SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
May 9, 1996
----------------------------
(Date of earliest event reported)
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
Maryland 000-26076 52-1494660
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
2000 W. 41st Street, Baltimore, Maryland 21211-1420
---------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (410) 467-5005
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
In its original filing on Form 8-K, the Company reported as pending the
acquisition of certain assets from (as previously amended) Kansas City TV 62
Limited Partnership ("KSMO"), Cincinnati TV 64 Limited Partnership ("WSTR") and
River City Broadcasting ("RCB"). The Company completed the acquisition of assets
from RCB on May 31, 1996, and entered into an Amended and Restated Asset
Purchase Agreement, a Group I Option and a Columbus Option reflecting certain
amendments, as described in the original filing, to the original agreements. The
Company completed the acquisition of KSMO on July 1, 1996 and completed the
acquisition of WSTR on August 1, 1996.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The following financial statements are filed with this report:
KANSAS CITY TV 62 LIMITED PARTNERSHIP
Balance Sheet as of June 30, 1996
Statements of Operations for the Three and Six Months
Ended June 30, 1995 and June 30, 1996
Statement of Cash Flows for the Six Months Ended
June 30, 1995 and June 30, 1996
Notes to Financial Statements
CINCINNATI TV 64 LIMITED PARTNERSHIP
Balance Sheet as of June 30, 1996
Statements of Operations for the Three and Six Months
Ended June 30, 1995 and June 30, 1996
Statement of Cash Flows for the Six Months Ended
June 30, 1995 and June 30, 1996
Notes to Financial Statements
Financial statements of businesses acquired (previously filed as
amended herein)
SUPERIOR COMMUNICATIONS GROUP, INC.
Independent Auditors Report
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994
Consolidated Statements of Operations for the Years Ended
December 31, 1995 and December 31, 1994
Consolidated Statements of Stockholder's Equity for the Years
Ended December 31, 1995 and December 31, 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
Report of Independent Public Accountants
Consolidated Balance sheets as of August 3, 1995 and
December 31, 1994
Consolidated Statements of Operations for the period from
January 1, 1995 through August 3, 1995 and the Year Ended
December 31, 1994
Consolidated Statements of Stockholders' Equity for the
Period from January 1, 1995 through August 3, 1995 and the
Year Ended December 31, 1994
Consolidated Statements of Cash Flows for the Period from
January 1, 1995 through August 3, 1995 and the Year Ended
December 31, 1994
Notes to Consolidated Financial Statements
KRRT, Inc.
Report of Independent Public Accountants
Balance Sheet as of December 31, 1995
Statement of Operations for the Period from July, 25 1995
through December 31, 1995
Statements of Changes in Stockholders' Equity for the Period
from July 25, 1995 through December 31, 1995
Statements of Cash Flows for the Period from July 25, 1995
through December 31, 1995
Notes to Financial Statements
RIVER CITY BROADCASTING L.P.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1994 and
December 31, 1995
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995
Consolidated Statements of Partners' Capital (Deficit) for the
Years Ended December 31, 1993, 1994 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995
Notes to Consolidated Financial Statements
Supplementary Information-Consolidating Balance Sheet as of
December 31, 1995
Supplementary Information-Consolidating Schedule of Operations
for the Year Ended December 31, 1995
(b) Pro forma financial information
Pro forma financial statements as of June 30, 1996 and for the six
months ended June 30, 1996 and the year ended December 31, 1995 are
filed with this report.
(c) Exhibits
10.71 Amended and Restated Asset Purchase Agreement dated as of
May 31, 1996 by and between River City Broadcasting, L.P. and Sinclair
Broadcast Group, Inc.
10.72 Group I Option Agreement dated as of May 31, 1996 by and
among River City Broadcasting, L.P., River City License Partnership
and Sinclair Broadcast Group, Inc.
10.73 Columbus Option dated as of May 31, 1996 by and among River
City Broadcasting, L.P., River City License Partnership and Sinclair
Broadcast Group, Inc.
<PAGE>
Kansas City TV 62 Limited Partnership
Balance Sheet
As of June 30, 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 522,967
Accounts receivable, net of allowance for
doubtful accounts of $252,018 4,021,199
Program contract rights, current portion 1,046,243
Prepaid expenses and other current assets 122,584
----------
Total current assets 5,712,993
Property and equipment, net of accumulated
depreciation 464,124
Due from related party -
Program contract rights, long-term portion 2,115,502
Intangible assets, net of accumulated amortization 3,727,907
-----------
Total assets $12,020,526
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Program contract rights payable, current portion $ 1,629,010
Accounts payable 97,621
Deferred revenue 114,711
Accrued liabilities 915,393
Note payable, current portion 1,120,502
-----------
Total current liabilities 3,877,237
PROGRAM CONTRACTS PAYABLE, net of current portion 1,664,335
NOTE PAYABLE, net of current portion 13,991,290
-----------
Total liabilities 19,532,862
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -
Additional paid-in capital -
Retained earnings (7,512,336)
-----------
Total stockholders' equity (7,512,336)
-----------
Total liabilities and stockholders' equity $12,020,526
===========
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
<S> <C> <C> <C> <C>
REVENUES:
Advertising revenue, net of agency commissions $ 4,144,103 $ 4,401,518 $ 7,008,506 $ 7,693,895
Revenues realized from barter arrangements 692,212 (807,348) 1,369,940 45,577
------------ ------------ ------------ ------------
Total Revenues 4,836,315 3,594,170 8,378,446 7,739,472
OPERATING EXPENSES:
Programming and production 2,197,505 1,745,583 2,272,081 1,842,027
Selling, general and administrative 505,573 771,159 1,720,429 1,901,725
Amortization of program contract rights 933,102 (515,477) 1,865,394 601,039
Depreciation and amortization of property and equipment 216,570 185,345 424,074 374,000
Amortization of intangible assets ------------ ------------ ----------- ------------
Total operating expenses 3,852,750 2,186,610 6,281,978 4,718,791
------------ ------------ ----------- ------------
Broadcast operating income 983,565 1,407,560 2,096,468 3,020,681
------------ ------------ ----------- ------------
OTHER INCOME:
Interest expense, net (512,911) (466,849) (1,057,399) (823,349)
Other income (expense) (4,105) (3,046) (23,525) 6,861
------------ ------------ ----------- ------------
Total other income (517,016) (469,895) (1,080,924) (816,488)
------------ ------------ ----------- ------------
Net income $ 466,549 $ 937,665 $ 1,015,544 $ 2,204,193
============ ============ =========== ============
Pro Forma Net Income After Imputing An Income Tax Provision:
Net income as reported $ 466,549 $ 937,665 $ 1,015,544 $ 2,204,193
Imputed income tax provision (223,943) (450,080) (487,461) (1,058,013)
------------ ------------ ----------- ------------
Pro Forma net income $ 242,606 $ 487,585 $ 528,083 $ 1,146,180
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
Kansas City TV 62 Limited Partnership
Statements of Cash Flows
For The Six Months Ended June 30, 1995 and June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,015,544 $ 2,204,193
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 318,949 281,820
Amortization of goodwill and other intangible assets 105,127 92,180
Amortization of program contracts rights 595,458 591,898
Changes in assets and liabilities:
Increase in accounts receivable (864,532) (68,406)
Increase in prepaid expenses (40,257) (105,036)
Increase (Decrease) in accounts payable 120,872 (24,713)
Decrease in accrued liabilities (793,637) (630,303)
Decrease in other current liabilities (42,058) (27,728)
Film Rights Payments (1,033,281) (921,424)
------------ ------------
Net cash flows from operating activities (617,815) 1,392,481
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (43,015) (11,310)
------------ ------------
Net cash flows from investing activities (43,015) (11,310)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners - (325,000)
Repayment of long-term debt (57,856) (1,123,089)
------------ ------------
Net cash flows from financing activities (57,856) (1,448,089)
------------ ------------
Net decrease in cash (718,686) (66,918)
------------ ------------
CASH, beginning of period 978,488 589,885
------------ ------------
CASH, end of period $ 259,802 $ 522,967
============ ============
Supplemental Schedule of Noncash Investing and Financing
Activities:
Film contracts acquired $ 41,000 $ 524,413
------------ -----------
Film contract liability additions $ 41,000 $ 524,413
============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
KANSAS CITY TV 62 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION:
Kansas City TV 62 Limited Partnership (the "Partnership") is a joint venture of
ABRY Communications III, L.P., the general partner, and Copley Place Capital
Group, the limited partner. The Partnership was organized under the laws of the
State of Delaware on April 18, 1990. On September 21, 1990, the Partnership
acquired the business and certain assets of Kansas City Television, Inc. (the
"Seller"). The Partnership is a television broadcaster serving the Kansas City
area through Station KSMO on UHF Channel 62.
These statements are unaudited, and certain information and footnote
disclosures normally included in the Partnership's annual financial statements
have been omitted, as permitted under the applicable rules and regulations.
Readers of these statements should refer to the financial statements and the
notes thereto as of December 31, 1995 and for the year ended included in the
original filing on Form 8-K. The results of operations presented in the
accompanying financial statements are not necessarily representative of
operations for an entire year.
2. RELATED PARTY TRANSACTIONS:
Prior to 1995, ABRY Communications III, L.P., provided certain administrative
and support services to the Partnership for which it was paid a management fee.
Management fees charged to operations aggregated $276,000 in 1994. No management
fees were charged during 1995 or 1996.
3. OPTION AGREEMENT:
On May 24, 1994, the Partnership entered into an agreement whereby the
Partnership granted a third-party an option to acquire the assets of the station
for an amount equal to the lesser of outstanding debt as of the exercise date,
including accrued interest thereon, or $9,000,000. The acquiring entity will
assume all other liabilities of the station. In conjunction with option
agreement, the Partnership entered into an agreement with the third-party
whereby the Partnership would pay the third-party a consulting fee of $250,000
per year as long as the option is outstanding. The Third-party exercised this
option and acquired the assets of the station for $10.5 million on July 2, 1996.
<PAGE>
Cincinnati TV 64 Limited Partnership
Balance Sheet
As of June 30, 1996
(Unaudited)
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,335
Accounts receivable, net of allowance for
doubtful accounts of $97 2,993
Program contract rights, current portion 3,215
Prepaid expenses and other current assets 34
---------
Total current assets 7,577
Property and equipment, net of accumulated
depreciation 4,979
Due from related party -
Program contract rights, long-term portion 3,190
Intangible assets, net of accumulated amortization 1,707
---------
Total assets $ 17,453
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Program contract rights payable, current portion $ 3,784
Accounts payable 492
Deferred revenue 114
Accrued liabilities 752
Note payable, current portion 200
---------
Total current liabilities 5,342
PROGRAM CONTRACTS PAYABLE, net of current portion 3,080
NOTE PAYABLE, net of current portion 18,778
---------
Total liabilities 27,200
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -
Additional paid-in capital -
Retained earnings (9,747)
---------
Total stockholders' equity (9,747)
---------
Total liabilities and stockholders' equity $ 17,453
=========
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
Cincinnati TV 64 Limited Partnership
Statements of Operations
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Advertising revenue, net of agency commissions $ 3,122 $ 3,679 $ 5,604 $ 6,477
Revenues realized from barter arrangements 859 881 1,669 1,715
------- ------- ------- -------
Total Revenues 3,981 4,560 7,273 8,192
OPERATING EXPENSES:
Programming and production 1,259 1,261 2,459 2,491
Selling, general and administrative 807 878 1,506 1,876
Amortization of program contract rights 341 484 716 1,011
Depreciation and amortization of property and equipment 144 142 300 284
Amortization of intangible assets 19 19 39 39
------- ------- ------- -------
Total operating expenses 2,570 2,784 5,020 5,701
------- ------- ------- -------
Broadcast operating income 1,411 1,776 2,253 2,491
------- ------- ------- -------
OTHER INCOME:
Interest expense, net (652) (550) (1,289) (1,112)
Other income (expense) - - - -
------- ------- ------- -------
Total other income (652) (550) (1,289) (1,112)
------- ------- ------- -------
Net income $ 759 $ 1,226 $ 964 $ 1,379
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
<TABLE>
<CAPTION>
Cincinnati TV 64 Limited Partnership
Statements of Cash Flows
For The Six Months Ended June 30, 1995 and June 30, 1996
(Unaudited)
(in thousands)
<S> <C> <C>
1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 964 $ 1,379
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 300 284
Amortization of goodwill and other intangible assets 39 39
Amortization of program contracts rights 716 1,011
Changes in assets and liabilities:
Decrease in accounts receivable 358 213
Increase in prepaid expenses (6) (20)
Decrease in accounts payable (611) (362)
Increase in accrued liabilities 485 446
Decrease in other current liabilities - (187)
Film Rights Payments (545) (1,235)
------- ------
Net cash flows from operating activites 1,700 1,568
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (78) (25)
------- ------
Net cash flows from investing activities (78) (25)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (1,410) (850)
------- ------
Net cash flows from financing activities (1,410) (850)
------- ------
Net increase in cash 212 693
------- ------
CASH, beginning of period 325 642
------- ------
CASH, end of period $ 537 $ 1,335
======= ======
Supplemental Schedule of Noncash Investing and Financing
Activities:
Film contracts acquired $ 416 $ 130
------- ------
Film contract liability additions $ 416 $ 130
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited statements.
<PAGE>
CINCINNATI TV 64 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION:
Cincinnati TV 64 Limited Partnership (the "Partnership") is a joint venture of
ABRY Communications II, L.P., the general partner, and Copley Place Capital
Group, the limited partner. The Partnership was organized under the laws of the
State of Delaware on August 1, 1989. The Partnership is a television broadcaster
serving the Cincinnati, Ohio area through Station WSTR on UHF Channel 64.
These statements are unaudited, and certain information and footnote
disclosures normally included in the Partnership's annual financial statements
have been omitted, as permitted under the applicable rules and regulations.
Readers of these statements should refer to the financial statements and the
notes thereto as of December 31, 1995 and for the year ended included in the
original filing on Form 8-K. The results of operations presented in the
accompanying financial statements are not necessarily representative of
operations for an entire year.
2. RELATED PARTY TRANSACTIONS:
Prior to 1995, ABRY Communications II, L.P., provided certain administrative and
support services to the Partnership for which it was paid a management fee.
3. OPTION AGREEMENT:
On May 24, 1994, the Partnership entered into an agreement whereby the
Partnership granted a third-party an option to acquire the assets of the station
for an amount equal to the lesser of outstanding debt as of the exercise date,
including accrued interest thereon, or $11,000,000. The acquiring entity will
assume all other liabilities of the station. In conjunction with option
agreement, the Partnership entered into an agreement with the third-party
whereby the Partnership would pay the third-party a consulting fee of $250,000
per year as long as the option is outstanding. The third-party exercised this
option in January 1996 and acquired the assets of the station for $9.9 million
on August 1, 1996.
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Consolidated Financial Data filed with this report includes
the unaudited pro forma consolidated balance sheet of the Company as of June 30,
1996 (the "Pro Forma Consolidated Balance Sheet") and the unaudited pro forma
consolidated statements of operations for the six months ended June 30, 1996 and
the year ended December 31, 1995 (the "Pro Forma Consolidated Statements of
Operations").
The unaudited Pro Forma Consolidated Balance Sheet is adjusted to give
effect to (I) the consummation of the acquisition of the assets and liabilities
of Kansas City TV 62 Limited Partnership ("KSMO") and Cincinnati TV 64 Limited
Partnership ("WSTR") and (II) cash on hand and borrowings under the existing
Bank Credit Agreement in amounts sufficient to complete the transactions
described in (I) above.
The unaudited Pro Forma Consolidated Statement of Operations are adjusted
to give effect to (I) the consummation of the acquisition of Superior
Communications Group, Inc. (Superior), KSMO, WSTR and River City Broadcasting
L.P. (RCB) (including KRRT, Inc.) and (II) cash on hand and borrowings under the
existing Bank Credit Agreement and New Credit Facilities in amounts sufficient
to complete the transactions described in (I) above. The WSYX-TV information in
the Pro Forma Consolidated Balance Sheet and Pro Forma Consolidated Statements
of Operations reflects the modification of the acquisition documents separating
Sinclair Broadcast Group, Inc.'s ("SBG") option to acquire the assets of
WSYX-TV, as reflected in the Amended and Restated Asset Purchase Agreement,
Group I Option and Columbus Option filed as exhibits to this report.
The pro forma adjustments are based upon available information and certain
assumptions the Company believes are reasonable. The Pro Forma Consolidated
Financial Data should be read in conjunction with the Company's Consolidated
Financial Statements and related notes thereto, and the Financial Statements and
related notes of Superior, KSMO, WSTR and RCB. The unaudited Pro Forma
Consolidated Data do not purport to represent what the Company's results of
operations or financial position would have been had any of the above events
occurred on the dates specified or to project the Company's results of
operations or financial position for or at any future period or date.
