliates harmless from and
against any and all claims, actions, suits, demands, proceedings, losses,
expenses, damages, obligations and Liabilities (including costs of collection,
attorney's fees and other costs of defense) arising out of or otherwise in
respect of: (a) any member of the Granite Group's termination of any employee or
any claim by an employee for wrongful assignment of any employment agreement to
Buyer; (b) any claim made for severance pay arising in connection with any
member of the Granite Group's employment or termination of any current or former
employee of any member of the Granite Group or any claim by an employee for
wrongful assignment of any employment agreements to Buyer; (c) benefits or
claims incurred on or after the date hereof by any current or former employees
under, or in connection with, any Employee Plan, program or arrangement
maintained or contributed to by any member of the Granite Group; and (d) claims
or Liabilities arising by reason of or relating to any failure of any member of
the Granite Group to comply with Code Section 4980B or Part 6 of Title I of
ERISA.
10. Risk of Loss; Failure of Broadcast Transmission.
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10.1 Risk of Loss. The risk of any loss, damage or impairment,
confiscation or condemnation of the Broadcasting Assets and the WLAJ Licenses or
any part thereof from fire or any other casualty or cause shall be borne by
Granite and WLAJ, Inc. at all times prior to the Closing. In any such event, the
proceeds of or any claim for any loss payable under any insurance policy, claim,
judgment or award with respect thereto (collectively, the "Proceeds") shall be
paid to Granite or WLAJ, Inc., which shall substantially repair, replace or
restore any such Broadcasting Assets as soon as possible after its loss,
impairment, confiscation or condemnation; provided, however, that, if Granite
reasonably concludes that the Proceeds plus any deductible amounts under any
applicable insurance policies are inadequate to complete such repair,
replacement and restoration, Granite may, unless Buyer accepts payment of such
Proceeds and deductible amounts from Granite in lieu of such repair, replacement
or restoration, by written notice thereof to Buyer within thirty (30) days of
any such occurrence, terminate this Agreement without any continuing obligation
either from Buyer, Granite or WLAJ, Inc. to the other.
10.2 Failure of Broadcast Transmission. If any event referred to in
Section 10.1 hereof occurs or if any event occurs which prevents broadcast
transmission by WLAJ in the normal and
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usual manner and if WLAJ, Inc. or Granite cannot restore or replace the
Broadcasting Assets so that such condition(s) are cured and normal and usual
transmission can be resumed before the Closing Date and Granite has not
terminated this Agreement, as permitted by Section 10.1 hereof, the Closing Date
shall be postponed, the exact date and time of such postponed Closing to be such
date and time within the effective period of the Final Order contemplated under
this Agreement as shall be designated by Granite upon five (5) days' written
notice to Buyer. In the event that such Broadcasting Assets cannot be restored
within the effective period of the Final Order and Granite has not terminated
this Agreement, as permitted by Section 10.1 hereof, the parties shall join in
an application or applications requesting the FCC to extend the effective period
of its consent for a period of an additional sixty (60) days. If such
Broadcasting Assets have not been restored or replaced by the Closing Date, as
and to the extent postponed pursuant to this Section 10.2, each party hereto
shall each have the right, by giving written notice of its election to do so to
the other parties, to terminate this Agreement forthwith without any further
obligation hereunder. Anything herein contained to the contrary notwithstanding,
Buyer may, at its option, proceed to close the transaction forthwith and
complete the restoration and
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replacement of the damaged Broadcasting Assets after the Closing Date, in which
event Granite shall pay or otherwise transfer to Buyer any and all proceeds and
deductible amounts under applicable insurance policies of the Granite Group.
11. Books and Records. Except for the Excluded Assets, Buyer shall
be entitled to all records, including but not limited to Contracts, the WLAJ
Licenses and all other licenses, permits and authorizations under any
applicable law, books of account, technical information and engineering data,
programming information, employment records, customer lists and files,
advertising records, FCC logs, asset history files, and other lease,
documents and correspondence of any member of the Granite Group relating to
their operation of WLAJ prior to the Closing Date as shall be reasonably
necessary to the maintenance of the business affairs of WLAJ after the
Closing Date; provided, however, that for a period of six (6) years Buyer
shall retain and make available for inspection by Granite, WLAJ, Inc. or its
representatives for any reasonable purpose all such records, books of
account, files, documents and correspondence, and Buyer shall not dispose of,
alter or destroy any such materials without giving ninety (90) days' prior
written notice to Granite so that Granite may, at its expense, examine, make
copies of or take possession of such materials. Within three (3) days after
the
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Closing, the members of the Granite Group shall deliver to Buyer in accordance
with Buyer's instructions all documents relating to WLAJ (other than Excluded
Assets) that are in the possession of any member of the Granite Group or any of
their representatives or agents and WLAJ, Inc. and Granite may, at their
expense, make and keep copies of all or any of such documents.