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA
HISTORICAL KSMO(A) WSTR(A) ADJUSTMENTS PRO FORMA
--------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including cash equivalents......................... $ 4,196 $ 723 $ 1,693 $ -- $ 6,612
Accounts receivable, net of allowance for
doubtful accounts................................. 81,842 3,855 2,754 88,451
Current portion of program contract costs................ 29,396 1,548 2,096 33,040
Deferred barter costs.................................... 3,964 65 (132) 3,897
Prepaid expenses and other current assets................ 3,697 83 32 3,812
Deferred tax asset....................................... 6,148 6,148
--------------- ---------- ---------- ------------- -------------
Total current assets....................... 129,243 6,274 6,443 -- 141,960
PROPERTY AND EQUIPMENT, net............................... 139,387 3,661 8,378 151,426
PROGRAM CONTRACT COSTS, less current portion.............. 33,267 1,745 2,364 37,376
LOANS TO OFFICERS AND AFFILIATES, net..................... 11,642 11,642
NON-COMPETE AND CONSULTING AGREEMENTS, net................ 19,994 19,994
DEFERRED TAX ASSET........................................ 1,076 1,076
OTHER ASSETS.............................................. 64,602 (13,775)(b) 50,827
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net ............. 1,239,994 7,139 7,456 1,254,589
--------------- ---------- ---------- ------------- -------------
Total Assets............................... $1,639,205 $18,819 $24,641 $ (13,775) $1,668,890
=============== ========== ========== ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable ........................................ $ 4,237 $ 98 $ 785 $ $ 5,120
Accrued Liabilities...................................... 31,116 503 116 31,735
Current portion of long-term liabilities-
Notes payable and commercial bank financing........... 61,235 61,235
Capital leases payable................................ 310 310
Notes and capital leases payable to affiliates ....... 1,976 1,976
Program contracts payable............................. 35,203 1,629 2,135 38,967
Deferred barter revenues................................. 5,218 5,218
--------------- ---------- ---------- ------------- -------------
Total current liabilities.................. 139,295 2,230 3,036 -- 144,561
LONG-TERM LIABILITIES
Notes payable and commercial bank financing............. 1,170,000 20,430(b) 1,190,430
Notes and capital leases payable to affiliates.......... 12,935 12,935
Program contracts payable............................... 51,010 1,664 2,325 54,999
Other long-term liabilites.............................. 2,384 2,384
--------------- ---------- ---------- ------------- -------------
Total liabilities...................................... 1,375,624 3,894 5,361 20,430 1,405,309
--------------- ---------- ---------- ------------- -------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES............ 3,968 -- -- -- 3,968
--------------- ---------- ---------- ------------- -------------
COMMITMENTS AND CONTINGENCIES.............................
STOCKHOLDERS' EQUITY......................................
Preferred stock, $.01 par value, 10,000,000 shares
authorized and -0- shares issued and outstanding 12 12
Class A Common stock, $.01 par value, 100,000,000
shares authorized 6,328,000 shares
issued and outstanding .............................. 64 64
Class B Common stock, $.01 par value, 35,000,000
shares authorized and 28,422,000 shares issued
and outstanding...................................... 284 284
Additional paid-in-capital.............................. 274,099 274,099
Accumulated deficit..................................... (20,853) (20,853)
Additional paid-in capital - stock options.............. 12,430 12,430
Deferred compensation................................... (6,423) (6,423)
--------------- ---------- ---------- ------------- -------------
Total stockholders' equity............................. 259,613 -- -- -- 259,613
--------------- ---------- ---------- ------------- -------------
Total Liabilities and Stockholders' Equity ............ $1,639,205 $ 3,894 $ 5,361 $ 20,430 $1,668,890
=============== ========== ========== ============= =============
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) The KSMO and WSTR columns reflect the assets and liabilities acquired in
connection with the purchase of KSMO and WSTR. Total acquired intangibles are
calculated as follows:
(1) KSMO:
Purchase Price 14,925
Add: Liabilities acquired -
Accounts payable............................. 98
Accrued liabilities.......................... 503
Current portion of program contract payable.. 1,629
Long term portion of program contract
payable...................................... 1,664
Less: Assets acquired -
Cash......................................... 723
Accounts receivable.......................... 3,855
Current portion of program costs............. 1,548
Deferred barter costs........................ 65
Prepaid expenses and other current assets.... 83
Property and equipment....................... 3,661
Program contract costs, less current portion. 1,745
--------
Acquired intangibles $ 7,139
========
(2) WSTR:
Purchase Price $19,280
Add: Liabilities acquired -
Accounts payable.............................. 785
Accrued liabilities........................... 116
Current portion of program contract payable... 2,135
Long term portion of program contract payable. 2,325
Less: Assets acquired -
Cash.......................................... 1,693
Accounts receivable........................... 2,754
Current portion of program cost............... 2,096
Deferred barter costs......................... (132)
Prepaid expenses and other current assets..... 32
Property and equipmen......................... 8,378
Program contract costs, less current portion.. 2,364
--------
Acquired intangibles $ 7,456
========
(b) To reflect the acquisition price of WSTR and KSMO through the incurrence of
$20,430 of bank financing and the removal of the $9.0 million purchase option to
acquire KSMO and WSTR and the forgiveness of the $4,775 note receivable from
WSTR.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Superior
Consolidated Flint Communications
Historical TV, Inc. (a) Group, Inc.(b) KSMO(c) WSTR(d)
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions .... $117,339 $1,012 $4,431 $ 7,694 $6,477
Revenues realized from station barter arrangements........ 9,571 2,321 1,715
---------------------------------------------------------------------
Total revenues.................................... 126,910 1,012 4,431 10,015 8,192
---------------------------------------------------------------------
OPERATING EXPENSES:
Program and production.................................... 20,699 101 539 1,550 785
Selling, general and administrative....................... 24,267 345 2,002 2,194 1,876
Expenses realized from station barter arrangements........ 7,859 2,276 1,715
Amortization of program contract costs and net realizable.
value adjustments................................... 17,557 125 736 601 1,011
Deferred compensation................................... 6,007
Depreciation and amortization of property and equipment 3,544 4 373 374 284
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other
assets............................................. 24,392 529 39
----------------------------------------------------------------------
Total operating expenses....................... 104,325 575 4,179 6,995 5,710
----------------------------------------------------------------------
Broadcast operating income (loss)................ 22,585 437 252 3,020 2,482
----------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense........................................ (27,646) (457) (823) (1,127)
Interest income......................................... 2,521 15
Other income (expense).................................. 650 19 4 7
----------------------------------------------------------------------
Income (loss) before (provision) benefit for income.
taxes and extraordinary items................... (1,890) 456 (201) 2,204 1,370
(PROVISION) BENEFIT FOR INCOME TAXES...................... 1,100 (219) 117 (1,283) (797)
----------------------------------------------------------------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS ....... $ (790) $ 237 $ (84) $ 921 $ 573
======================================================================
----------------------------------------------------------------------
LOSS PER COMMON SHARE .................................... $ (0.02)
======================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands) ........ 34,750
======================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
River City Pro Forma
Broadcasting, L.P.(e) WSYX(e) Adjustments Pro Forma
<S> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ..... $86,869 $ (10,783) $ -- $213,039
Revenues realized from station barter arrangements......... 13,607
-------------------------------------------------- ----------
Total revenues..................................... 86,869 (10,783) -- 226,646
-------------------------------------------------- ----------
OPERATING EXPENSES:
Program and production.................................... 10,001 (736) 32,939
Selling, general and administrative....................... 39,786 (3,950) 789 (f) 67,309
Expenses realized from station barter arrangements........ 11,850
Amortization of program contract costs and net realizable.
value adjustments................................... 9,721 (458) 29,293
Deferred compensation..................................... 1,295 (g) 7,302
Depreciation and amortization of property and equipment... 6,294 (1,174) (1,096)(h) 8,603
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other
assets.............................................. 14,041 (3,599) 3,972 (i) 39,374
----------------------------------------------- -------
Total operating expenses........................ 79,843 (9,917) 4,960 196,670
----------------------------------------------- --------
Broadcast operating income (loss)................. 7,026 (866) (4,960) 29,976
----------------------------------------------- -------
OTHER INCOME (EXPENSE):
Interest expense........................................ (12,352) (16,686)(j) (59,091)
Interest income......................................... 2 (924)(k) 1,614
Other income (expense).................................. (115) (8) 557
----------------------------------------------- ----------
Income (loss) before (provision) benefit for income
taxes and extraordinary items................... (5,439) (874) (22,570) (26,944)
(PROVISION) BENEFIT FOR INCOME TAXES........................ 3,166 509 13,136 (l) 15,729
----------------------------------------------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS.......... $ (2,273) $ (365) $ (9,434) $(11,215)
=============================================== =========
------------------------------------------------ ----------
LOSS PER COMMON SHARE ...................................... $ (0.29)
=============================================== =========
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands).......... $ 38,932 (m)
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
River City
Broadcasting L.P.(n)
------------------
KRRT Inc.
------------------
Flint Superior Paramount
Consolidated TV, Communications Stations Group
Historical Inc.(a) Group, Inc(b) KSMO(c) WSTR(d) of Kerville, Inc.
REVENUES: --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Station broadcast revenues, net of agency commissions....$ 187,934 $ 7,217 $13,400 $17,484 $ 15,529 $ 7,567
Revenues realized from station barter arrangements...... 18,200
-------------------------------------------------------------------------
Total revenues......................................... 206,134 7,217 13,400 17,484 15,529 7,567
-------------------------------------------------------------------------
OPERATING EXPENSES:
Program and production................................... 22,563 511 1,461 3,347 1,002 833
Selling, general and administrative...................... 41,763 2,114 4,188 4,374 4,023 1,958
Expenses realized from station barter arrangements....... 16,120 876
Amortization of program contract costs and net realizable
value adjustments...................................... 29,021 897 4,899 4,007 4,971 921
Deferred compensation....................................
Depreciation and amortization of property and equipment.. 5,400 20 1,660 632 585 194
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other
assets................................................. 45,989 12 1,066 210 77 253
-------------------------------------------------------------------------
Total operating expenses............................. 160,856 3,554 13,274 12,570 10,658 5,035
-------------------------------------------------------------------------
Broadcast operating income (loss).................... 45,278 3,663 126 4,914 4,871 2,532
-------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest expense......................................... (39,253) -- (1,579) (2,039) (2,506)
Interest income.......................................... 3,942 81
Other income (expense)................................... 221 41 (188) 630 63
-------------------------------------------------------------------------
Income (loss) before (provision) benefit for
income taxes and extraordinary items............... 10,188 3,785 (1,641) 3,505 2,365 2,595
(PROVISION) BENEFIT FOR INCOME TAXES...................... (5,200) (1,514) 461 (1,682) (1,135) (1,076)
-------------------------------------------------------------------------
Net income (loss) before extraordinary items........... 4,988 2,271 (1,180) 1,823 1,230 1,519
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of related income
tax benefit .......................................... (4,912)
-------------------------------------------------------------------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS........$ 76 $ 2,271 $(1,180) $ 1,823 $ 1,230 $ 1,519
=========================================================================
EARNINGS PER COMMON SHARE
Net income before extraordinary items................$ 0.15
Extraordinary items..................................$ (0.15)
-------------------------------------------------------------------------
Net income per common share................................$ 0.00
-------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands)......... 32,198
========================================================================
</TABLE>
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(UNAUDITED)
(continued)
<TABLE>
<CAPTION>
River City Broadcasting L. P. (n)
-----------------------------------------------------
KRRT Inc.
-----------------------------
River City Pro Forma
Broadcasting L.P. WSYX Adjustments Pro Forma
---------------------------------------------- -----------
REVENUES:
<S> <C> <C> <C> <C>
Station broadcast revenues, net of agency commissions.... $188,190 $(28,767) $ -- $ 408,554
Revenues realized from station barter arrangements...... 18,200
-------------------------------------------- -----------
Total revenues......................................... 188,190 (28,767) -- 426,754
-------------------------------------------- -----------
OPERATING EXPENSES:
Program and production................................... 62,041 (8,133) -- 83,625
Selling, general and administrative...................... 30,456 (3,153) (620)(f) 85,103
Expenses realized from station barter arrangements....... 16,996
Amortization of program contract costs and net realizable
value adjustments...................................... 33,452 (2,624) 75,554
Deferred compensation.................................... 8,855 (g) 8,855
Depreciation and amortization of property and equipment.. 11,524 (2,107) (361)(h) 17,547
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other
assets................................................. 27,649 (9,780) 11,972 (i) 77,448
-------------------------------------------- -----------
Total operating expenses............................. 165,122 (25,797) 19,846 365,128
-------------------------------------------- -----------
Broadcast operating income (loss).................... 23,068 (2,970) (19,846) 61,626
-------------------------------------------- -----------
OTHER INCOME (EXPENSE):
Interest expense......................................... (34,523) (36,742)(j) (116,642)
Interest income.......................................... 1,715 (2,838)(k) 2,900
Other income (expense)................................... (22) 57 802
-------------------------------------------- -----------
Income (loss) before (provision) benefit for income
taxes and extraordinary items..................... (9,762) (2,913) (59,426) (51,314)
(PROVISION) BENEFIT FOR INCOME TAXES...................... 4,686 1,398 30,331 (l) 26,269
-------------------------------------------- -----------
Net income (loss) before extraordinary items........... (5,076) (1,515) (29,095) (25,045)
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of related
income tax benefit ...................................... (4,912)
-------------------------------------------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS........ $ (5,076) $ (1,515) $(29,095) $ (29,957)
=========================================== ===========
EARNINGS PER COMMON SHARE
Net income before extraordinary items............... $ (0.72)
Extraordinary items................................. $ (0.14)
-------------------------------------------- -----------
Net income per common share............................... $ (0.86)
=========================================== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands)........ $ 34,687 (m)
=========================================== ===========
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) The Flint T.V., Inc. column reflects the results of operations for WSMH for
the year ended December 31, 1995 and for the period from January 1, 1996 to
February 28, 1996, the date the transaction was consummated.
(b) The Superior Communications Group, Inc. column reflects the results of
operations for Superior for the year ended December 31, 1995 and for the
period from January 1, 1996 to May 7, 1996 the date the transaction was
consummated.
(c) The KSMO column reflects the results of operations for the year ended
December 31, 1995 and for the period from January 1, 1996 to June 30, 1996
as the purchase transaction was consummated in July 1996.
(d) The WSTR column reflects the results of operations for the year ended
December 31, 1995 and for the period from January 1, 1996 to June 30, 1996
as the purchase transaction was consummated in August 1996.
(e) The River City Broadcasting L.P. column reflects the results of operations
for RCB (including KRRT, Inc.) for the period from January 1, 1996 to May
31, 1996, the date the transaction was consummated, the WSYX column reflects
the modification of the acquisition eliminating the acquisition of WSYX-TV.
(f) To record additional corporate expenses as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Corporate expenses on a pro forma basis $ 5,723 $ 9,236
Less: Corporate expenses recorded by Company (3,066) (5,374)
Less: Corporate expenses recorded by RCB (1,868) (4,482)
---------- ----------
Pro forma adjustment $ 789 $ (620)
========== ==========
</TABLE>
(g) To record compensation expense related to options granted to Barry Baker
under the employment agreement included as part of the RCB acquisition and
options granted under the Long-Term Incentive Plan.
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Compensation expense related to the Barry
Baker employment agreement and the Long-Term
Incentive Plan on a pro-forma basis $ 7,302 $8,855
Less: Compensation expense recorded by
the Company related to the Barry Baker
employment agreement and the Long-Term
Incentive Plan (6,007) --
--------- --------
$(1,295) $8,855
========= ========
(h) To record depreciation expense related to acquired tangible assets and eliminate depreciation expense recorded by WSMH,
Superior, KSMO, WSTR and RCB. Tangible assets are to be depreciated over lives ranging from 5 to 29.5 years, calculated as
follows:
</TABLE>
<TABLE>
<CAPTION>
6/30/96
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSMH Superior KSMO WSTR RCB Total
------- ----------- --------- -------- ----------- -----------
Depreciation expense on acquired tangible assets $32 $315 $240 $507 $ 3,965 $ 5,059
Less: Depreciation expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (e) (4) (373) (374) (284) (5,120) (6,155)
------- ----------- --------- -------- ----------- -----------
Pro forma adjustment $28 $(58) $(134) $223 $(1,155) $(1,096)
======= =========== ========= ======== =========== ===========
12/31/95
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSMH Superior KSMO WSTR RCB Total
------- ----------- --------- --------- ---------- -----------
Depreciation expense on acquired tangible assets $192 $945 $480 $1,014 $ 9,516 $ 12,147
Less: Depreciation expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (n) (20) (1,660) (632) (585) (9,611) (12,508)
------- ----------- --------- --------- ---------- -----------
Pro forma adjustment $172 $(715) $(152) $429 $ (95) $ (361)
======= =========== ========= ========= ========== ===========
</TABLE>
<PAGE>
(i) To record amortization expense related to acquired intangible assets and
deferred financing costs and eliminate amortization expense recorded by
WSMH, Superior, KSMO, WSTR and RCB. Intangible assets are to be amortized
over lives ranging from 1 to 40 years, calculated as follows:
<TABLE>
<CAPTION>
6/30/96
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSMH Superior KSMO WSTR RCB Total
------- ---------- ------- ------- ----------- ----------
Amortization expense on acquired intangible assets $167 $827 $180 $285 $ 12,094 $ 13,553
Deferred financing costs 1,429
Less: Amortization expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (e) -- (529) -- (39) (10,442) (11,010)
------- ---------- ------- ------- ----------- ----------
Pro forma adjustment $167 $298 $180 $246 $ 1,652 $ 3,972
======= ========== ======= ======= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
12/31/95
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSMH Superior KSMO WSTR RCB Total
---- -------- ---- ---- --- -----
Amortization expense on acquired intangible assets $1,002 $2,481 $360 $570 $ 24,188 $ 28,601
Deferred financing costs 2,858
Less: Amortization expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (n) (12) (1,066) (210) (77) (18,122) (19,487)
--- ------ ---- --- ------- -------
Pro forma adjustment $ 990 $1,415 $150 $493 $ 6,066 $ 11,972
====== ====== ==== ==== ======== ========
(j) To record interest expense for the six months ended June 30, 1996 on acquisition financing relating to Superior of $59,850 (in
Credit Facility with commercial bank at 8.0% for 4 months), KSMO and WSTR of $10,425 and $10,005, respectively (both in Credit
Facility with commercial bank at 8.0% for 6 months) and RCB (including KRRT of $868,300 (in Credit Facility with commercial bank
at 8.0% for 5 months) and on $851 for hedging arrangements related to the RCB financing and eliminate interest expense recorded.
No interest expense has been recorded for WSMH as it has been assumed that the proceeds from the August 1995 public debt
offering were used to purchase WSMH.
</TABLE>
<TABLE>
<CAPTION>
6/30/96
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Superior KSMO WSTR RCB Total
----------- --------- ---------- ----------- -----------
Interest expense adjustment as noted above $1,596 $417 $ 400 $ 29,032 $ 31,445
Less: Interest expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (e) (457) (823) (1,127) (12,352) (14,759)
----------- --------- ---------- ----------- -----------
Pro forma adjustment $1,139 $(406) $ (727) $ 16,680 $ 16,686
=========== ========= ========== =========== ===========
To record interest expense for the year ended December 31, 1995 on acquisition financing relating to WSMH of $34,400 (in Credit
Facility with commercial bank at 8.0% for 8 months - assumes that the proceeds from the August 1995 public debt offering were
used to pay the commerical bank financing), Superior of $59,850 (in Credit Facility with commercial bank at 8.0% for 12 months),
KSMO and WSTR of $10,425 and $10,005, respectively (both in Credit Facility with commercial bank at 8.0% for 8 months - assumes
that the proceeds from the August 1995 public debt offering were used to pay the commercial bank financing) and RCB (including
KRRT) of $868,300 (in Credit Facility with commercial bank at 8.0% for 12 months) and on $851 for hedging agreements related to
the RCB financing and eliminate interest expense recorded.
</TABLE>
<TABLE>
<CAPTION>
12/31/95
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSMH Superior KSMO WSTR RCB Total
--------- ----------- ----------- ----------- ----------- -----------
Interest expense adjustment as noted above $1,835 $4,788 $ 556 $ 533 $ 69,677 $ 77,389
Less: Interest expense recorded by WSMH, Superior,
KSMO, WSTR and RCB (n) -- (1,579) (2,039) (2,506) (34,523) (40,647)
--------- ----------- ----------- ----------- ----------- -----------
Pro forma adjustment $1,835 $3,209 $(1,483) $(1,973) $ 35,154 $ 36,742
========= =========== =========== =========== =========== ===========
<PAGE>
(k) To eliminate interest income for the six months ended June 30, 1996 on public debt proceeds relating to WSMH, KSMO and WSTR of
$34,400 (with a commercial bank at 5.7% for 2 months), $10,425 and $10,005 (both with a commercial bank at 5.7% for 6 months),
respectively and eliminate interest income.
</TABLE>
<TABLE>
<CAPTION>
6/30/96
-----------------------------------------------------------
<S> <C> <C> <C> <C>
WSMH KSMO WSTR Total
Interest income adjustment as noted above $ (327) $ (297) $ (285) $ (909)
Less: Interest income recorded by WSTR -- -- (15) (15)
--------- --------- --------- ---------
Pro forma adjustment $ (327) $ (297) $ (300) $ (924)
========= ========= ========= =========
To eliminate interest income for the year ended December 31, 1995 on public debt proceeds relating to WSMH, KSMO and WSTR of
$34,400, $10,425 and $10,005 (all with a commercial bank at 5.7% for 4 months), respectively and eliminate interest income
recorded.
</TABLE>
<TABLE>
<CAPTION>
12/31/95
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WSMH KSMO WSTR RCB Total
--------- --------- --------- --------- ---------
Interest income adjustment as noted above . $ (654) $ (198) $ (190) $ - $ (1,042)
Less: Interest income recorded by WSMH and RCB (n) (81) (1,715) (1,796)
--------- --------- --------- --------- ---------
Pro forma adjustment $ (735) $ (198) $ (190) $ (1,715) $ (2,838)
========= ========= ========= ========= =========
</TABLE>
(l) To record tax benefit of pro forma adjustments.
(m) Weighted average shares outstanding on a Pro Forma basis assumes that the
$115 million of Series A Exchangeable Preferred Stock was exchanged for
4,181,818 shares of $.01 par value Class A Common Stock as of the IPO date
(June 13, 1995).
(n) The River City Broadcasting, L.P. columns reflect the results of operations
for RCB (including KRRT, Inc.) for the year ended December 31, 1995, the
results of operations for WSYX to reflect the exclusion of this station from
the companies acquisition, the results of operations for Paramount Stations
Group for the seven months and three days ended August 3, 1995.
<PAGE>
Consolidated Financial Statements
and Other Financial Information
Superior Communications Group, Inc.
Years ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE>
Superior Communications Group, Inc.
Consolidated Financial Statements
and Other Financial Information
Years ended December 31, 1995 and 1994
Contents
Report of Independent Auditors ..............................................1
Consolidated Financial Statements
Consolidated Balance Sheets .................................................2
Consolidated Statements of Operations .......................................4
Consolidated Statements of Stockholders' Equity .............................5
Consolidated Statements of Cash Flows .......................................6
Notes to Consolidated Financial Statements ..................................7
Other Financial Information
Report of Independent Auditors on Other Financial Information ..............17
Details of Consolidated Balance Sheet ......................................18
Details of Consolidated Statement of Operations.............................19
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Superior Communications Group, Inc.
We have audited the accompanying consolidated balance sheets of Superior
Communications Group, Inc. (the Company) as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity, 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 consolidated financial position of Superior
Communications Group, Inc. as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 23, 1996
<PAGE>
Superior Communications Group, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1994
----------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 272,218 $ 1,088,527
Accounts receivable, less allowance
for doubtful accounts of $200,000 and $150,000 2,800,531 2,608,609
Deferred film costs 2,028,478 2,474,170
Prepaid expenses and other 106,344 165,053
----------------------------------
Total current assets 5,207,571 6,336,359
Property and equipment:
Land 538,144 535,347
Building 723,186 723,186
Equipment and fixtures 8,731,303 8,482,329
----------------------------------
9,992,633 9,740,862
Accumulated depreciation (2,604,504) (1,618,864)
----------------------------------
7,388,129 8,121,998
Other assets:
Deferred film costs, net 3,131,340 3,533,338
Intangible assets, net 8,778,246 10,413,781
Other assets 4,408 20,156
----------------------------------
11,913,994 13,967,275
----------------------------------
Total assets $24,509,694 $28,425,632
==================================
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
December 31
1995 1994
--------------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 1,805,532 $ 1,617,089
Current portion of film contract commitments 1,824,891 1,559,914
Accounts payable 365,615 257,770
Accrued expenses 362,315 416,379
Due to related parties 58,760 62,482
--------------------------------
Total current liabilities 4,417,113 3,913,634
Long-term debt 12,185,454 12,469,015
Film contract commitments 2,783,220 2,298,625
Due to related parties 35,000 100,000
Deferred income taxes 3,383,907 3,899,249
Deferred income 31,341 37,341
Stockholders' equity:
Preferred stock, $.001 par value, 20,000 shares authorized,
10,190.84 shares issued, 8,147.97 and 10,190.84 shares
outstanding at cost in 1995 and 1994. (Liquidation
preference at December 31, 1995 and 1994 of $10,043,731
and $11,323,291, respectively) 9,365,801 9,365,801
Class B common stock, $.001 par value, 100,000 shares
authorized, 10,190.84 shares issued, 9,169.405 and
10,190.84 shares outstanding in 1995 and 1994. 10 10
Class A common stock, $.001 par value, 10,000 shares
authorized, 1,870.7 shares issued and outstanding 2 2
Additional paid-in capital 36,210 16,053
Retained deficit (4,853,864) (3,674,098)
Treasury stock (2,874,500) -
--------------------------------
Total stockholders' equity 1,673,659 5,707,768
--------------------------------
Total liabilities and stockholders' equity $24,509,694 $28,425,632
================================
</TABLE>
See accompanying notes.
-3-
<PAGE>
Superior Communications Group, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1995 1994
--------------------------------
<S> <C> <C>
Gross sales $15,837,243 $13,974,224
Less agency commissions 2,437,582 2,032,429
--------------------------------
Net sales 13,399,661 11,941,795
Operating expenses:
Sales and promotion 2,127,911 2,015,648
Broadcast operations 1,460,716 1,065,579
General and administrative 2,059,805 2,013,921
--------------------------------
5,648,432 5,095,148
--------------------------------
Operating income 7,751,229 6,846,647
Other expenses:
Amortization--deferred film costs and barter programming 4,899,093 4,382,047
Depreciation and amortization 2,725,654 3,064,864
Interest expense, net 1,578,898 1,324,130
Other expense, net 188,111 -
--------------------------------
9,391,756 8,771,041
--------------------------------
Loss before income tax benefit (1,640,527) (1,924,394)
Income tax benefit (460,761) (89,202)
--------------------------------
Net loss $ (1,179,766) $ (1,835,192)
================================
Undeclared preferred stock dividend requirement, inception to date
$ 1,895,761 $ 1,132,451
================================
</TABLE>
See accompanying notes.
-4-
<PAGE>
Superior Communications Group, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Partners' Preferred Class B Class A Paid-In
Capital Stock Common Stock Common Stock Capital
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $5,950,100 $ - $ - $ - $ -
Conversion of Superior Communication
of Kentucky, L.P. interest into
preferred and common stock of
Company, January 28, 1994 (5,950,100) 5,950,091 7 2 -
Equity contribution, January 28, 1994 - 3,099,997 3 - -
Conversion of stockholder note into
preferred and common stock of
Company, January 28, 1994 - 172,713 - - -
Contribution of net assets by former
general partner including cash of
$17,052, January 28, 1994 - 143,000 - - -
Vesting of 120.7 shares of common stock
from stock grant - - - - 16,053
Net loss - - - - -
-----------------------------------------------------------------------------
Balance at December 31, 1994 - 9,365,801 10 2 16,053
Purchase of 2,042.87 shares of preferred
stock and 1,021.435 of Class B
common stock by the Company - - - - -
Vesting of shares of common stock from
stock grant - - - - 20,157
Net loss - - - - -
-----------------------------------------------------------------------------
Balance at December 31, 1995 $ - $9,365,801 $10 $ 2 $ 36,210
===============================================================================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Retained Treasury Total
Deficit Stock Equity
----------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1994 $(1,838,906) $ - $4,111,194
Conversion of Superior Communication
of Kentucky, L.P. interest into
preferred and common stock of
Company, January 28, 1994 - - -
Equity contribution, January 28, 1994 - - 3,100,000
Conversion of stockholder note into
preferred and common stock of Company,
January 28, 1994 - - 172,713
Contribution of net assets by former
general partner including cash of
$17,052, January 28, 1994 - - 143,000
Vesting of 120.7 shares of common stock
from stock grant - - 16,053
Net loss (1,835,192) - (1,835,192)
--------------------------------------------------
Balance at December 31, 1994 (3,674,098) - 5,707,768
Purchase of 2,042.87 shares of preferred
stock and 1,021.435 of Class B
common stock by the Company - (2,874,500) (2,874,500)
Vesting of shares of common stock from
stock grant - - 20,157
Net loss (1,179,766) - (1,179,766)
--------------------------------------------------
Balance at December 31, 1995 $(4,853,864) $(2,874,500) $1,673,659
==================================================
</TABLE>
See accompanying notes.
-5-
<PAGE>
<TABLE>
<CAPTION>
Superior Communications Group, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1995 1994
---------------------------------------
<S> <C> <C>
Operating activities
Net loss $(1,179,766) $(1,835,192)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Barter program revenue (1,565,295) (1,310,618)
Deferred income (6,000) (6,000)
Stock grant expense 20,157 16,053
Provision for bad debts 50,000 99,750
Amortization--deferred film costs and barter programming 4,899,093 4,382,047
Depreciation and amortization 2,725,654 3,064,864
Loss on disposal of assets 193,415 36,769
Deferred taxes (515,342) (118,720)
Changes in operating assets and liabilities:
Accounts receivable (241,922) (744,505)
Prepaid expenses and other 58,709 (50,585)
Accounts payable 107,845 (323,086)
Accrued expenses (54,064) 290,929
---------------------------------------
Net cash provided by operating activities 4,492,484 3,501,706
Investing activities
Capital expenditures (558,385) (240,453)
Other assets 15,748 -
Intangible assets acquired - (873,369)
Acquisition of Oklahoma City Broadcasting Company,
less cash acquired - (10,696,379)
---------------------------------------
Net cash used in investing activities (542,637) (11,810,201)
Financing activities
Proceeds from long-term debt 25,500 14,200,000
Payments on long-term debt (2,995,118) (6,865,178)
Payments on film contract commitments (1,727,816) (1,545,099)
Net activity on related party liability (68,722) 37,557
Proceeds from capital contribution - 3,117,052
---------------------------------------
Net cash (used) provided by financing activities (4,766,156) 8,944,332
---------------------------------------
Net (decrease) increase in cash and cash equivalents (816,309) 635,837
Cash and cash equivalents at beginning of year 1,088,527 452,690
---------------------------------------
Cash and cash equivalents at end of year $ 272,218 $ 1,088,527
=======================================
</TABLE>
See accompanying notes.
-6-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1995
1. Significant Accounting Policies
Description of Business
The consolidated financial statements of Superior Communications Group, Inc.
(SCGI) include the accounts of SCGI and its wholly owned subsidiaries, Superior
Communications of Kentucky, Inc. (SCKI) and Superior Communications of Oklahoma,
Inc. (SCOI), which are collectively referred to as the Company. All intercompany
balances have been eliminated. The Company owns and operates television
broadcasting stations in Lexington, Kentucky and Oklahoma City, Oklahoma.
Organization
The Company, previously known as Superior Communications of Kentucky, L.P. (the
Partnership), was incorporated in its current form on January 28, 1994
concurrent with the acquisition of SCOI (Note 2). Effective on January 28, 1994,
the former partners of the Partnership exchanged all of their partnership
interests for shares of preferred and common stock of the newly formed parent
company, SCGI, under a Security Purchase and Exchange Agreement (Exchange
Agreement) and the Partnership was then dissolved. Additionally, the former
corporate general partner of the Partnership was also dissolved and the
shareholders of the general partner exchanged certain operating assets with the
Company for preferred and common stock. Furthermore, under the Exchange
Agreement, SCGI then contributed the operating assets of the former partnership
to the newly formed SCKI in exchange for all of the outstanding common stock of
SCKI.
Operations and Credit Risk
The Company's accounts receivable are from the sale of advertising, primarily to
businesses which are local to the broadcast area or to national advertising
agencies. The Company performs credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables are due within
30 days. Credit losses have been within management's expectations. The carrying
amount reported in the balance sheet for accounts receivable approximates its
fair value.
Cash and Cash Equivalents
The Company considers all demand deposits and short-term investments purchased
with a maturity of 90 days or less to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair value.
-7-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Deferred Film Costs and Film Contract Commitments
The Company has contracts with various film distributors from which films are
licensed for television transmission over various contract periods (generally
one to five years) and for a specified number of broadcasts. Net deferred film
costs represent the lower of unamortized cost or estimated net realizable value
of the film contracts available for use. Deferred film costs are amortized on
the straight-line method over the contract periods. Film contract commitments
represent the total obligations due under these contracts, which are generally
payable in equal installments over periods that are 12 to 18 months shorter than
the lives of the contracts, and do not bear interest.
The portion of the deferred film cost to be amortized within one year and after
one year is reported in the balance sheet as current and other assets,
respectively, and the payments under the film contract commitments due within
one year and after one year are similarly classified as current and long-term
liabilities, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation for financial reporting
purposes is based on the straight-line method over estimated useful lives
ranging from 5 to 12 years for equipment and 15 years for buildings. Costs of
repairs and maintenance are charged to expense as incurred.
Intangible Assets
Intangible assets as reflected in Note 3 are being amortized on a straight-line
basis over their useful lives ranging from one to fifteen years.
Barter Transactions
Revenue from barter transactions (advertising provided in exchange for
programming or goods and services) is recognized as income when advertisements
are broadcast, and goods or services received are capitalized or charged to
operations when received or used. Included in the statements of operations is
broadcasting net revenue from barter transactions of $1,940,989 and $1,593,330
during 1995 and 1994, respectively, and station operating costs and expenses
from barter transactions of $1,871,077 and $1,632,184, respectively. As of
December 31, 1995 and 1994, the Company has recorded accrued liabilities for
deferred barter revenue of $86,586 and $149,434, respectively.
-8-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Deferred Income
Deferred income relates to prepaid rental income for use of SCKI's tower
facility. The amount is being recognized on a straight-line basis through 2001
(term of agreement).
Use of Estimates
The preparation of the 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.
Income Taxes
Deferred income taxes recorded on the Company's consolidated balance sheets
reflect the 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.
Reclassifications
Certain amounts in the 1994 financial statements have been reclassified or
restated to conform to the current year presentation.