12. Possession and Control of WLAJ. Notwithstanding any other provision of
this Agreement, between the date of this Agreement and the Closing Date, Buyer
shall not directly or indirectly control, supervise or direct, or attempt to
control, supervise or direct, the operations of WLAJ, and the conduct of such
business operations, including control and supervision of programming, shall be
the sole responsibility of, and in the complete discretion and independent and
separate control of, WLAJ, Inc. and/or Granite. Neither title to WLAJ, the
Broadcasting Assets nor right to possession thereof shall pass to Buyer until
the Closing Date.
13. Brokers. Buyer represents and warrants to the Granite Group that it has
not engaged any broker, finder or consultant in connection with this Agreement
and the transactions contemplated herein or any aspect thereof. Granite
represents and warrants to Buyer that no member of the Granite Group has engaged
any broker, finder or consultant in connection with this Agreement and the
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transactions contemplated herein or any aspect thereof. Each party agrees to
indemnify and hold the other harmless from any and all loss, cost, liability,
damage and expense (including legal and other expenses incident thereto) in
respect of any claim by a broker, finder or consultant for a fee or commission
or similar payment by virtue of any alleged agreements, arrangements or
understandings with the indemnifying party.
14. Survival; Indemnification.
14.1 Survival. The several representations and warranties of the parties
contained in this Agreement (or in any document delivered in connection
herewith) shall be deemed to have been made on the date of this Agreement and on
the Closing Date, shall survive the Closing Date and shall remain operative and
in full force and effect without limitation; provided, however, that any claim
with respect to the representations and warranties of: (a) the members of the
Granite Group contained in (i) Sections 4.1 (Organization and Standing), 4.2
(Authorization and Binding Obligations), 4.3 (No Contravention; Consents), 4.4
(Title to Assets), 4.5 (Condition of Assets), 4.6 (Licenses and Authorizations),
4.7 (Contracts), 4.8 (Franchises, Trademarks and Trade Names), Section 4.9
(Employee Plans; ERISA), 4.10 (Financial Statements), 4.11 (Litigation;
Compliance), 4.12 (Cable Carriage), 4.13 (Labor), 4.14 (Affiliated and Recent
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Transactions), 4.17 (Miscellaneous) and 13 (Brokers) must be made within
twenty-four (24) months from the Closing Date, (ii) Section 4.16 (Environmental
Matters) must be made within three (3) years from the Closing Date and (ii)
Section 4.15 (Taxes) may be made at any time after the Closing Date (subject to
any applicable statutes of limitations); or (b) Buyer contained in Sections 5.1
(Organization and Standing), 5.2 (Authorization and Binding Obligations), 5.3
(No Contravention), 5.4 (Litigation), 5.5 (Absence of Knowledge as to Certain
Facts), 5.6 (Miscellaneous) and 13 (Brokers) must be made within twenty-four
(24) months from the Closing Date. The several covenants and agreements of the
parties contained in this Agreement (or in any document delivered in connection
herewith) shall remain operative and in full force and effect without any time
limitation, except as any such covenant or agreement shall be limited in
duration by the express terms hereof. Notwithstanding the foregoing, (i) any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with this Section 14.1 will continue to survive if a claim for
indemnity shall have been made under this Section 14 on or prior to such
termination date, until such claim has been satisfied or otherwise resolved; and
(ii) the foregoing limitation periods shall not apply to any claim for
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breach of representation or warranty based upon intentional misrepresentation.
14.2 Granite Group Indemnification - Breach. The members of the Granite
Group, jointly and severally, agree to indemnify, defend and hold Buyer harmless
from and after the Closing from and against any and all loss, cost, Liability,
damage and expenses (including reasonable legal and other expenses incident
thereto) resulting from breach of the representations, warranties, covenants and
agreements of any member of the Granite Group contained in this Agreement;
provided, however, that any claim for a breach of a representation or warranty
shall have been made prior to the expiration date thereof, if any, set forth in
Section 14.1 hereof.
14.3 Granite Group Indemnification - Liabilities. The members of the
Granite Group, jointly and severally, agree to indemnify, defend and hold Buyer
harmless from and after the Closing from and against: (a) any and all
Liabilities (other than the Assumed Obligations), losses, damages, actions,
suits, proceedings, demands, assessments, judgments, costs and expenses
(including reasonable legal and other expenses incident thereto), resulting from
causes of action or claims of any kind (excluding any and all claims and
Liabilities arising or resulting from a
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breach of any of Buyer's agreements or warranties or from an inaccuracy in any
of Buyer's representations hereunder) asserted by unrelated third parties and
arising with respect to the operations of WLAJ (by any member of the Granite
Group)or any member of the Granite Group prior to the Closing Date, including
any Liabilities arising from any labor or employment actions or claims, where
the events giving rise to such actions or claims arose, prior to the Closing
Date; (b) all Retained Liabilities and (c) all Taxes of any member of the
Granite Group that are (i) attributable to periods ending prior to the Closing
Date other than Prorated Obligations that are Assumed Liabilities, or (ii) any
other Taxes of Granite or its Affiliates not expressly assumed by Buyer under
this Agreement. Granite shall be entitled to any net refunds of Taxes (including
interest thereon) with respect to the periods ending prior to the Closing Date.
Subject to Section 19.2 hereof, any Tax resulting from the sale of the
Broadcasting Assets by any member of the Granite Group shall be deemed to be a
Tax solely attributable to a pre-Closing period.
14.4 Buyer's Indemnification. Buyer agrees to indemnify, defend and hold
the members of the Granite Group harmless from and after the Closing Date from
and against:
14.4.1 Buyer's Indemnification - Breach. Any and all loss, cost,
Liability, damage and expense (including
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reasonable legal and other expenses incident thereto) resulting from Buyer's
breach of any of its representations, warranties, covenants and agreements under
this Agreement; provided, however, that any such claim, for breach of a
representation or warranty shall have been made prior to the expiration date
thereof, if any, set forth in Section 14.1 hereof; and
14.4.2 Buyer's Indemnification - Liabilities. Any Liabilities
(other than Retained Liabilities), and any and all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses (including reasonable legal
and other expenses incident thereto) resulting from causes of action or claims
of any kind asserted by unrelated third parties arising with respect to the
operations of WLAJ or Buyer on or after the Closing Date (excluding any and all
such Liabilities arising or resulting from a breach of any of the members of the
Granite Group's agreements or covenants or an inaccuracy of any of the members
of the Granite Group's representations or warranties hereunder) and any Assumed
Obligations.
14.5 Granite Group's Obligations. Notwithstanding anything to the
contrary in Section 14.2 above or the February Purchase Agreement, no member of
the Granite Group shall be obligated to make any payments under Section 14.2 or
Section 14.2 of the February Purchase Agreement above with respect to a breach
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of a representation or warranty contained herein or therein (a) unless the
aggregate amounts of all claims made under Section 14.2 hereunder and under
Section 14.2 thereunder, collectively, equals or exceeds $250,000, whereupon
Buyer shall be entitled to indemnification for claims in excess of such amount
or (b) in excess of $75,000,000 in the aggregate; provided, however, that the
foregoing limitations shall not apply to claims for indemnification based upon
intentional misrepresentation or with respect to Retained Liabilities.
14.6 Taxes. The members of the Granite Group, on the one hand, and
Buyer, on the other hand, agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and assistance
(including access to books and records) relating to the Broadcasting Assets as
is reasonably necessary for the preparation of any return of Taxes, claim for
refund or audit, and the prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment.
14.7 Indemnification Claim. Upon obtaining knowledge of any claim or
demand which has given rise to, or could reasonably give rise to, a claim for
indemnification hereunder, the party seeking indemnification ("Indemnitee")
shall promptly give written notice ("Notice of Claim") of such claim or demand
to the other party ("Indemnitor"). Indemnitee shall furnish to
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Indemnitor in reasonable detail such information as Indemnitee may have with
respect to such indemnification claim (including copies of any summons,
complaint or other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or asserting the
same). Subject to the limitations set forth in Section 14.1 hereof, no failure
or delay by Indemnitee in the performance of the foregoing shall reduce or
otherwise affect the obligation of Indemnitor to indemnify and hold Indemnitee
harmless, except to the extent that such failure or delay shall have adversely
affected Indemnitor's ability to defend against, settle or satisfy any
Liability, damage, loss, claim or demand for which Indemnitee is entitled to
indemnification hereunder.