2. Acquisition of Station
On January 28, 1994, SBI, a newly formed corporation and wholly owned subsidiary
of the Company, purchased all of the outstanding stock of Oklahoma City
Broadcasting Company (OCBC) for $10,973,241. The acquisition was accounted for
as a purchase transaction with the purchase price being allocated to the assets
and liabilities acquired based upon their fair market values at the date of
acquisition. In connection with the transaction, SBI also entered into a
noncompete agreement with the seller of OCBC valued at $1,500,000, for which a
note payable was issued to the seller (Note 4). The cost of the noncompete
agreement is being amortized over the five-year term of the agreement. The
acquisition was financed from the issuance of stock for $3,100,000 and from bank
debt in the amount of $7,873,241. Concurrent with the acquisition, SBI and OCBC
merged, forming SCOI.
-9-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
3. Intangible Assets
The components of intangible assets consist of the following as of December 31,
1995 and 1994:
1995 1994
---------------------------------
Advertising contracts acquired $ - $ 441,075
Loan origination costs and other 617,410 624,064
Organization and syndication costs 1,634,828 1,634,828
Covenant not-to-compete 2,500,000 2,500,000
FCC license and FOX affiliation agreement 4,269,819 4,391,223
Goodwill 3,546,186 3,546,186
---------------------------------
12,568,243 13,137,376
Less accumulated amortization (3,789,997) (2,723,595)
---------------------------------
Intangible assets, net $ 8,778,246 $10,413,781
==================================
4. Long-Term Debt
Long-term debt at December 31, 1995 consists of bank and seller debt as follows:
Bank Debt
On January 28, 1994, the Company entered into a senior secured term loan
agreement and revolving credit agreement (collectively the Credit Agreement)
with a bank in the amount of $12,700,000 and $2,000,000, respectively. The term
loan is due in quarterly installments through January 2000, and the revolving
credit agreement is due January 2000. The outstanding balance on the revolving
credit agreement was $1,500,000 at December 31, 1994, and no amounts were
outstanding at December 31, 1995. The Credit Agreement provides for interest at
the bank's Base Rate (8.5% at December 31, 1995) plus 1.75%, and is secured by
the stock of SCGI and its subsidiaries. Covenants contained in the Credit
Agreement limit capital expenditures, define required levels of earnings and
cash flows and limit additional indebtedness and film contract commitments.
The proceeds of these loans were utilized by the Company to finance the
acquisition of SCOI, and to repay amounts owed to a former bank under a term
note payable of $5,260,589.
-10-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
4. Long-Term Debt (continued)
Bank Debt (continued)
On February 13, 1995, the Company repurchased 1,021.435 shares of Class B common
stock and 2,042.87 shares of preferred stock of the Company for $2,874,500. The
repurchase was financed through an additional term loan with a bank for
$2,900,000. The term loan is due in quarterly installments of $290,000 beginning
October 1997 through January 2000, plus interest at the bank's Base Rate plus
1.75%. A mandatory prepayment per the terms of the loan agreement was required
in 1995 and was applied to this loan. The outstanding balance on this term loan
was $2,610,000 at December 31, 1995.
Seller Debt
In connection with the acquisition of OCBC, the Company also incurred
indebtedness to the former owner of OCBC for $1,500,000. The note is secured by
a lien on SCOI's assets and is subordinated to that of the bank debt. The seller
debt bears interest at a rate of 7.5% and is payable in annual installments of
$300,000, plus interest, beginning January 28, 1995. The outstanding balance on
this note was $1,200,000 at December 31, 1995.
The following is a schedule of aggregate maturities of long-term debt as of
December 31, 1995:
1996 $ 1,805,532
1997 2,820,973
1998 3,990,045
1999 4,322,500
2000 1,051,936
--------------
$13,990,986
==============
Fair Value
The carrying amounts of the Company's borrowings under its bank and seller debt
arrangements approximate their fair value. The fair values of the Company's debt
are estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
-11-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
5. Film Contract Commitments
The Company has acquired certain film rights under long-term film contract
commitments. These commitments are generally payable in equal installments over
periods that are twelve to eighteen months shorter than the lives of the related
film rights and do not bear interest. Annual payments required under these
commitments are as follows:
1996 $1,824,891
1997 1,514,859
1998 978,063
1999 287,637
2000 2,661
---------------
$4,608,111
===============
The values of the film rights acquired under these contracts are included as net
deferred film costs in the accompanying consolidated balance sheet and have the
following balances at December 31, 1995:
Deferred film costs $11,202,089
Less accumulated amortization (6,042,271)
----------------
5,159,818
Less current portion (2,028,478)
----------------
Deferred film costs, net $ 3,131,340
================
As discussed in Note 1, the Company enters into contracts with various film
distributors which allow limited showings of films and syndicated programs. At
December 31, 1995, the Company has entered into contracts totaling approximately
$1,063,943 for which the license period and program availability for telecasting
begins after December 31, 1995. These contracts are not recorded in the
accompanying consolidated balance sheet.
6. Due to Related Parties
Amounts due to related parties consist of fees charged by shareholders of the
Company in connection with the acquisition of the Partnership (Note 1) in
November 1992 and includes accrued interest at 7.75%.
-12-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
7. Income Taxes
Significant components of the Company's deferred tax assets and liabilities as
of December 31 are as follows:
1995 1994
-----------------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 76,456 $ 56,178
Net operating loss carryforwards 351,981 181,081
Other - 23,200
-----------------------------------
Total deferred tax assets 428,437 260,459
Deferred tax liabilities:
Properties and broadcast rights 2,500,911 2,234,846
Intangible assets 1,311,433 1,924,862
-----------------------------------
Total deferred tax liabilities 3,812,344 4,159,708
-----------------------------------
Net deferred tax liabilities $3,383,907 $3,899,249
=====================================
Significant components of the provision for income tax expense (benefit) for the
year ended December 31 are as follows:
1995 1994
----------------------------------
Current:
State $ 54,581 $ 29,518
Deferred:
Federal (461,231) (127,337)
State (54,111) 8,617
----------------------------------
Total deferred (515,342) (118,720)
----------------------------------
$(460,761) $ (89,202)
===================================
The Company's effective income tax rates differ from federal statutory income
tax rates due primarily to the amortization of goodwill and state income taxes.
Additionally, in 1994 the Company recorded deferred income tax expense of
$507,673 upon the contribution of the partnership interests and general partner
operating assets (Note 1).
At December 31, 1995, the Company has federal and state net operating loss
carryforwards of $666,000 and $2,090,000, respectively, which begin to expire in
2009.
-13-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
8. Stockholders' Equity
As discussed in Note 1, the Company reorganized effective January 28, 1994 under
the terms of the Exchange Agreement. Pursuant to the terms of the agreement the
former owners of the Partnership were given 7,090.84 shares of preferred stock,
7,090.84 shares of Class B common stock and 1,750 shares of Class A common stock
of the Company. Also on January 28, 1994, certain stockholders contributed an
additional $3,100,000 in exchange for 3,100 shares each of preferred stock and
Class B common stock of the Company.
On February 13, 1995, the Company repurchased 1,021.435 shares of Class B common
stock and 2,042.87 shares of preferred stock of the Company for $2,874,500.
The preferred stock, which has a stated liquidation preference of $1,000 a
share, has no voting rights. Dividends accumulate at 12% based upon the stock's
stated liquidation value and are payable at the discretion of the Board of
Directors and subject to restriction within the Credit Agreement. Unless all
accumulated dividends on the preferred stock have been paid, no dividend may be
paid, and no other distributions may be made upon the common stock of the
Company. Upon liquidation of the Company, any proceeds to be distributed are
first utilized to pay the preferred stockholders at an amount equal to $1,000
per share (liquidation preference) plus any accrued but unpaid dividends,
inception to date ($1,895,761 at December 31, 1995). If amounts remain available
for distribution in excess of the preferred liquidation, those amounts are to be
allocated 80% to the Class B common stockholders and 20% to the Class A common
stockholders. The Class A common stock is subject to restriction on sale,
transfer and also contain forfeiture provisions.
9. Stock Grants
The Company has granted 120.7 shares of Class A common stock to an officer of
the Company. The Class A common stock has significant restrictions including
forfeiture obligations if the officer were no longer an employee of the Company.
Pursuant to the terms of the stock grant agreement, all shares will vest upon
the completion of the sale of the Company's shares of outstanding stock as
discussed in Note 11. Accordingly, the Company recorded a charge to operations
of $20,157 in 1995 ($16,053 in 1994) to reflect the vesting of the remaining
stock granted.
-14-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
10. Operating Leases and Other Commitments
The Company has entered into various noncancelable lease arrangements for office
space rental, ratings and research services, broadcast accounting software and
other licensing agreements. Total expense charged to operations under these
agreements was approximately $283,000 in 1995. The minimum future payments under
these agreements are as follows:
1996 $ 252,088
1997 267,059
1998 281,039
1999 150,247
2000 139,323
--------------
$1,089,756
==============
11. Subsequent Event
On March 4, 1996, the shareholders of the Company entered into an agreement with
an unrelated entity to sell all of the Company's outstanding shares of preferred
and common stock. Pursuant to the terms of the stock purchase agreement, the
buyer will cause the Company to pay in full all of the outstanding debt of the
Company plus accrued interest and prepayment penalties. The balance of the
proceeds will be distributed to the selling shareholders.
12. Supplemental Cash Flow Disclosures
The Company entered into the following noncash transactions:
o As discussed in Note 4, on February 13, 1995, the Company paid
$2,874,500 for stock placed in treasury, which was financed through the
issuance of long-term debt.
o Deferred film costs in the amount of $2,548,375 and $1,820,606 were
recorded through the assumption of film contract commitments in the
same amounts during 1995 and 1994, respectively.
o The Company recorded a $1,500,000 noncompete agreement from the seller
of KOCB in exchange for the issuance of a note payable to the seller in
the same amount during 1994.
o The Company received $125,948 of net assets in exchange for stock in
connection with the January 28, 1994 restructuring.
-15-
<PAGE>
Superior Communications Group, Inc.
Notes to Consolidated Financial Statements (continued)
12. Supplemental Cash Flow Disclosures (continued)
Additionally, cash paid for interest and income taxes was as follows:
1995 1994
---------------------------------
Interest $1,523,785 $1,262,553
=================================
Income taxes $ 16,448 $ 50,000
=================================
-16-
<PAGE>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
FINANCIAL STATEMENTS AS OF AUGUST 3, 1995 AND FOR THE
PERIOD FROM JANUARY 1, 1995 THROUGH AUGUST 3, 1995
AND AS OF DECEMBER 31, 1994 TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc. and Subsidiaries:
We have audited the accompanying balance sheets of Paramount Stations Group of
Kerville, Inc. (a Virginia corporation) as of August 3, 1995 and December 31,
1994, and the related statements of operations, stockholders' equity and cash
flows for the period from January 1, 1995 through August 3, 1995, and the year
ended December 31, 1994. 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 Paramount Stations Group of
Kerville, Inc. as of August 3, 1995 and December 31, 1994, and the results of
its operations and its cash flows for the period from January 1, 1995 through
August 3, 1995, and the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Baltimore, Maryland,
April 26, 1996
<PAGE>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
------------------------------------------
BALANCE SHEETS
--------------
AS OF AUGUST 3, 1995 AND DECEMBER 31, 1994
------------------------------------------
<TABLE>
<CAPTION>
August 3, December 31,
1995 1994
------------- --------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 1,122 $ 400
Accounts receivable, net of allowance for doubtful
accounts of $190,610 and $148,755, respectively 2,543,148 2,961,824
Current portion of program contract costs 1,144,236 1,130,513
Deferred barter costs - 41,274
Other current assets 340,302 123,132
-------------- --------------
Total current assets 4,028,808 4,257,143
-------------- --------------
Property and equipment, net 825,967 986,880
Program contract costs, noncurrent portion 504,701 1,430,927
Due from affiliate 4,795,220 2,567,935
Goodwill, net 15,305,080 15,558,387
Other assets - 5,092
-------------- --------------
Total Assets $ 25,459,776 $ 24,806,364
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,869 $ 189,547
Accrued liabilities 48,308 385,512
Current portion of program contracts payable 1,202,739 1,961,803
Deferred barter revenues - 13,674
-------------- --------------
Total current liabilities 1,252,916 2,550,536
LONG-TERM LIABILITIES:
Program contracts payable, noncurrent portion 932,591 1,576,134
-------------- --------------
Total Liabilities 2,185,507 4,126,670
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, Class A, $1 par value; 1,000 shares
authorized, 800 shares issued and outstanding 800 800
Common stock, Class B, $1 par value; 8,800 shares
authorized; 7,040 issued and outstanding 7,040 7,040
Additional paid-in capital 16,954,952 15,879,113
Retained earnings 6,311,477 4,792,741
-------------- --------------
Total Stockholders' Equity 23,274,269 20,679,694
-------------- --------------
Total Liabilities and Stockholders' Equity $ 25,459,776 $ 24,806,364
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH AUGUST 3, 1995
----------------------------------------------------------
AND THE YEAR ENDED DECEMBER 31, 1994
------------------------------------
<TABLE>
<CAPTION>
August 3, December 31,
1995 1994
-------------- --------------
<S> <C> <C>
REVENUES:
Advertising revenues, net of agency commissions
of $1,159,012 and $1,950,484, respectively $ 6,665,863 $ 11,499,302
Revenues realized from station barter arrangements 900,743 1,300,904
-------------- --------------
Total revenue 7,566,606 12,800,206
-------------- --------------
OPERATING EXPENSES:
Programming 288,704 427,316
Selling 1,459,894 2,700,025
Administration 497,671 1,003,846
Promotion 247,686 468,837
Engineering 296,677 571,813
Amortization of program contract rights 921,053 1,912,677
Depreciation of property and equipment 194,337 379,232
Amortization of intangible assets 253,307 426,495
Barter expense 875,950 1,255,799
-------------- --------------
Total operating expenses 5,035,279 9,146,040
-------------- --------------
Broadcast operating income 2,531,327 3,654,166
OTHER INCOME 63,248 2,884
-------------- --------------
Income before taxes 2,594,575 3,657,050
INCOME TAX PROVISION 1,075,839 1,541,215
-------------- --------------
Net income $ 1,518,736 $ 2,115,835
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH AUGUST 3, 1995 AND THE YEAR ENDED DECEMBER 31, 1994
Common Stock Common Stock
Class A Class B Additional Total
------------------- ----------------- Paid-In Retained Stockholders'
Shares Value Shares Value Capital Earnings Equity
------- ---------- ------- ------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 800 $ 800 7,040 $ 7,040 $ 14,337,898 $ 2,676,906 $ 17,022,644
Forgiveness of income taxes by Parent - - - - 1,541,215 - 1,541,215
Net income - - - - - 2,115,835 2,115,835
------ --------- ------ ------- ----------- ------------ -------------
BALANCE, December 31, 1994 800 800 7,040 7,040 15,879,113 4,792,741 20,679,694
Forgiveness of income taxes by Parent - - - - 1,075,839 - 1,075,839
Net income - - - - - 1,518,736 1,518,736
------ --------- ------ ------- ------------ ------------ -------------
BALANCE, August 3, 1995 800 $ 800 7,040 $ 7,040 $ 16,954,952 $ 6,311,477 $ 23,274,269
====== ========= ====== ======= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH AUGUST 3, 1995
----------------------------------------------------------
AND THE YEAR ENDED DECEMBER 31, 1994
------------------------------------
<TABLE>
<CAPTION>
August 3, December 31,
1995 1994
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,518,736 $ 2,115,835
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of program contract rights 921,053 1,912,677
Depreciation of property and equipment 194,337 379,232
Amortization of goodwill 253,307 426,495
Forgiveness of income tax expense by Parent 1,075,839 1,541,215
Changes in assets and liabilities:
Increase in due from affiliate (2,227,285) (2,567,935)
Decrease (increase) in accounts receivable 418,676 (567,548)
Decrease in deferred charges 41,274 32,141
(Increase) decrease in other current assets (217,170) 62,407
Decrease in other assets 5,092 -
(Decrease) increase in accounts payable (187,678) 119,639
Decrease in due to related parties - (1,553,444)
(Decrease) increase in accrued liabilities (337,204) 177,183
Decrease in deferred barter revenue (13,674) (50,660)
Film rights payments (1,411,157) (1,975,061)
-------------- --------------
Net cash provided by operating activities 34,146 52,176
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (33,424) (52,176)
-------------- --------------
Net increase in cash 722 -
CASH, beginning of year 400 400
-------------- --------------
CASH, end of year $ 1,122 $ 400
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Film contracts acquired $ 8,550 $ 981,351
============ ============
Film contract liability additions $ 8,550 $ 981,351
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
PARAMOUNT STATIONS GROUP OF KERVILLE, INC.
------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
AUGUST 3, 1995 AND DECEMBER 31, 1994
------------------------------------
1. ORGANIZATION:
------------
Paramount Stations Group of Kerville, Inc. (the Company) is a wholly-owned
subsidiary of Paramount Stations Group Holding Company, Inc. (the Parent). The
Company was organized under the laws of Virginia on August 21, 1984. The Company
is a television broadcaster serving the San Antonio, Texas area through station
KRRT on Channel 35. The Company was affiliated with UPN and FOX during 1995 and
1994, respectively.
During 1994, the Company entered into an agreement to sell substantially all of
its assets to KRRT, Inc. This sale was consummated on August 4, 1995.
Accordingly, the accompanying financial statements for 1995 are presented as of
August 3, 1995 (Note 9).
2. SUMMARY OF ACCOUNTING POLICIES:
------------------------------
Cash
- ----
All cash from customers is deposited directly into a lock box held by the
Company's Parent (Note 4).
Revenue Recognition
- -------------------
Revenue from the sale of air time to advertisers is recognized when the
advertisement is broadcast.