14.8 Notice of Claim. If the claim or demand set forth in the
Notice of Claim given by Indemnitee pursuant to Section 14.7 hereof is a claim
or demand asserted by a third party, Indemnitor shall have fifteen business (15)
days after the Date of Notice of Claim to notify Indemnitee in writing of its
election to defend such third party claim or demand on behalf of the Indemnitee.
If Indemnitor elects to defend such third party claim or demand, Indemnitee
shall make available to Indemnitor and its agents and representatives all
records and other materials which are reasonably required in the defense of such
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third party claim or demand and shall otherwise cooperate with, and assist
Indemnitor in the defense of, such third party claim or demand, and so long as
Indemnitor is defending such third party claim in good faith, Indemnitee shall
not pay, settle or compromise such third party claim or demand. If Indemnitor
elects to defend such third party claim or demand, Indemnitee shall have the
right to participate in the defense of such third party claim or demand, at
Indemnitee's own expense. In the event, however, that Indemnitee reasonably
determines that representation by counsel to Indemnitor of both Indemnitor and
Indemnitee may present such counsel with a potential conflict of interest that
would make separate representation inadvisable under generally accepted
standards of professional conduct, or where non-monetary relief is being sought
against Indemnitee by a third party, then such Indemnitee may elect to defend
such third party claim or demand and employ separate counsel to represent or
defend it in any such action or proceeding and Indemnitor will pay the
reasonable fees and disbursements of such counsel; provided, however, that
Indemnitee's defense of such action or proceeding shall not limit Indemnitee's
right to indemnification under this Section 14 if it is ultimately determined
that indemnification is due from Indemnitor. If Indemnitor does not
elect to defend such third party claim or demand or does not
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defend such third party claim or demand in good faith, Indemnitee shall have the
right, in addition to any other right or remedy it may have hereunder at
Indemnitor's expense, to defend such third party claim or demand; provided,
however, that (a) Indemnitee shall not have any obligation to participate in the
defense of, or defend, any such third party claim or demand; and (b)
Indemnitee's defense of or its participation in the defense of any such third
party claim or demand shall not in any way diminish or lessen the obligations of
Indemnitor under the agreements of indemnification set forth in this Section 14.
14.9 Indemnitor's Obligations. Except for third party claims being
defended in good faith, Indemnitor shall satisfy its obligations hereunder in
cash within thirty (30) days after the Date of Notice of Claim.
14.10 Date of Notice of Claim. The term "Date of Notice of Claim" shall
mean the date the Notice of Claim is effective pursuant to Section 19.5 hereof.
14.11 Consent of Indemnification. No claim giving rise to a Notice of
Claim shall be compromised or settled except with the prior written consent of
the Indemnitee, which consent shall not be unreasonably withheld.
14.12 Subrogation. In the event that any member of the Granite Group
makes any payment to Buyer for indemnification for
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which Buyer could have collected on a claim against a third party (including
Lansing under the WLAJ Documents but excluding insurance claims), Granite shall
be entitled to pursue claims and conduct litigations on behalf of Buyer and any
of its successors, to pursue and collect on any indemnification or other remedy
available to Buyer thereunder with respect to such claim and generally to be
subrogated to the rights of Buyer.
14.13 Limitation on Liability. The parties hereto acknowledge and agree
that from and after the Closing the sole and exclusive remedy with respect to
any and all claims relating to the subject matter of this Agreement (other than
any claims relating to a breach of a covenant or agreement under this Agreement
which by its terms contemplates performance after the Closing) shall be made
pursuant to the provisions of this Section 14.
15. Hart-Scott-Rodino Filings. The parties hereto have made any and all
filings which are required under HSRA with respect to the transactions
contemplated by this Agreement, the filing fees for which have been shared
equally by Buyer and Granite, and shall continue to cooperate in the taking of
all steps that are necessary, proper or desirable in connection therewith.