Program Contract Costs
- ----------------------
The Company has entered into agreements with program distributors granting it
the right to broadcast programs over contract periods which generally run from
three to seven years. Program contract costs are stated at the lower of
amortized cost or estimated net realizable value. Broadcast contract costs and
the related liabilities are recorded at the contract value when the license
period begins and the program is available for use. Program contract costs are
amortized using the greater of the straight-line by months over the contract
term or straight-line over the number of showings on an aggregate basis.
Program contract costs expected to be used in the succeeding year and program
contract rights due within one year are classified as current assets and current
liabilities, respectively.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the assets on a straight-line basis. Major renewals and
betterments are capitalized and ordinary repairs and maintenance are charged to
expense in the period incurred.
-2-
<PAGE>
Goodwill
- --------
In a series of transactions completed in 1991, the Company's Parent purchased
all of the outstanding stock of TVX, Inc., who owned and operated several
television stations, including the Company. Goodwill was allocated to each of
the stations based on specific identification and allocation of unidentified
goodwill based on cash flow multiples used to calculate the purchase price of
each station. Management monitors the financial performance of the station and
continually evaluates the realizability of goodwill and the existence of any
impairment to its recoverability.
Goodwill in the amount of $17,370,000 was allocated to the Company and is being
amortized over 40 years using the straight-line method. At August 3, 1995 and
December 31, 1994, accumulated amortization of goodwill aggregated $2,064,920
and $1,811,613, respectively.
Barter Transactions
- -------------------
Certain program contract rights provide for the exchange of advertising air time
in lieu of cash payments for the programming. As the program is aired, equal
amounts of revenue and program amortization expense are recorded, at estimated
fair market value, in results of operations.
In addition, the Company provides advertising air time to certain customers in
exchange for merchandise or services. The estimated fair value of the
merchandise or services to be received is recorded as an asset, and the
corresponding obligation to broadcast advertising is recorded as deferred
revenue. Services and other assets are charged to expense as they are used or
consumed. Deferred revenue is recognized in operations as the related
advertising is broadcast.
3. INCOME TAXES:
-------------
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The Company adopted the new accounting and disclosure rules effective
December 31, 1994.
The provision for income taxes consists of the following:
August 3, December 31,
1995 1994
-------------- --------------
Federal $ 920,164 $ 1,318,150
State 155,675 223,065
-------------- --------------
$ 1,075,839 $ 1,541,215
============= =============
-3-
<PAGE>
The following is a reconciliation of the statutory federal income taxes to the
recorded provision:
August 3, December 31,
1995 1994
------------ -------------
Statutory federal income taxes $ 882,156 $ 1,243,397
Adjustments:
State tax, net of federal effect 102,745 147,223
Goodwill amortization 86,125 145,008
Others 4,813 5,587
------------- -------------
Provision for income taxes $ 1,075,839 $ 1,541,215
============ ============
The Company's Parent files a consolidated federal tax return, and separate state
tax returns for each of its subsidiaries. It is the Parent's policy not to
allocate income tax expense to its subsidiaries. The accompanying financial
statements have been prepared in accordance with the separate return method of
FASB 109, whereby the allocation of tax expense is based on what the
subsidiary's current and deferred tax expense would have been had the subsidiary
filed a federal income tax return outside its consolidated group. The difference
between the computed tax expense and the amounts paid to the Parent for taxes is
recorded as additional paid-in-capital. Under this method, the Company has no
deferred tax assets or liabilities because those amounts are considered paid to
or received from the Parent. The Company had no alternative minimum tax credit
carryforwards as of August 3, 1995.
The temporary differences between book basis and tax basis generated by the
Company and recorded on the Parent's financial statements are as follows:
<TABLE>
<CAPTION>
August 3, December 31,
1995 1994
-------------- --------------
<S> <C> <C>
Program contract net realizable value adjustments $ 159,819 $ 12,428
Depreciation and amortization (33,318) 5,550
Bad debt reserves 16,362 24,047
-------------- --------------
$ 142,863 $ 42,025
============= =============
</TABLE>
4. RELATED PARTY TRANSACTIONS:
--------------------------
The Parent pays the income taxes of the Company. It is the Parent's policy not
to charge this expense to its subsidiaries. Therefore, the provision for income
tax expense is recorded as additional paid-in capital in the accompanying
balance sheets. The Parent also provides and receives short-term cash advances
to and from the Company through a central cash management system. No interest is
charged or received for these advances.
-4-
<PAGE>
5. PROPERTY AND EQUIPMENT:
----------------------
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful Life August 3, December 31,
(Years) 1995 1994
------------- ---------------- ----------
<S> <C> <C> <C>
Studio equipment 5 $ 2,931,607 $ 2,898,183
Leasehold improvements 4-11 358,472 358,472
Furniture and fixtures 5 59,671 59,671
Autos and trucks 5 32,700 32,700
-------------- --------------
3,382,450 3,349,026
Less- Accumulated depreciation 2,556,483 2,362,146
-------------- --------------
$ 825,967 $ 986,880
</TABLE>
6. PROGRAM CONTRACTS:
-----------------
The Company purchases the right to broadcast programs through fixed term license
agreements. Broadcast rights consist of the following as of August 3, 1995 and
December 31, 1994:
August 3, December 31,
1995 1994
-------------- --------------
Aggregate cost $ 16,469,625 $ 16,461,076
Less- Accumulated amortization 14,820,688 13,899,636
-------------- --------------
1,648,937 2,561,440
Less- Current portion 1,144,236 1,130,513
-------------- --------------
$ 504,701 $ 1,430,927
============= =============
Contractual obligations incurred in connection with the acquisition of broadcast
rights are $2,135,330 as of August 3, 1995. Future payments, by year, for
program contract rights payable as of August 3, 1995, are as follows:
1995 $ 580,830
1996 941,200
1997 459,900
1998 97,300
1999 30,500
Thereafter 25,600
-------------
$ 2,135,330
=============
The fair value of program contracts payable is the present value of the future
obligations based on the current rates available to the Company for debt of
similar maturity. The carrying amount and the fair value of program contracts
payable at August 3, 1995, were $2,135,300 and $1,521,665, respectively.
-5-
<PAGE>
7. RETIREMENT SAVINGS PLAN:
-----------------------
The Company participates in the Parent company's retirement savings plan under
Section 401(k) of the Internal Revenue Code. This plan covers substantially all
employees of the Company who meet minimum age or service requirements and allows
participants to defer a portion of their annual compensation on a pre-tax basis.
Contributions from the Company are made on a monthly basis in an amount equal to
50% of the participating employee contributions, to the extent such
contributions do not exceed 6% of the employees' eligible compensation during
the month.
8. COMMITMENTS AND CONTINGENCIES:
-----------------------------
Broadcast rights acquired under license agreements are recorded as an asset and
a corresponding liability at the inception of the license period. In addition to
these rights payable at August 3, 1995, the Company had $1,060,900 of
commitments to acquire broadcast rights for which the license period has not
commenced and, accordingly, for which no liability has been recorded. Future
payments arising from such commitments outstanding at August 3, 1995, are as
follows:
1995 $ 29,400
1996 140,600
1997 214,200
1998 319,500
1999 273,200
Thereafter 84,000
-------------
$ 1,060,900
=============
The Company has entered into operating leases for building space and equipment.
Rental expense was $76,700 and $129,268 for the period from January 1, 1995
through August 3, 1995 and year ended December 31, 1994, respectively. As of
August 3, 1995, future minimum lease payments under these operating leases were
as follows:
1995 $ 43,569
1996 79,996
1997 9,000
1998 9,000
1999 9,000
Thereafter 491,250
-------------
$ 641,815
=============
The Company has also entered into several contracts for data processing
equipment and service. Rental expense was $36,425 and $61,341 for the period
from January 1, 1995 through August 3, 1995 and the year ended December 31,
1994, respectively. As of August 3, 1995, future minimum payments under these
contracts are as follows:
1995 $ 25,565
1996 61,248
1997 59,858
-------------
$ 146,671
=============
-6-
<PAGE>
Litigation
- ----------
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages,
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Companies' financial position, results of operations or cash flows.
9. SALES AGREEMENT:
----------------
During 1994, the Company entered into an agreement with KRRT, Inc., to sell
virtually all tangible and intangible assets of the Company for $30,000,000.
This sale was completed on August 4, 1995.
-7-
<PAGE>
KRRT, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND
FOR THE PERIOD FROM JULY 25, 1995
THROUGH DECEMBER 31, 1995
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc. and Subsidiaries:
We have audited the accompanying balance sheet of KRRT, Inc. (a Texas
corporation) as of December 31, 1995, and the related statements of operations,
stockholders' equity and cash flows for the period from July 25, 1995 through
December 31, 1995. 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 audit.
We conducted our audit 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 audit provides 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 KRRT, Inc. as of December 31,
1995, and the results of its operations and its cash flows for the period from
July 25, 1995 through December 31, 1995, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Baltimore, Maryland,
May 7, 1996
<PAGE>
KRRT, INC.
----------
BALANCE SHEET
-------------
AS OF DECEMBER 31, 1995
-----------------------
ASSETS
------
CURRENT ASSETS:
Cash $ 8,459
Short-term investments 500,000
Current portion of program contracts 1,451,959
Other receivable 61,666
------------
Total current assets 2,022,084
Property and equipment, net 5,367,799
Noncurrent portion of program contracts 869,006
FCC license, net of accumulated amortization of $397,075 23,427,401
Goodwill, net of accumulated amortization of $6,095 579,067
Other assets, net 648,359
------------
Total assets $ 32,913,716
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank overdraft $ 7,108
Accrued liabilities 2,833
LMA advance 132,990
Current portion of program contracts payable 1,451,959
Current portion of long-term debt 2,000,000
Accrued interest expense 152,578
------------
Total current liabilities 3,747,468
LONG-TERM LIABILITIES:
Noncurrent portion of program contracts 869,006
Note payable 500,000
Long-term debt, net of current portion 19,000,000
------------
Total liabilities 24,116,474
------------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 1,000 shares authorized, issued
and outstanding -
Additional paid-in capital 10,001,000
Accumulated deficit (1,203,758)
------------
Total stockholders' equity 8,797,242
------------
Total liabilities and stockholders' equity $ 32,913,716
============
The accompanying notes are an integral part of this balance sheet.
<PAGE>
KRRT, INC.
----------
STATEMENT OF OPERATIONS
-----------------------
FOR THE PERIOD FROM JULY 25, 1995 THROUGH DECEMBER 31, 1995
-----------------------------------------------------------
REVENUES $ 1,437,039
--------------
OPERATING EXPENSES:
Management fees 277,775
Rating services 193,100
Legal and professional fees 159,126
Depreciation expense 328,125
Amortization expense 492,811
Film amortization expenses 69,674
Miscellaneous expenses 251,748
--------------
Total operating expenses 1,772,359
--------------
Operating loss (335,320)
OTHER INCOME (EXPENSE):
Interest income 11,556
Interest expense (879,994)
--------------
Net loss before benefit for income taxes (1,203,758)
BENEFIT FOR INCOME TAXES -
--------------
Net loss $ (1,203,758)
==============
The accompanying notes are an integral part of this statement.
<PAGE>
<TABLE>
<CAPTION>
KRRT, INC.
----------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
FOR THE PERIOD FROM JULY 25, 1995 THROUGH DECEMBER 31, 1995
-----------------------------------------------------------
Common Stock Additional Total
------------------------------------- Paid-In Accumulated Stockholders'
Shares Value Capital Deficit Equity
------ ----- ------- ------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, July 25,
1995 - $ - $ - $ - $ -
Capital contributions 1,000 - 10,001,000 - 10,001,000
Net loss - - - (1,203,758) (1,203,758)
-------------- -------------- -------------- -------------- --------------
BALANCE, December 31,
1995 1,000 $ - $ 10,001,000 $ (1,203,758) $ 8,797,242
============== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
KRRT, INC.
----------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE PERIOD FROM JULY 25, 1995 THROUGH DECEMBER 31, 1995
-----------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,203,758)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation expense 328,125
Amortization expense 492,811
Film amortization expense 69,674
Changes in assets and liabilities:
Increase in short-term investments (500,000)
Increase in other receivables (61,666)
Increase in bank overdraft 7,108
Increase in accrued liabilities 2,833
Increase in LMA advance 132,990
Increase in accrued interest expense 152,578
Program payments (69,674)
------------
Net cash used in operating activities (648,979)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Assets acquired, net of debt financing of $21,000,000 (9,843,562)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable 500,000
Contributed capital 10,001,000
------------
Net cash flows provided by financing activities 10,501,000
------------
Net increase in cash 8,459
CASH, beginning of period -
------------
CASH, end of period $ 8,459
============
SUPPLEMENTAL CASHFLOW DISCLOSURE:
Cash paid for interest $ 727,416
============
The accompanying notes are an integral part of this statement.
<PAGE>
KRRT, INC.
----------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995
-----------------
1. ORGANIZATION
KRRT, Inc., a Texas corporation (the Company) was organized and incorporated on
July 25, 1995 and on August 4, 1995, purchased the license and non-license
assets of Paramount Stations Group of Kerville, Inc., the owner and operator of
television KRRT-TV, San Antonio, Texas. The Company is a wholly-owned subsidiary
of JJK Broadcasting, Inc. (the "Parent"). The Company simultaneously entered
into a local marketing agreement (LMA) with River City Broadcasting LP (River
City) (Note 2). The Company is a television broadcaster serving the San Antonio
area through station KRRT on Channel 35, a UPN affiliate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
The Company's primary source of revenue is monthly fees received in accordance
with the LMA with River City. Under the terms of this agreement, the Company
receives monthly fees and is reimbursed for all operating expenses, scheduled
principal and interest payments on the long-term debt discussed in Note 8 and
scheduled program rights payments in exchange for the right to provide
programming and general advertising receivables.
Revenue is recorded as payments are scheduled to be received.
Short-Term Investments
- ----------------------
Short-term investments represent repurchase agreements which mature within three
months. This investment is stated at cost plus accrued income which approximates
market value.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. The Company depreciates and amortizes
property and equipment over the estimated useful lives of the assets, generally
using the straight-line method over six to forty years.
Intangible Assets
- -----------------
Intangible assets include value attributable to licenses issued by the Federal
Communications Commission (FCC) and goodwill representing the excess of the cost
over the fair market value of the assets purchased and the liabilities assumed.
These assets are amortized using the straight-line method over twenty-five years
and forty years, respectively. The Company monitors the financial performance
and continually evaluates the realizability of goodwill and the existence of any
impairment to its recoverability based on the projected future cash flows.
-2-
<PAGE>
Program Contract Rights
- -----------------------
The station has entered into agreements with program distributors granting it
the right to broadcast programs over contract periods which generally run from
one to seven years. An asset and liability are booked equal to the liability
assumed on the purchase date. The asset is recorded at its net realizable value
based on expected future revenues. Accordingly, given that the Company's future
revenues are based on program payments (Note 2), amortization is recorded in
amounts equal to program payments as they are scheduled to be made.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue, expenses, gains
and losses during the reporting periods. Actual results could differ from these
estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1995:
Studio equipment $ 2,416,651
Transmitting equipment 1,423,283
Office equipment 139,337
Furniture and fixtures 162,894
Vehicles 31,482
Buildings 111,574
Leasehold improvements 64,534
Towers 1,204,827
Tools and test equipment 69,828
Spare parts 71,514
--------------
5,695,924
Less: Accumulated depreciation and amortization (328,125)
---------------
Property and equipment, net $ 5,367,799
===============
4. ACQUISITION
In August 1995, the Company acquired substantially all of the assets of
Paramount Stations Group of Kerville, Inc. for $30 million. This acquisition was
accounted for as a purchase under Accounting Principles Board Opinion 16,
whereby the purchase price was allocated to property, FCC license and goodwill
for $5.7 million, $23.8 million and $.5 million, respectively, based upon an
independent appraisal.
-3-
<PAGE>
5. OTHER ASSETS
Other assets consist of the following at December 31, 1995:
Amortization
Period
------
Loan origination fee 5 years $ 420,000
Organization costs 5 years 318,000
--------------
738,000
Less: accumulated amortization (89,641)
--------------
Other assets, net $ 648,359
==============
6. COMMITMENTS AND CONTINGENCIES
The Company has entered into operating leases for building space and equipment.
Rental expense was $76,913 for the period from July 25, 1995 through December
31, 1995. As of December 31, 1995, future minimum lease payments under these
operating leases were as follows:
1996 $ 133,864
1997 61,478
1998 45,000
1999 45,000
2000 45,000
Thereafter 482,250
--------------
$ 812,592
==============
The Company has also entered into several contracts for data processing
equipment and service. Rental expense was $240,030 for the period from July 25,
1995 through December 31, 1995. As of December 31, 1995, future minimum payments
under these contracts are as follows:
1996 $ 592,443
1997 581,929
--------------
$ 1,174,372
=============
Litigation
- ----------
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages,
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position, results of operations or net cash flows.
7. INCOME TAXES
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
-4-
<PAGE>
The following is a reconciliation of the statutory federal income taxes to the
recorded provision:
December 31,
1995
-------------
Statutory federal income taxes $ (409,278)
Adjustments:
State income taxes, net of federal effect (40,706)
Valuation allowance 449,984
-------------
(Benefit) for income taxes $ -
=============
Temporary differences between the financial reporting carrying amounts and tax
basis of assets and liabilities give rise to deferred taxes. The principal
sources of temporary differences and their effects on the provision for deferred
income taxes are as follows:
December 31,
1995
-------------
Depreciation and amortization $ 126,154
Valuation allowance (126,154)
--------------
Deferred income tax provision $ -
=============
Total deferred tax assets and deferred tax liabilities as of December 31, 1995,
and the sources of the difference between financial accounting and tax bases of
the Company's assets and liabilities which give rise to the deferred tax assets
and deferred tax liabilities and the tax effects of each are as follows:
December 31,
1995
-------------
Deferred tax assets:
Depreciation and amortization $ 126,154
Valuation allowance (126,154)
--------------
$ -
=============
During the year ended December 31, 1995, the Company recorded a full valuation
allowance on the deferred tax assets to reduce the total to an amount that
management believes will ultimately be realized. Realization of deferred tax
assets is dependent upon sufficient future total income during the period that
temporary differences and carryforwards are expected to be available to reduce
taxable income.
8. LONG-TERM DEBT
In connection with the acquisition of the Station, KRRT, Inc. entered into a
Bank Credit Agreement with a principal of $21,000,000 and interest at LIBOR plus
2.5%. Payments are scheduled to begin
-5-
<PAGE>
on January 31, 1996. The debt is secured by all the assets of KRRT, Inc.,
including their rights under the LMA agreement and the assets of their Parent.
Annual maturities of long-term debt as of December 31, 1995, are as follows:
1996 $ 2,000,000
1997 4,000,000
1998 5,000,000
1999 5,800,000
2000 4,200,000
-------------
$ 21,000,000
=============
The carrying amount the Company's long-term debt approximates Fair value. The
Fair value was determined by reference to quoted values obtained from the
lender.
9. RELATED PARTY TRANSACTIONS
The Company's Parent receives a management fee equal to the portion of the LMA
fees designated as management fees for management services provided. During the
period from July 25, 1995 through December 31, 1995, the Company paid $277,775
to their Parent.
During 1995, the Parent contributed $10,001,000 to the Company to partially
finance the acquisition of the Station from Paramount Stations Group of
Kerville, Inc. (Note 4).
In connection with the financing of the acquisition, the Parent contributed
$500,000 to satisfy a covenant with the Bank of Montreal. This $500,000 is
recorded as a long-term note payable.
10. PROGRAM CONTRACTS
The Company purchases the right to broadcast programs through fixed term license
agreements. Broadcast rights consist of the following as of December 31, 1995:
December 31,
1995
-------------
Aggregate cost $ 2,390,639
Less- Accumulated amortization 69,674
-------------
2,320,965
Less- Current portion 1,451,959
-------------
$ 869,006
=============
-6-
<PAGE>
Contractual obligations incurred in connection with the acquisition of broadcast
rights are $2,320,965 as of December 31, 1995, respectively. Future payments, by
year, for program contract rights payable as of December 31, 1995, are as
follows:
1996 $ 1,521,663
1997 525,399
1998 162,764
1999 77,007
Thereafter 34,132
-------------
$ 2,320,965
=============
The Fair value of film contracts payable is the present value of the future
obligations based on the current rates available to the Company for debt of
similar maturity. The carrying amount and fair value of program rights, payable
at December 31, 1995, were 2,320,965 and 1,653,975 respectively.
11. SUBSEQUENT EVENT
In April 1996, Sinclair Broadcast Group, Inc. (SBG) entered into an asset
purchase agreement with the Company whereby the Company has agreed to sell the
non-license assets for approximately $29.6 million. The Company estimates the
transaction will be consummated in May 1996.
-7-
<PAGE>
RIVER CITY BROADCASTING
(RIVER CITY BROADCASTING, L.P.
AND ITS MAJORITY-OWNED BUSINESSES)
Consolidated Financial Statements
and Schedules
December 31, 1994 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
----------------------------
The Partners
River City Broadcasting, L.P.:
We have audited the accompanying consolidated balance sheets of River City
Broadcasting, L.P. and its majority-owned businesses as of December 31, 1994 and
1995, and the related consolidated statements of operations, partners' capital
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of River City
Broadcasting, L.P. and its majority-owned businesses as of December 31, 1994 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information included in
Schedules 1 and 2 is presented for purposes of additional analysis of the
consolidated financial statements rather than to present the financial position,
results of operations, and cash flows of the individual broadcast properties.
The consolidating information has been subjected to the auditing procedures
applied in the audits of the consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation to the
consolidated financial statements taken as a whole.
KPMG Peat Marwick LLP
February 23, 1996
<PAGE>
RIVER CITY BROADCASTING
Consolidated Balance Sheets
December 31, 1994 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Assets 1994 1995
------ ---- ----
Current assets:
Cash and cash equivalents $ 2,444,738 $ 3,009,949
Receivables, less allowance for doubtful
accounts of approximately $751,000 in 1994
and $1,011,000 in 1995 38,380,927 55,700,972
Current portion of program rights 18,721,662 23,275,767
Prepaid and other current assets 3,364,193 4,456,352
---------- ----------
Total current assets 62,911,520 86,443,040
Property and equipment, net 83,518,363 96,269,944
Program rights, less current portion 19,255,197 19,650,217
Intangible assets, net 239,689,766 350,878,357
Other noncurrent assets 11,301,757 20,588,525
----------- -----------
Total assets $ 416,676,603 $ 573,830,083
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Current liabilities:
Current installments of long-term debt $ - $ 38,587,000
Current installments of program rights payable 26,178,686 30,071,545
Accrued expenses 7,376,801 12,462,416
Accounts payable 862,162 6,924,246
Distributions payable 2,274,613 -
---------- -----------
Total current liabilities 36,692,262 88,045,207
Long-term debt, less current installments 309,550,000 404,413,000
Program rights payable, less current installments 17,136,852 27,579,601
Deferred compensation 5,260,477 5,516,833
---------- ----------
Total liabilities 368,639,591 525,554,641
Commitments and contingencies
Partners' capital; 19,386 general partner units and 126,047
and 148,651 limited partner units outstanding at
December 31, 1994 and 1995, respectively 48,037,012 48,275,442
----------- ----------
Total liabilities an
partners' capital $ 416,676,603 $ 573,830,083
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIVER CITY BROADCASTING
Consolidated Statements of Operations
Years ended December 31, 1993, 1994, and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1993 1994 1995
---- ---- ----
Net operating revenues:
Local time sales $ 34,377,284 $ 52,867,854 $ 107,591,097
National time sales 28,718,245 42,950,399 69,945,187
Other revenues 3,119,122 4,567,058 10,653,860
---------- ---------- -----------
Total operating revenues 66,214,651 100,385,311 188,190,144
---------- ----------- -----------
Operating costs:
Station operating expenses 15,857,926 26,516,623 62,040,690
Selling expenses 10,889,632 11,977,659 25,973,660
Program amortization expense 18,799,127 16,479,271 33,452,252
Corporate expenses 1,872,983 2,498,181 4,482,364
Depreciation 6,287,274 8,259,487 11,523,526
Amortization of intangible assets 6,094,026 11,228,316 27,649,173
---------- ----------- -----------
Total operating costs 59,800,968 76,959,537 165,121,665
---------- ----------- -----------
Operating income 6,413,683 23,425,774 23,068,479
---------- ----------- -----------
Other income (expense):
Interest expense (5,341,346) (11,033,149) (33,087,633)
Amortization of deferred financing
costs and debt discount (1,573,262) (1,066,296) (1,434,904)
Interest income 177,656 333,673 1,715,104
Other (45,227) 21,720 (22,616)
-------- ------- --------
(6,782,179) (11,744,052) (32,830,049)
---------- ----------- -----------
Income (loss) before
extraordinary item (368,496) 11,681,722 (9,761,570)
Extraordinary item - early extin-
guishment of debt (6,841,084) (3,348,506) -
---------- ----------- -----------
Net earnings (loss) $ (7,209,580) $ 8,333,216 $ (9,761,570)
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIVER CITY BROADCASTING
Consolidated Statements of Partners' Capital (Deficit)
Years ended December 31, 1993, 1994, and 1995
<TABLE>
<CAPTION>
General Limited
partner partners Total
------- -------- ------
<S> <C> <C> <C>
Balance at December 31, 1992 $ (6,936,635) $ - $ (6,936,635)
Partners' capital contributions - 76,500,000 76,500,000
Conversion of equity debentures - 8,191,527 8,191,527
Redemption of partners' capital (12,986,107) (15,580,796) (28,566,903)
Net loss (973,697) (6,235,883) (7,209,580)
--------- ---------- ----------
Balance at December 31, 1993 (20,896,439) 62,874,848 41,978,409
Distributions - (2,274,613) (2,274,613)
Net earnings 8,333,216 - 8,333,216
---------- ---------- ----------
Balance at December 31, 1994 (12,563,223) 60,600,235 48,037,012
Issuance of limited partner interest - 10,000,000 10,000,000
Net loss - (9,761,570) (9,761,570)
---------- ---------- ----------
Balance at December 31, 1995 $(12,563,223) $ 60,838,665 $ 48,275,442
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIVER CITY BROADCASTING
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1994, and 1995
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (7,209,580) $ 8,333,216 $ (9,761,570)
Extraordinary item (note 12) 6,841,084 2,164,006 -
Interest expense on conversion of debenture
to equity 101,327 - -
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Program amortization expense 18,799,127 16,479,271 33,452,252
Depreciation 6,287,274 8,259,487 11,523,526
Loss on disposition of property and
equipment 47,416 - 193,249
Amortization of deferred financing
costs and debt discount 1,573,262 1,066,296 1,434,904
Amortization of intangible assets 6,094,026 11,228,316 27,649,173
Retirement of program rights payable (15,773,065) (13,892,127) (24,065,769)
Change in assets and liabilities, net
of effects from purchase of broad-
cast properties:
Increase in receivables, net (1,816,872) (7,940,420) (17,320,045)
Increase in prepaid and other current
assets (133,109) (472,744) (763,768)
Increase in other noncurrent assets (247,492) (921,957) (9,286,768)
Increase (decrease) in accounts payable
and accrued expenses (1,087,119) (644,978) 11,147,699
Increase in deferred compensation 1,161,000 3,236,477 256,356
---------- ---------- --------
Net cash provided by operating
activities 14,637,279 26,894,843 24,459,239
---------- ----------- -----------
Cash flows from investing activities,
net of effects from purchase of broad-
cast properties:
Costs to acquire broadcast properties - (175,397,321) (137,884,857)
Additions to property and equipment 1,080,171) (5,304,587) (11,286,967)
Additions to intangible assets (1,329,361) (2,210,655) (2,682,454)
Funding of local marketing agreement - (11,000,000) -
-------- ------------ ------------
Net cash used in investing
activities 2,409,532) (193,912,563) (151,854,278)
----------- ----------- -----------
Cash flows from financing activities:
Retirement of long-term debt (58,554,497) (138,360,116) (1,550,000)
Proceeds from term loan - 120,000,000 110,000,000
Net borrowings under revolving loan commitment - 188,000,000 25,000,000
Redemption of partnership interest (28,566,903) - -
Proceeds from partners' capital
contributions 76,500,000 - -
Distributions paid - - (2,274,613)
Additions to deferred financing fees (165,174) (4,450,344) (3,215,137)
--------- ----------- -----------
Net cash provided by (used in)
financing activities (10,786,574) 165,189,540 127,960,250
---------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 1,441,173 (1,828,180) 565,211
Cash and cash equivalents, beginning of year 2,831,745 4,272,918 2,444,738
---------- ---------- ----------
Cash and cash equivalents, end of year $ 4,272,918 $ 2,444,738 $ 3,009,949
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(1) Business Description
--------------------
River City Broadcasting, L.P. (River City Broadcasting or the
Partnership) is a limited partnership formed to purchase and operate
broadcast properties and related activities. River City Broadcasting
has acquired nine broadcast television stations and 24 radio stations.
The Partnership also operates one television station and three radio
stations under local marketing agreements (LMAs). River City
Broadcasting is managed by its general partner subject to terms and
conditions specified in the Second Amended and Restated Agreement of
Limited Partnership (Limited Partnership Agreement).
On September 3, 1993, River City Broadcasting entered into a
Reorganization Agreement, whereby additional equity funding was
injected into the Partnership, and certain partners' interests were
redeemed (the Recapitalization).
(2) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
----------------------------
The accompanying consolidated financial statements include the accounts
of River City Broadcasting and its majority-owned businesses.
Management's Use of Estimates
-----------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Program Rights
--------------
Program rights and related liabilities are recorded at cost when the film
is available for broadcasting. Agreements define the lives of the
rights and frequently the number of showings. The cost of program
rights is charged against earnings using straight-line and accelerated
methods.
Program rights, representing the cost of those rights available for
broadcasting and expected to be broadcast in the succeeding fiscal
year, are shown as a current asset. Program rights payable are
classified as current based on those payments of the various contracts
contractually due within the succeeding fiscal year.
Program rights are stated at the lower of cost or estimated net
realizable value.
(Continued)
<PAGE>
2
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
Property and Equipment
----------------------
Property and equipment is recorded at cost. Maintenance and repairs are
charged against earnings, while improvements which extend useful lives
are capitalized.
Depreciation expense is computed using primarily the straight-line method
over the estimated useful lives of the related assets.
Intangible Assets
-----------------
Intangible assets consist principally of network affiliation agreements,
broadcasting licenses, covenants not to compete, deferred financing
costs, and going-concern values. Amortization expense is computed on a
straight-line basis over the estimated lives of the assets, which
generally range from 5-20 years.
The Partnership assesses the recoverability of these intangible assets by
determining whether the amortization of the remaining balances over
their remaining lives can be recovered through projected undiscounted
future results. The amount of impairment, if any, is measured based on
projected discounted future results using a discount rate reflecting
the Company's average cost of funds. The methodology that management
used to project results of operations forward was based on the
historical trend line of actual results.
Interest Rate Risk Management
-----------------------------
The Partnership uses a combination of financial instruments as part of
its program to manage interest rate risk on its floating rate debt.
Such investments are considered hedges and, accordingly, changes in
their market value, representing the cost to close the Partnership's
position in these financial instruments, are not reflected in the
consolidated financial statements (see note 7).
Deferred Compensation
---------------------
River City Broadcasting has entered into deferred compensation agreements
with members of management at certain of the broadcast properties.
Deferred compensation expense is recorded over the period of employee
service based on terms as contained in the respective agreements.
In addition to the deferred compensation agreements described above, the
Partnership has granted Phantom Warrant Units to certain key members
of management. These Phantom Warrant Units were granted pursuant to a
Phantom Unit Plan (the Plan). Under Plan provisions, the Phantom
Warrant Unit holders will receive performance compensation based on
the appreciation in value of the Partnership. This compensation is
recognized as incurred based on a six-year vesting period.
Warrant Units
-------------
Concurrently with the Recapitalization, warrant units were issued to two
key members of management, who are also the sole shareholders of the
general partner of River City Broadcasting. These warrant units
provide for, among other things as described in the Limited
Partnership Agreement, participation in Partnership profits and losses
and equity appreciation on a basis substantially similar to a 10%
partnership interest.
(Continued)
<PAGE>
3
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
Income Taxes and Distributions for Taxes
----------------------------------------
No income tax provision has been included in the consolidated financial
statements since profit and loss in the Partnership and the related
tax attributes are deemed to be distributed to, and to be reportable
by, the partners of the Partnership on their respective income tax
returns. Accordingly, based on the tax attributes to be passed through
to the partners, the Partnership records a distribution payable
calculated pursuant to the Limited Partnership Agreement for amounts
expected to be distributed to the partners for their estimated tax
liability.
Limited Partnership Agreement
-----------------------------
The allocation of Partnership profits and losses, cash distributions,
voting rights, certain equity preference and appreciation rights, and
other matters are defined in the Limited Partnership Agreement. These
items, except voting rights, are principally determined based on the
tax basis of the respective partners.
Revenues
--------
Broadcasting revenues are derived principally from the sale of program
time and spot announcements to local, regional, and national
advertisers. Advertising revenue is recognized in the period during
which the program time and spot announcements are broadcast.
Barter Transaction
------------------
Barter transactions are recorded at the estimated fair values of the
products and services received. Barter revenues are recognized when
commercials are broadcast. The assets or services received in exchange
for broadcast time are recorded when received or used.
Consolidated Statements of Cash Flows
-------------------------------------
For purposes of the consolidated statements of cash flows, the
Partnership considers all cash investments with an original maturity
of three months or less to be cash equivalents.
Reclassification
----------------
Certain 1993 and 1994 balances have been reclassified to conform with the
1995 presentation.
(3) Acquisition of Broadcast Properties
-----------------------------------
In September 1994, the Partnership acquired certain assets and assumed
certain liabilities of Continental Broadcasting Ltd. (Continental) for
total cash consideration of approximately $175,397,000. In connection
with the acquisition, River City Broadcasting assumed $120,000,000 of
senior subordinated notes and related accrued interest. Broadcast
properties acquired include WSYX-TV (Columbus, Ohio), KOVR-TV
(Sacramento, California), and WLOS-TV/WFBC-TV (formerly WAXA-TV)
(Asheville, North Carolina, and Anderson, South Carolina).
(Continued)
<PAGE>
4
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
This acquisition is a purchase transaction and, accordingly, the assets
acquired and liabilities assumed have been recorded at their estimated
fair values as of the acquisition date, as determined by independent
appraisal. The allocation of the purchase price is summarized as
follows:
Intangible assets $ 221,995,342
Property and equipment 62,285,634
Accounts receivable 13,313,252
Program rights 10,471,346
Prepaid and other current assets 164,898
Program rights payable (7,752,322)
Accounts payable and accrued expenses (2,672,495)
----------
Total purchase price 297,805,655
Assumption of debt, plus related
accrued interest (122,408,334)
-------------
$ 175,397,321
=============
In July 1995, the Partnership acquired certain assets of Keymarket
Communication and affiliated companies (Keymarket), as defined in the
underlying Asset Purchase Agreement, for total cash consideration of
approximately $131,000,000 and $10,000,000 of limited partner units.