16. Reserved.
17. Termination.
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17.1 Events of Termination. This Agreement may be terminated:
17.1.1 Buyer. Subject to Section 19.1 hereof, by Buyer, if the
Closing shall not have occurred on or prior to December 31, 1998 (other than as
a result of the failure by Buyer or its Affiliates to comply fully with its
obligations under this Agreement);
17.1.2 Granite. Subject to Section 19.1 hereof, by Granite, if the
Closing shall not have occurred on or prior to December 31, 1998 (other than as
a result of the failure by any member of the Granite Group or their respective
Affiliates to comply fully with its obligations under this Agreement);
17.1.3 Mutual Consent. By mutual consent of Buyer and Granite;
17.1.4 By Granite on Breach. Subject to Section 19.1 hereof, by
Granite if (a) Buyer is in material breach of this Agreement and (b) neither
Granite nor WLAJ, Inc. is then in material breach of this Agreement;
17.1.5 By Buyer on Breach. Subject to Section 19.1 hereof, by Buyer
if (a) a member of the Granite Group is in material breach of this Agreement and
(b) Buyer is not then in material breach of this Agreement;
17.2 Effect of Termination.
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17.2.1 Effect. If this Agreement is validly terminated pursuant to
Section 17.1, this Agreement will forthwith become null and void, and there will
be no liability or obligation on the part of any party hereto (or any of their
respective officers, directors, employees, agents or other representatives or
Affiliates), except as provided in Section 17.2.2 hereof and except that the
provisions with respect to expenses in Section 19.2 hereof, confidentiality in
Section 19.18 hereof, and amendment/modification of the February Purchase
Agreement in Section 20 will continue to apply following any such termination.
17.2.2 Generally. Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 17.1 hereof (excluding Section 17.1.3 hereof), the members of the
Granite Group will remain liable to Buyer for any willful breach of this
Agreement by any member of the Granite Group existing at the time of such
termination, and Buyer will remain liable to the Granite Group for any willful
breach of this Agreement by Buyer existing at the time of such termination, and
the members of the Granite Group, on the one hand or Buyer, on the other hand,
may seek such remedies, including damages and fees of attorneys, against the
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other with respect to any such breach as are provided in this Agreement or as
are otherwise available at law or in equity.
18. Covenant Against Competition; Confidentiality.
18.1 Non-Competition. Each member of the Granite Group hereby agrees
that for a period of three (3) years from and after the Closing, no member of
the Granite Group shall, directly or indirectly, including through any Affiliate
thereof, in any manner (including without limitation as a coventurer, operator,
partner, stockholder, advisor or lender) engage in the radio or television
station business ("Prohibited Business") within the Lansing, Michigan Designated
Market Areas as measured by Nielsen Media Research Company, except on behalf of
Buyer or through the operation of WDWB-TV, Detroit, Michigan. If any provision
of this Section 18 is held to be invalid by a court of competent jurisdiction,
the covenants contained herein shall be applicable and enforceable for such
lesser period of time, and for such lesser activity included within such
limitations, as such court may then or thereafter determine to be reasonable and
proper under the circumstances. In the event that any provision of this Section
18 is deemed to be unenforceable, the remainder of this Section 18 shall not be
affected thereby and each provision hereof shall be valid and enforced to the
fullest extent permitted by law.
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18.2 Confidentiality. Each member of the Granite Group and any
Affiliates thereof shall at all times prior to and for three (3) years after the
Closing Date maintain confidential and not use for any purpose other than the
operation of WLAJ, any information relating to WLAJ (other than information in
the public domain not as the result of a breach of this Agreement), its business
and operations except: (a) as necessary to the performance of this Agreement;
(b) as authorized in writing by Buyer; or (c) to the extent that disclosure is
required by law or the order of any Governmental Authority under color of law;
provided, that, prior to disclosing any information pursuant to this clause (c),
the disclosing Person shall have given prior written notice thereof to Buyer
and, to the extent practicable, provided Buyer with the opportunity to contest
such disclosure at Buyer's expense. Without the prior written consent of Buyer,
no member of the Granite Group nor any Affiliate thereof shall directly or
indirectly offer employment to any Business Employee hired by Buyer at Closing
within three (3) years after the Closing Date, except for any Business Employee
whose employment with Buyer or its successors shall have been terminated.
18.3 Specific Performance. Each member of the Granite Group hereby
acknowledges that the damages Buyer would sustain in the event of any violation
of the provisions of this Section 18
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are difficult or impossible to ascertain. Accordingly, each member of the
Granite Group hereby agrees that Buyer shall be entitled, in addition to any
other remedy or damages available to it in the event of any such violation, to
injunctive relief to restrain such violation by any member of the Granite Group
or any Person intended to be subject to the restriction contained herein which
may be acting for or with any member of the Granite Group or such other Person.