Broadcast properties acquired consist of 19 radio stations within the
Los Angeles, California, Nashville, Tennessee, New Orleans, Louisiana,
Memphis, Tennessee, Buffalo, New York and Wilkes-Barre/Scranton,
Pennsylvania markets. Additionally, the Partnership acquired the
rights to operate three radio stations under LMAs.
In October 1995, the Partnership acquired a 60% interest in Twin Peaks
Radio (Twin Peaks) through its acquisition of Sandia Peak
Broadcasters, Inc. As discussed in note 17, the Partnership acquired
the remaining 40% interest in Twin Peaks in January 1996. Twin Peaks
is a partnership which owns and operates three radio stations in the
Albuquerque, New Mexico area. Total cash consideration paid in 1995
amounted to approximately $3,200,000.
In November 1995, the Partnership acquired certain assets of WVRV-FM in
St. Louis, Missouri, for cash consideration of approximately
$3,600,000. River City Broadcasting previously operated this station
under an LMA.
The 1995 acquisitions are purchase transactions and, accordingly, the
assets acquired and liabilities assumed have been recorded at their
estimated fair values as of the acquisition date, as determined by
independent appraisal. The allocation of the purchase price is
summarized as follows:
Intangible assets $ 134,375,077
Property and equipment 13,181,389
Prepaid and other current
assets 328,391
---------
Total purchase price 147,884,857
Issuance of limited partner units (10,000,000)
-----------
$ 137,884,857
==============
(Continued)
<PAGE>
5
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
The following unaudited supplemental pro forma information presents
revenues, income (loss) before extraordinary item, and net earnings
(loss) as though River City Broadcasting had consummated the 1995
acquisitions on January 1, 1994 (1994) and January 1, 1995 (1995):
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Revenues $ 148,492,000 $ 213,749,000
=========== ===========
Loss before extraordinary item $ (22,907,000) $ (17,232,000)
=========== ===========
Net loss $ (26,255,000) $ (17,232,000)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
(4) Intangible Assets
-----------------
A summary of intangible assets follows:
Asset
lives in
1994 1995 years
---- ---- -----
<S> <C> <C> <C>
Network affiliation agreements, net
of amortization of approximately
$3,077,000 and $9,724,000 in 1994
and 1995, respectively $ 143,950,815 $ 137,813,988 20
Broadcasting licenses, net of amortiza-
tion of approximately $1,506,000 and
$4,605,000 in 1994 and 1995, respec-
tively 47,529,039 114,567,600 20
Deferred financing costs, net of amor-
tization of approximately $382,000
and $1,817,000 in 1994 and 1995,
respectively 4,068,376 7,052,734 8
Covenants not to compete, net of amor-
tization of approximately $5,900,000
and $11,410,000 in 1994 and 1995,
respectively 18,100,004 12,669,639 5
Going-concern value, net of amortiza-
tion of approximately $636,000 and
$1,168,000 in 1994 and 1995, respec-
tively 5,554,642 8,502,935 20
Other intangible assets, net of amorti-
zation of approximately $16,754,000
and $27,118,000 in 1994 and 1995,
respectively 20,072,564 70,271,461 2-20
----------- ----------- ====
$ 239,275,440 $ 350,878,357
=========== ===========
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
(5) Property and Equipment
----------------------
A summary of property and equipment follows:
Lives
1994 1995 in years
---- ---- --------
<S> <C> <C> <C>
Land $ 7,129,861 $ 11,622,969 -
Buildings and improvements 21,284,574 25,150,610 31.5
Equipment, furniture, and fixtures 79,261,457 96,668,728 5-15
====
Construction in progress 3,550,525 1,436,638
---------- ----------
111,226,417 134,878,945
Less accumulated depreciation 27,708,054 38,609,001
----------- -----------
$ 83,518,363 $ 96,269,944
=========== ===========
(6) Long-Term Debt
A summary of long-term debt follows:
1994 1995
---- ----
Revolving Credit and Term Loan Agreements
-----------------------------------------$ 308,000,000 $ 443,000,000
Senior subordinated notes 1,550,000 -
---------- -------------
309,550,000 443,000,000
Less current installments - 38,587,000
----------- -----------
$ 309,550,000 $ 404,413,000
=========== ===========
</TABLE>
Upon the acquisition of the Continental broadcast properties in 1994, the
Partnership assumed $120,000,000 of 10-5/8% senior subordinated notes.
Interest is payable semiannually on January 1 and July 1 of each year.
Pursuant to terms of the underlying indenture, subsequent to their
assumption, River City Broadcasting offered to redeem the underlying
notes from the holders at 101% of the principal amount thereof. In
connection with this offer, $118,450,000 of the outstanding notes were
redeemed in 1994. A put premium of $1,184,500 was charged to expense
in 1994. The balance of the senior subordinated notes was redeemed in
1995.
Concurrent with the acquisition of the Continental broadcast properties
in 1994, the Partnership entered into a Senior Credit Facility
providing a $120,000,000 term loan commitment and a revolving loan
commitment of $230,000,000. In December 1994, the Partnership
exercised the $120,000,000 term loan commitment in connection with the
redemption of the senior subordinated notes described above.
In April 1995 the Partnership amended the Senior Credit Facility (Amended
Senior Credit Facility). The Amended Senior Credit Facility provided
for an additional term loan commitment of $110,000,000. In July 1995,
the Partnership exercised the $110,000,000 term loan commitment in
connection with the Keymarket acquisition.
(Continued)
<PAGE>
7
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
At December 31, 1995 the Partnership had outstanding borrowings of
$213,000,000 under the revolving loan commitment. The revolving loan
commitment of $230,000,000 is reduced as follows: $9,200,000 each
quarter beginning December 31, 1995 through December 31, 1999;
$10,750,000 each quarter through December 31, 2000; and $15,300,000
each quarter through June 30, 2001. The term loan is payable in
increasing quarterly installments through December 2002. Accelerated
principal payments are required upon the Partnership meeting certain
financial objectives or upon the occurrence of certain other events as
defined in the Amended Senior Credit Facility. Borrowings are secured
by substantially all of the Partnership's assets and by a lien on all
limited partner interests. The Amended Senior Credit Facility includes
certain covenants which, among other things, require the Partnership
to meet certain financial performance goals and maintain certain
financial ratios, limit capital expenditures, and limit the incurrence
of additional indebtedness.
Under terms of the Amended Senior Credit Facility, the Partnership has
the option to elect from various interest rate options. The Amended
Senior Credit Facility also includes a provision whereby the interest
rate is adjusted each quarter based on River City Broadcasting's
financial performance. Substantially all amounts borrowed under the
Amended Senior Credit Facility accrue interest based on the LIBOR
rate. At December 31, 1995, the Company's effective borrowing rate
under this agreement, including the effect of interest rate risk
management activities, was 8.7%. The Amended Senior Credit Facility
requires the Partnership to pay unused commitment fees (term and
revolver) at 3/8 of 1%, payable quarterly.
Theaggregate maturities of long-term debt reflect scheduled principal
payments due under the term loan commitment and the required principal
reductions on the revolving loan commitment and are as follows:
Year ending December 31:
1996 $ 38,587,000
1997 46,387,000
1998 51,175,000
1999 55,963,000
2000 73,663,000
Thereafter 177,225,000
-----------
$ 443,000,000
===========
(7) Interest Rate Risk Management
-----------------------------
The Partnership uses a combination of financial instruments, including
interest rate swaps, interest rate caps, interest rate collars, and
forward rate agreements, as part of its program to manage the floating
interest rate risk of its debt portfolio and related overall cost of
borrowing. These financial instruments, which are for nontrading
purposes, allow the Partnership to maintain a target range of fixed
rate debt. The Amended Senior Credit Facility requires the Partnership
to hedge 50% of its floating rate risk through December 1997.
Interest rate swaps involve the exchange of floating rate for fixed rate
interest payments to effectively convert floating rate debt to fixed
rate debt. The interest rate swap agreement is for a term of
approximately three years and matures December 1997.
(Continued)
<PAGE>
8
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
The Partnership purchased interest rate caps to convert floating rate
debt to a fixed rate if such rates rise above 9.5%. The cost of the
interest rate caps totaled approximately $613,000 and is being
amortized over the term of the agreements, generally three years. The
unamortized balance is approximately $408,000 at December 31, 1995.
Interest rate cap agreements mature in December 1997 and January 1998.
Interest rate collars involve the conversion of floating rate debt to a
fixed rate if such rates exceed 9.5% or fall below a specified floor
rate (generally 4.0%-4.2%). Such agreements mature in December 1997.
Forward rate agreements are short-term contracts (generally 3-6 months)
which allow the Partnership to lock in its effective LIBOR rates over
short-term periods. Such agreements mature January 1996 through April
1996.
The following financial instruments were held at December 31, 1995:
Notional Fair
amounts value
-------- -----
Interest rate swap $ 50,000,000 $(2,103,000)
Interest rate caps 105,000,000 12,000
Interest rate collars 70,000,000 (91,000)
Forward rate agreements 411,000,000 (304,000)
=========== =========
Estimated fair values shown above only represent the value of the hedge
or swap component of these transactions, and thus are not indicative
of the Partnership's overall hedged position. As fully hedged
transactions, the estimated fair values of the interest rate financial
instruments do not affect income and are not recorded in the
consolidated financial statements, but rather only represent the
amount which would be required to close the Partnership's position in
the financial instruments at December 31, 1995.
(8) Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
Cash and Cash Equivalents, Receivables, and Payables - The carrying
amount approximates fair value because of the short-term maturity
of these instruments.
Long-Term Investment - The Partnership holds a 16% interest in a
partnership for which there are no quoted market prices. A
reasonable estimate of fair value could not be made. The
investment is carried at its cost of $1,654,000 in the
consolidated balance sheet.
Long-Term Debt - The fair value of the Partnership's debt is estimated
based on the current rates offered to the Partnership for debt of
the same remaining maturities. The carrying amount approximates
fair value because of the variable interest rate attached to the
debt.
(Continued)
<PAGE>
9
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
Program Rights Payable - The fair value of film contracts payable is
the present value of the future obligations based on the current
rates available to the Partnership for debt of similar maturity.
The carrying amount and fair value of program rights payable at
December 31, 1995 were $56,223,000 and $48,494,000, respectively.
(9) Local Marketing Agreement
In August 1995 the Partnership entered into a five-year LMA with KRRT,
Inc. (Licensee). In a related transaction, the Partnership loaned
$10,000,000 to the Licensee. The related note bears interest at 8%.
Pursuant to the LMA, KRRT-TV of Kerrville, Texas (the brokered
station) will air programming provided by River City Broadcasting in
exchange for specified compensation. Such compensation is principally
based on certain station operating costs of the brokered station,
including debt service. River City Broadcasting will retain all
advertising revenues derived from programming for which it has
provided. The LMA is cancellable by the Licensee or River City
Broadcasting.
(10) Equity Debentures
In connection with the purchase of KDSM-TV and the first amendment of the
Limited Partnership Agreement, River City Broadcasting issued two
debentures totaling $2,500,000. These debentures were issued in
consideration of, among other things, consent granted by a certain
partner allowing River City Broadcasting to complete certain
transactions as contained in the respective debenture agreements.
Amounts due under the debenture agreements were to be satisfied
through equity distributions made in accordance with terms of the
Limited Partnership Agreement. Accordingly, for financial reporting
purposes, the debentures were treated as equity preference items and
the related principal and accrued interest were not reflected (as
liabilities or as equity) in the consolidated financial statements of
River City Broadcasting. Concurrent with the Recapitalization, these
debentures were satisfied through an equity distribution to the
partner.
(11) Supplemental Cash Flow and Other Financial Information
Cash paid for interest totaled approximately $6,106,000, $11,523,000,
and $29,249,000 for the years ended December 31, 1993, 1994, and 1995,
respectively.
River City Broadcasting purchased program rights, on an installment
basis, amounting to approximately $16,285,000, $15,749,000, and
$38,401,000 in 1993, 1994, and 1995, respectively. Amounts reflected
as retirements of program rights payable represent amounts actually
paid to vendors under various program rights agreements.
In connection with the Keymarket acquisition, the Partnership granted
$10,000,000 of limited partner units to the Keymarket seller.
Cash overdrafts amounting to approximately $3,959,000 were included in
accounts payable at December 31, 1995.
Based on certain events, including network affiliation changes at certain
broadcast properties, management performed a review of program rights
to determine projected usage and revenue streams. Based on this
review, the Partnership wrote off certain programming and recognized a
charge of approximately $7,100,000 to operations for the year ended
December 31, 1995.
Pursuant to the deferred compensation agreements and Phantom Warrant
Units described in note 2, the Partnership recognized approximately
$1,161,000, $3,236,000, and $1,143,000 of deferred compensation
expense in 1993, 1994, and 1995, respectively.
At December 31, 1994, the Partnership recorded a distribution payable of
$2,274,613 in anticipation of income taxes due by the partners as
described in note 2. In accordance with the Limited Partnership
Agreement this distribution was paid in 1995.
In 1993, River City Broadcasting retired a $1,000,000 subordinated
debenture for $8,191,527. This amount includes accrued interest of
$350,443 of which $101,327
(Continued)
<PAGE>
10
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
represents 1993 interest expense. The debenture contained a contingent
interest provision, determined based on certain equity like features,
which was triggered concurrent with the Recapitalization. Retirement
of this debenture was effected through its conversion to a limited
partnership interest and a charge to interest expense of $7,191,527
(see note 16).
(12) Extraordinary Items
-------------------
Concurrently with the Recapitalization in 1993, the Partnership
redeemed, through conversion to equity, the $1,000,000 1989
subordinated debenture for $8,191,527, including accrued interest of
$350,443. This redemption was treated as an early extinguishment of
debt for financial reporting purposes.
As described in note 7, the Partnership redeemed $118,450,000 of the
outstanding Continental notes with a put premium of $1,184,500.
Additionally, in connection with the extinguishment of its prior
Amended Senior Credit Facility, the Partnership expensed approximately
$2,164,000 of related deferred financing fees. These items were
treated as an early extinguishment of debt for financial reporting
purposes.
(13) Related Party Transactions
--------------------------
Prior to the Recapitalization, the general partner received a management
fee from each station primarily based on the individual station's
revenues. Subsequent to the Recapitalization, the general partner no
longer received management fees. Pursuant to the Recapitalization,
corporate expenses are allocated to each station to cover the
salaries and expenses of senior management. Such allocation is based
upon certain financial information and management's estimate of
actual time spent. Management believes the allocation is reasonable
and approximates what the expenses would have been on a stand-alone
basis. In 1993, management fees totaling approximately $1,220,000
were paid to a general partner whose interest was redeemed concurrent
with the Recapitalization. Beginning in 1994, costs associated with
certain members of senior management were allocated to corporate
expenses. Previously, these costs were included in station operating
expenses. Total management fees and expenses, including corporate
expenses, for the years ended December 31, 1993, 1994, and 1995
amounted to approximately $1,873,000, $2,498,000 and $4,482,000,
respectively.
(Continued)
<PAGE>
11
RIVER CITY BROADCASTING
Notes to Consolidated Financial Statements
(14) Employee Benefits
-----------------
River City Broadcasting maintains a qualified profit-sharing plan with a
trustee, which includes a thrift provision qualifying under Section
401(k) of the Internal Revenue Code, covering substantially all
employees. The provision allows the participants to contribute up to
12% of their compensation in the plan year, subject to statutory
limitations. River City Broadcasting contributed approximately
$121,000, $215,000, and $388,000 for the years ended December 31,
1993, 1994, and 1995, respectively, to the Plan.
In 1994, River City Broadcasting began contributing to a multi-employer
plan on behalf of certain union employees. Contributions to the plan
totaled approximately $20,000 and $31,000 for the years ended
December 31, 1994 and 1995, respectively.
(15) Commitments and Contingencies
-----------------------------
In conjunction with River City Broadcasting's commitment to obtain new
programming, the Partnership has purchased approximately $34,579,000
of future program rights, including $14,089,000 of sports rights, of
which approximately $4,047,000 will become payable in 1996. These
rights are generally for a period ranging from one to four years.
Program rights and related obligations in the accompanying
consolidated financial statements do not include these future
commitments.
The Partnership loaned approximately $6,200,000 to Keymarket of South
Carolina (KSC), a Company owned by a member of Keymarket management.
The loan bears interest at the applicable federal rate, is secured by
all of the assets of KSC, and is payable upon demand by the
Partnership. KSC owns three radio stations and operates two additional
radio stations under an LMA. River City Broadcasting holds an option
to acquire KSC for consideration totaling the amount of the loans
outstanding, including accrued interest, plus $1,000,000.
The Partnership has capitalized approximately $1,400,000 of fees
associated with a bond offering filed with the SEC in 1995. In the
event the offering is aborted, the Partnership will recognize a charge
to operations of $1,400,000. If the offering is consummated, these
fees will be amortized over the life of the bonds.
River City Broadcasting is involved in certain litigation matters arising
in the normal course of business. In the opinion of management, these
matters are not significant and will not have a material adverse
effect on the Partnership's financial position.