19. Miscellaneous.
19.1 General. Notwithstanding any other provision of this Agreement, if
a default by any party hereto can be cured or a condition satisfied (other than
receipt of a Final Order for which this Section 19.1 does not apply) within
fifteen (15) business days after the time initially fixed for the Closing as set
forth herein, then the Closing Date shall be extended for the period (not to
exceed fifteen (15) business days) required for such party to make such cure or
satisfaction; provided, that, such default does not, and would not reasonably be
expected to, have a material adverse effect on WLAJ, the Broadcasting Assets,
the WLAJ Licenses, Buyer (in the case of a default by any member of the Granite
Group) or any member of the Granite Group (in the case of a default by Buyer).
If such cure or satisfaction cannot be, or is not, completed within fifteen (15)
business days after
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such initial time, then the rights of the parties shall be governed by the
applicable provisions of this Agreement.
19.2 Costs, Expenses Etc. Except as expressly provided elsewhere herein
each of the parties hereto shall bear all costs and expenses incurred by it in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein. The payment of all sales, use, transfer or
similar Taxes, documentation stamps, or other similar charges imposed by any and
all Governmental Authorities (excluding any income Taxes) with respect to the
transfer of title to the Broadcasting Assets hereunder and the other
transactions anticipated hereby shall be borne equally by Granite and Buyer;
provided, that, transfer taxes relating to transfers of real property included
in the Broadcasting Assets shall be borne by Granite. All recording costs and
fees incurred in connection with clearing and removing any liens and
Encumbrances not assumed by Buyer to which the Broadcasting Assets may be
subject, so as to permit the applicable members of the Granite Group to convey
good and marketable title to the Broadcasting Assets free and clear of all
Encumbrances other than Permitted Encumbrances, shall be the responsibility of
Granite.
19.3 Further Assurances. Each party shall, from time to time, upon the
request of another party, execute, acknowledge
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and deliver to the other party such other documents or instruments, and take any
and all actions as are reasonably necessary for the implementation and
consummation of the transactions contemplated by this Agreement.
19.4 Notice of Proceedings. Each party hereto will promptly and in any
case within five (5) business days notify the other parties in writing upon
becoming aware of any labor organization drive or any order or decree or any
complaint praying for an order or decree restraining or enjoining the
consummation of this Agreement or the transactions contemplated hereunder, or
upon receiving any notice from any Governmental Authority of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Agreement or such transactions, or to nullify
or render ineffective this Agreement or such transactions if consummated.
19.5 Notices. Any notice, request, demand or consent required or
permitted to be given under this Agreement shall be in writing (including
telexes, telecopies, facsimile transmissions and similar writings) and shall be
effective when transmitted and confirmation of receipt is obtained for telexes,
telecopies, facsimile transmissions and similar writings; when delivered
personally; one (1) day after sent by recognized
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overnight courier; and five (5) days after sent by mail, first class, postage
prepaid, registered mail, return receipt requested; in each case to the
following address or telecopier number, as applicable:
(a) If to any member of the Granite Group to:
Granite Broadcasting Corporation
767 Third Avenue
34th Floor
New York, New York 10017
Attention: President
Telephone:(212) 826-2530
Telecopier: (212) 826-2858
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Telephone: (202) 887-4000
Telecopier: (202) 887-4288
(b) If to Buyer to:
Freedom Communications, Inc.
17666 Fitch
Irvine, California 92614-6022
Attention: Alan J. Bell
Telephone: (949) 253-2313
Telecopier: (949) 253-2349
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with copies to:
Freedom Communications, Inc.
17666 Fitch
Irvine, California 92614-6022
Attention: Glenn E. Fuller
Telephone: (949) 253-2306
Telecopier: (949) 798-3524
or at such other address as either party shall specify by notice
to the other.
19.6 Headings and Entire Agreement; Amendment. The section and
subsection headings do not constitute any part of this Agreement and are
inserted herein for convenience of reference only. This Agreement embodies the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all negotiations, representations, warranties, commitments,
offers, contracts and writings prior to the date hereof, including, without
limitation, that certain letter agreement between Granite and Buyer dated
January 12, 1998 and (with respect to WLAJ) the February Purchase Agreement. It
may not be amended, modified or changed orally, but only in writing signed by
the party against whom enforcement of any amendment, modification, change,
waiver, extension or discharge is sought.
19.7 Waiver. No waiver of a breach of, or default under, any provision
of this Agreement shall be deemed a waiver of such provision or of any
subsequent breach or default of the
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same or similar nature or of any other provision or condition of this Agreement.
19.8 Binding Effect and Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties. Neither this Agreement nor any
obligation hereunder shall be assignable except with the prior written consent
of the other parties hereto which may be withheld for any reason; provided,
however, that Buyer may assign this Agreement, in whole or in part, to any
direct or indirect wholly owned subsidiary thereof, provided Buyer agrees in
writing with Granite and WLAJ, Inc., which writing shall be reasonably
satisfactory to Granite, to unconditionally guarantee all obligations of such
assignee under this Agreement. No party hereto assumes any duty hereunder to any
other person or entity, and this Agreement shall operate exclusively for the
benefit of the parties hereto and not for the benefit of any other Person or
entity.
19.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one agreement.
19.10 Schedules and Attachments. The Schedules attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of
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the provisions of such Schedules and the provisions of this Agreement, the
provisions in this Agreement shall control.
19.11 Rights Cumulative. Except as set forth herein, all rights, powers
and remedies herein given to the parties hereto are cumulative and not
alternative, and are in addition to all statutes or rules of law.
19.12 Governing Law. This Agreement, and the rights and obligations
of the parties hereto, shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed therein.
19.13 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance, is held invalid, such
invalidity shall not affect any other provision which can be given effect
without the invalid provision or application, and to this end the provisions
hereof shall be severable.
19.14 Third Party Rights. Nothing in this Agreement (including the
Schedules and other attachments hereto, or any ancillary agreement,
instrument or document contemplated hereby or relating hereto) shall be
deemed to create any right with respect to any Person not a party to, or any
property not subject to, this Agreement.
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19.15 Time of Essence. Time is of the essence in the performance of
this Agreement.
19.16 Press Releases. Except as otherwise required by law, Buyer and the
members of the Granite Group shall: (a) prior to its issuance of any press
release relating to the transactions contemplated by this Agreement, submit to
the other parties, and obtain the approval thereof, any part or parts of the
press release which characterize the other parties, which approval shall not be
unreasonably withheld; and (b) use its best efforts to characterize the other
parties, in any other public statements made by the party making such statement
about the other parties, on substantially the same basis as in any press release
made by the party making such statement.
19.17 Specific Performance. Each member of the Granite Group hereby
agrees that Buyer shall be entitled, in addition to any other remedies or
damages available to Buyer in the event of any breach of this Agreement by any
member of the Granite Group, to specific performance of the obligations of each
member of the Granite Group under this Agreement.
19.18 Confidentiality. Buyer agrees with respect to all
technical and commercial and other information relating to Granite, WLAJ, Inc.
or WLAJ that is or has been furnished or disclosed to Buyer, its officers,
directors, agents, Affiliates
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or consultants on, after or before the date hereof, including, but not limited
to, information regarding the organization, personnel, business activities,
customers, policies, assets, finances, costs, sales, revenues, rights,
obligations, liabilities and strategies of Granite, WLAJ, Inc. or WLAJ
("Information"), that, unless and until the transactions contemplated by this
Agreement shall have been consummated (and for five (5) years from the date of
such consummation for Information relating to Granite): (a) such Information is
confidential and/or proprietary to Granite, WLAJ, Inc. and WLAJ and entitled to
and shall receive treatment as such by Buyer; (b) Buyer will, and will require
all of its employees, representatives, agents, Affiliates and advisors who have
access to such information, to hold in confidence and not disclose to others nor
use (except in respect of the transactions contemplated by this Agreement) any
such Information; provided, however, that Buyer shall not have any restrictive
obligation with respect to any Information which: (i) is contained in a printed
publication available to the general public; (ii) is or becomes publicly known
through no wrongful act or omission of, or violation of the terms hereof by,
Buyer or any third party; (iii) becomes known to Buyer from a source which did
not wrongfully acquire such Information and has no confidentiality
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obligation with respect to such Information at the time of receipt of such
information; or (iv) is required by law or the order of any governmental
authority under color of law; provided, that, prior to disclosing any
Information pursuant to this clause (iv), Buyer shall have given prior written
notice thereof to the Granite Group, to the extent practicable, provided the
Granite Group with the opportunity to contest such disclosure at their expense;
and (c) all such Information, unless otherwise specified in writing, shall
remain the property of the applicable Granite Group member, in the event this
Agreement is terminated and shall be returned to the applicable Granite Group
member, together with any and all copies made thereof, upon request for such
return by the applicable Granite Group member (except for documents submitted to
a Governmental Authority with the consent of a Granite Group member or upon
subpoena and which cannot be retrieved with reasonable effort). Without the
prior written consent of Granite and WLAJ, Inc., Buyer shall not directly or
indirectly offer employment to any employee of Granite or WLAJ, Inc. (other than
any Business Employee) within three (3) years after the Closing Date, except for
any such employees whose employment with Granite or WLAJ, Inc. or their
successors shall have been terminated.
20. Amendment/Modification of February Purchase Agreement.
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20.1 Generally. Notwithstanding anything to the contrary contained
herein or in the February Purchase Agreement, the February Purchase Agreement is
hereby amended such that all references to, covenants, representations,
Liabilities and warranties relating to, and agreements with respect to, WLAJ,
WLAJ, Inc. and WLAJ License, Inc. and Lansing, including the WLAJ Granite
Assets, the WLAJ Lansing Assets, the WLAJ Application, the WLAJ Employees, the
WLAJ Licenses, any WLAJ Document and the Loan (the "WLAJ Transaction Matters"),
are hereby eliminated from the February Purchase Agreement (including the
Schedules relating to the WLAJ Transaction Matters and any text accompanying the
WLAJ Transaction Matters, in each case however, only to the extent relating to
WLAJ Transaction Matters), and, as amended, the February Purchase Agreement is
an agreement among the parties thereto for the purchase of the WWMT Assets and
WWMT (with the Base Price remaining unchanged) and in no way relates to WLAJ,
the WLAJ Granite Assets, the WLAJ Lansing Assets or the WLAJ Licenses or any
other WLAJ Transaction Matters.
20.2 Specific Amendments. Without limitation to Section 20.1, the
following provisions of the February Purchase Agreement are hereby modified as
follows:
(a) Definitions.
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(i) the definition of "FCC Applications" shall mean the WWMT
Application;
(ii) The definitions of "Granite Broadcasting Assets" and
"Broadcasting Assets" shall mean the WWMT Assets;
(iii) the definition of "Stations" shall mean WWMT; and
(iv) the definition of "Station Licenses" shall mean WWMT
Licenses.
(b) Section 2.2.5. Section 2.2.5 is hereby deleted in its entirety.
(c) All references to WWMT License, Inc. shall be amended to mean
WWMT-TV License, Inc.
21. Operation of WLAJ. From the date hereof until the earlier of the
Closing or termination of this Agreement, Buyer shall supply to the Granite
Group all services, and the use of all facilities, personnel and tangible
personal property ("Assistance") previously furnished by WWMT-TV, Inc. to WLAJ
and reasonably necessary for Granite to perform its obligations under the Time
Brokerage Agreement consistent with past practices. The parties anticipate that
Assistance will consist of accounting, human resources and news functions.
Granite shall pay a fee for
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the Assistance equal to WWMT's actual cost of supplying the Assistance, which
fee shall be due and payable on the earlier of the Closing Date or within five
(5) business days after receipt of invoicing from Buyer.
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IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed and delivered in its name and on its behalf, all as of the date and
year first above written.
GRANITE BROADCASTING CORPORATION
By: /s/ Lawrence I. Wills
---------------------------------
Name
---------------------------------
Title:
WLAJ, INC.
By: /s/ Lawrence I. Wills
---------------------------------
Name
---------------------------------
Title:
---------------------------------
WLAJ LICENSE, INC.
By: /s/ Lawrence I. Wills
---------------------------------
Name
---------------------------------
Title:
---------------------------------
FREEDOM COMMUNICATIONS, INC.
By: /s/ Alan J. Bell
---------------------------------
Name: Alan J. Bell
Title: Senior Vice President and
President, Broadcast
Division
WWMT-TV, INC.
By: /s/ Lawrence I. Wills
---------------------------------
Name
---------------------------------
Title:
---------------------------------
WWMT-TV LICENSE, INC.
By: /s/ Lawrence I. Wills
---------------------------------
Name
---------------------------------
Title:
---------------------------------
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-91056) pertaining to the Employee Stock Purchase Plans of
Granite Broadcasting Corporation of our report dated December 19, 1997 with
respect to the financial statements of KOFY-TV (A Division of Pacific FM,
Incorporated) for each of the two years in the period ended June 30, 1997,
filed with the Securities and Exchange Commission.
New York, New York
August 13, 1998