(16) Subsequent Event
----------------
In January 1996, the Partnership acquired the remaining 40% partnership
interest in Twin Peaks Radio which owned and operated three radio
stations in the Albuquerque, New Mexico area.
(Continued)
<PAGE>
Schedule 1
----------
<PAGE>
Schedule 2
----------
<PAGE>
<TABLE>
<CAPTION>
RIVER CITY BROADCASTING
Supplementary Information - Consolidating Balance Sheet
December 31, 1995
WTTV-TV/
Assets KDNL-TV KABB-TV KDSM-TV WTTK-TV KOVR-TV
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equiva-
lents $ 136,987 663,728 61,963 257,698 276,919
Receivables, net 9,446,816 6,475,645 1,971,162 7,524,596 5,333,369
Current portion of
program rights 5,048,222 4,990,635 990,783 7,557,344 2,270,161
Prepaid and other
current assets 2,762,779 404,158 177,762 115,647 101,716
---------- -------- -------- -------- --------
Total current
assets 17,394,804 12,534,166 3,201,670 15,455,285 7,982,165
Property and equipment,
net 13,398,013 6,071,055 1,628,463 6,306,885 25,573,822
Program rights, less
current portion 3,804,258 3,727,993 805,856 9,598,582 458,149
Intangible assets, net 13,834,974 330,825 2,979,140 4,981,976 53,061,805
Other noncurrent assets 18,862,013 114,830 - 577,465 1,034,217
Intracompany receivable
(payable) 419,533,197 6,829,155 (5,474,147) (6,508,035) (81,859,044)
----------- ---------- --------- ---------- ----------
Total assets $ 486,827,259 29,608,024 3,140,982 30,412,158 6,251,114
=========== ========== ========= ========== ==========
WLOS-TV/ KPNT-FM/
Assets WSYX-TV WFBC-TV WVRV-FM KEYMARKET Consolidated
------ ------- ------- ------- ------- -------
Current assets:
Cash and cash equiva-
lents 150,287 167,249 418 1,294,700 3,009,949
Receivables, net 6,767,482 4,861,239 1,094,329 12,226,334 55,700,972
Current portion of
program rights 1,432,430 986,192 - - 23,275,767
Prepaid and other
current assets 302,959 399,386 18,945 173,000 4,456,352
---------- -------- -------- -------- --------
Total current
assets 8,653,158 6,414,066 1,113,692 13,694,034 86,443,040
Property and equipment,
net 15,504,051 15,949,746 2,081,073 9,756,836 96,269,944
Program rights, less
current portion 917,035 338,344 - - 19,650,217
Intangible assets, net 113,401,363 33,195,000 4,375,786 124,717,488 350,878,357
Other noncurrent assets - - - - 20,588,525
Intracompany receivable
(payable) (128,728,876) (48,106,061) (11,616,036) (144,070,153) -
----------- ---------- ---------- ----------- ----------
Total assets $ 9,746,731 7,791,095 (4,045,485) 4,098,205 573,830,083
========== ========== ========== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Liabilities and
Partners' Capital (Deficit)
Current liabilities:
Current installments of
long-term debt 38,587,000 - - - -
Current installments of
Program rights payable 6,152,592 4,610,141 1,322,747 10,670,157 2,992,716
Accrued expenses 5,881,279 849,425 534,880 912,655 987,257
Accounts payable 3,907,463 573,611 372,024 306,187 13,758
---------- -------- -------- -------- -------
Total current
liabilities 54,528,334 6,033,177 2,229,651 11,888,999 3,993,731
Long-term debt, less
current installments 404,413,000 - - - -
Program rights payable,
less current install-
ments 7,655,070 6,095,348 1,339,883 9,919,146 1,104,898 1,173,874
Deferred compensation 5,459,000 - - - 57,833
---------- --- --- --- -------
Total liabilities 472,055,404 12,128,525 3,569,534 21,808,145 5,156,462
Partners' capital (deficit) 14,771,855 17,479,499 (428,552) 8,604,013 1,094,652
----------- ---------- --------- ---------- ----------
Total liabilities
and partners'
capital
(deficit) $ 486,827,259 29,608,024 3,140,982 30,412,158 6,251,114
=========== ========== ========= ========== ==========
Liabilities and
Partners' Capital (Deficit)
Current liabilities:
Current installments of
long-term debt - - - - 38,587,000
Current installments of
Program rights payable 1,726,769 1,343,423 - 1,253,000 30,071,545
Accrued expenses 515,993 980,540 422,952 1,377,435 12,462,416
Accounts payable 282,022 52,453 1,207 1,415,521 6,924,246
-------- ------- ------ ---------- ----------
Total current
liabilities 2,524,784 2,376,416 424,159 4,045,956 88,045,207
Long-term debt, less
current installments - - - - 404,413,000
Program rights payable,
less current install-
ments 7,655,070 291,382 - - 27,579,601
Deferred compensation - - - - 5,516,833
--- --- --- --- ----------
Total liabilities 3,698,658 2,667,798 424,159 4,045,956 525,554,641
Partners' capital (deficit) 6,048,073 5,123,297 (4,469,644) 52,249 48,275,442
---------- ---------- ---------- ------- -----------
Total liabilities
and partners'
capital
(deficit) $ 9,746,731 7,791,095 (4,045,485) 4,098,205 573,830,083
========== ========== ========== ========== ===========
<FN>
Note: Financing for the Partnership's acquisitions and working capital needs,
the acquisition of Twin Peaks, and Partnership distributions are included
in KDNL-TV.
</FN>
</TABLE>
See accompanying independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
RIVER CITY BROADCASTING
Supplementary Information - Consolidating Schedule of Operations
Year ended December 31, 1995
WTTV-TV/
KDNL-TV KABB-TV KDSM-TV WTTK-TV KOVR-TV WSYX-TV
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues:
Local time sales $ 15,219,598 9,291,868 4,327,637 14,617,850 10,941,996 15,378,536
National time sales 10,572,978 10,260,740 2,844,380 10,481,144 12,358,279 12,067,694
Other revenues 1,438,516 1,544,350 306,137 924,624 2,045,354 1,320,056
---------- ---------- -------- -------- ---------- ----------
Total operating
revenues 27,231,092 21,096,958 7,478,154 26,023,618 25,345,629 28,766,286
---------- ---------- --------- ---------- ---------- ----------
Operating costs:
Station operating expenses 9,043,580 6,355,009 1,972,370 4,927,980 11,095,313 8,133,543
Selling expenses 3,654,498 2,993,809 1,516,619 3,038,069 2,945,963 2,452,770
Program amortization
expense 7,571,430 3,979,706 1,504,520 8,385,108 5,386,975 2,623,583
Corporate expenses 649,508 500,000 - 550,000 400,000 700,000
Depreciation 633,464 713,700 897,220 2,283,646 2,680,064 2,107,422
Amortization of intangi-
ble assets 1,010,731 97,507 936,720 2,239,389 3,771,848 9,779,555
---------- ------- -------- ---------- ---------- ----------
Total operating
costs 22,563,211 14,639,731 6,827,449 21,424,192 26,280,163 25,796,873
---------- ---------- --------- ---------- ---------- ----------
Operating income
(loss) 4,667,881 6,457,227 650,705 4,599,426 (934,534) 2,969,413
---------- ---------- -------- ---------- --------- ----------
Other income (expense):
Interest expense (32,986,956) - - (100,677) - -
Amortization of de-
ferred financing
costs and debt
discount (1,434,904) - - - - -
Interest income 1,697,599 3,965 - - - -
Other - - 12,041 (98,111) 170,633 (56,771) (50,408
---------- --- ------- -------- -------- -------- --------
(32,724,261) 3,965 12,041 (198,788) 170,633 (56,771
---------- ------ ------- --------- -------- --------
Net earnings
(loss) $(28,056,380) 6,461,192 662,746 4,400,638 (763,901) 2,912,642
========== ========== ======== ========== ========= ==========
WLOS-TV/ KPNT-FM/
WFBC-TV WVRV-FM KEYMARKET Consolidated
------- ------- --------- ------------
Net operating revenues:
Local time sales 9,350,343 4,334,425 24,128,844 107,591,097
National time sales 8,407,648 322,655 2,629,669 69,945,187
Other revenues 1,566,790 363,859 1,144,174 10,653,860
---------- -------- ---------- -----------
Total operating
revenues 19,324,781 5,020,939 27,902,687 188,190,144
---------- --------- ---------- -----------
Operating costs:
Station operating expenses 6,808,280 2,313,721 11,390,894 62,040,690
Selling expenses 2,310,355 1,407,484 5,654,093 25,973,660
Program amortization
expense 1,600,930 - 2,400,000 33,452,252
Corporate expenses 400,000 204,333 1,078,523 4,482,364
Depreciation 1,930,747 (91,281) 368,544 11,523,526
Amortization of intangi-
ble assets 2,463,069 378,430 6,971,924 27,649,173
---------- -------- ---------- -----------
Total operating
costs 15,513,381 4,212,687 27,863,978 165,121,665
---------- --------- ---------- -----------
Operating income
(loss) 3,811,400 808,252 38,709 23,068,479
---------- -------- ------- -----------
Other income (expense):
Interest expense - - - (33,087,633)
Amortization of de-
ferred financing
costs and debt
discount - - - (1,434,904)
Interest income - - 13,540 1,715,104
Other - - - (22,616)
---------- --- --- --------
(50,408) - 13,540 (32,830,049)
-------- --- ------- -----------
Net earnings
(loss) 3,760,992 808,252 52,249 (9,761,570)
========== ======== ======= ===========
<FN>
Note: Interest expense related to the financing of the Partnership's
acquisitions and working capital needs, organization costs of the
Partnerships, the acquisition of Twin Peaks, and deferred compensation
expense are included in KDNL-TV.
</FN>
</TABLE>
See accompanying independent auditors' report.
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
RIVER CITY BROADCASTING, L.P.,
AS SELLER,
AND
SINCLAIR BROADCAST GROUP, INC.
AS BUYER
DATED AS OF APRIL 10, 1996
AS AMENDED AND RESTATED
AS OF MAY 31, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
TRANSFER OF ASSETS
1.1 Transfer of Assets........................................................3
1.2 Excluded Assets...........................................................7
1.3 Liabilities..............................................................10
ARTICLE 2
PURCHASE; CLOSING
2.1 Purchase Price...........................................................13
2.2 Adjustments..............................................................15
2.3 The Closing..............................................................21
2.4 Deliveries at Closing....................................................24
2.5 Deliveries by Seller Prior to Closing and Upon Execution
.......................................................................27
2.6 Effect of Laws or Proceedings............................................28
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Formation................................................................30
3.2 Partnership Action.......................................................30
3.3 Financials...............................................................30
3.4 Business Since the Balance Sheet Date....................................31
3.5 Condition of Assets......................................................31
3.6 Title, Etc...............................................................31
3.7 Trademarks, Etc..........................................................33
3.8 Insurance................................................................33
<PAGE>
- ii -
3.9 Contracts...............................................................33
3.10 Employees...............................................................34
3.11 Litigation..............................................................34
3.12 Compliance with Laws....................................................35
3.13 No Conflicts............................................................35
3.14 Brokers.................................................................35
3.15 Retransmission Consent Agreements. ...................................35
3.16 Environmental...........................................................36
3.17 Employee Plans..........................................................37
3.18 Compliance with ERISA...................................................37
3.19 Taxes...................................................................38
3.20 Certificates of Incorporation, Bylaws and Capitalization of
Sandia..................................................................39
3.21 Options, Warrants, Rights re: Sandia....................................39
3.22 Validity of Sandia Stock................................................39
3.23 Partnership Agreements and Partnership Interests in Twin
Peaks and Twin Peaks License Partnership................................40
3.24 Options, Warrants, Rights re: Twin Peaks and Twin Peaks
License Partnership.....................................................40
3.25 Validity of Twin Peaks Partnership Interest and Twin Peaks
License Partnership Interest............................................41
3.26 Undisclosed Liabilities.................................................41
3.27 Totality of Assets......................................................41
3.28 Complete Disclosure.....................................................42
3.29 Acquisition of Exchangeable Preferred Stock.............................42
3.30 Affiliate Transactions..................................................42
<PAGE>
- iii -
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Incorporation............................................................42
4.2 Corporate Action.........................................................43
4.3 No Conflicts.............................................................43
4.4 Brokers..................................................................43
4.5 Litigation...............................................................43
4.6 Assignments..............................................................44
4.7 Articles of Incorporation, Bylaws and Capitalization of
Buyer....................................................................44
4.8 Options, Warrants, Rights................................................44
4.9 Validity of Stock of Buyer...............................................45
4.10 Offering.................................................................45
4.11 Buyer SEC Documents; Financial Statements................................45
4.12 Capitalization...........................................................46
ARTICLE 5
COVENANTS OF SELLER PENDING AND AFTER THE CLOSING DATE
5.1 Maintenance of Business..................................................46
5.2 Organization/Goodwill....................................................49
5.3 Reports; Access to Facilities, Files and Records.........................49
5.4 Consents.................................................................50
5.5 Notice of Proceedings....................................................50
5.6 Confidential Information.................................................51
5.7 Consummation of Agreement................................................51
<PAGE>
- iv -
5.8 Notice of Certain Developments..........................................51
5.9 Hart-Scott-Rodino.......................................................52
5.10 Updated Information.....................................................52
5.11 Environmental Audit.....................................................52
5.12 Programming.............................................................53
5.13 Film Payments and Capital Leases........................................53
5.14 Down Payment............................................................53
5.15 No Solicitation.........................................................54
ARTICLE 6
COVENANTS OF BUYER
6.1 Confidential Information................................................54
6.2 Consummation of Agreement...............................................55
6.3 Notice of Proceedings...................................................55
6.4 Hart-Scott-Rodino.......................................................56
6.5 Consents and Assignments................................................56
6.6 Capitalization of Buyer.................................................56
6.7 Notice of Material Impact...............................................56
6.8 New Employment Agreements...............................................57
6.9 Insurance...............................................................57
6.10 Stock Options...........................................................57
6.11 Amended Charter.........................................................57
<PAGE>
- v -
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLER
7.1 Representations, Warranties, Covenants..................................57
7.2 Proceedings.............................................................58
7.3 Opinion of Counsel......................................................59
7.4 Hart-Scott-Rodino.......................................................59
7.5 Leases/Subleases........................................................59
7.6 Group I Time Brokerage Agreement........................................59
7.7 Option Agreement........................................................59
7.8 New Employment Agreements...............................................60
7.9 Articles Supplementary..................................................60
7.10 Material Adverse Change.................................................60
7.11 Approval of Stock Options...............................................60
7.12 Stock Options...........................................................60
7.13 Amended Charter.........................................................60
7.14 RCB Loans...............................................................60
7.15 Evidence of Capitalization..............................................61
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF BUYER
8.1 Representations, Warranties, Covenants..................................61
8.2 Proceedings.............................................................62
8.3 Opinion of Counsel......................................................63
8.4 Damage to the Assets....................................................63
8.5 Option Agreements.......................................................63
<PAGE>
- vi -
8.6 Hart-Scott-Rodino.......................................................63
8.7 Leases/Subleases........................................................63
8.8 Group I Time Brokerage Agreement........................................63
8.9 Add Back Programming Liabilities........................................63
8.10 Material Adverse Change.................................................63
8.11 Certain Financial Statements............................................64
8.12 Marcus Non-Compete......................................................64
ARTICLE 9
INDEMNIFICATION
9.1 Survival................................................................64
9.2 Indemnification of Buyer................................................64
9.3 Indemnification of Seller. .............................................65
9.4 Limitation of Liability.................................................65
9.5 Bulk Sales Indemnity....................................................66
9.6 Notice of Claims........................................................67
9.7 Defense of Third Party Claims...........................................67
9.8 Indemnity as Sole Remedy................................................67
9.9 Arbitration.............................................................68
ARTICLE 10
TERMINATION/MISCELLANEOUS
10.1 Termination of Agreement................................................70
10.2 Liabilities Upon Termination............................................71
10.3 Employee Matters........................................................73
<PAGE>
- vii -
10.4 Proxy Statement; Special Stockholders Meeting to Approve
Amended Charter.........................................................76
10.5 Registration Statement; Nasdaq Listing..................................77
10.6 Expenses................................................................78
10.7 Assignments.............................................................78
10.8 Further Assurances......................................................79
10.9 Notices.................................................................79
10.10 Captions................................................................81
10.11 Law Governing...........................................................81
10.12 Consent to Jurisdiction, Etc............................................81
10.13 Waiver of Provisions....................................................81
10.14 Counterparts............................................................81
10.15 Reference to Agreement, Entire Agreement, Amendments....................82
10.16 Access to Books and Records.............................................82
10.17 Public Announcements and Press Releases.................................83
10.18 Recitals, Headings......................................................83
10.19 Severability............................................................83
10.20 Receivables.............................................................83
10.21 Board of Directors and Committees.......................................85
10.22 List of Definitions.....................................................86
Exhibits
Exhibit 2.1(b) Articles Supplementary
Exhibit 2.2(b) Post-Closing Escrow Agreement
Exhibit 2.4 Consent and Agreement
Exhibit 2.5(a) Employment Agreement
Exhibit 2.5(b) Consulting Agreement
Exhibit 2.5(c) Baker Stock Option Agreement
<PAGE>
- viii -
Exhibit 2.5(d) Corporate Employee Stock Option Agreement
Exhibit 2.5(e) Station Employee Stock Option Agreement
Exhibit 2.5(f) First Amendment to Incentive Stock Option
Plan
Exhibit 2.5(g) Long Term Incentive Plan
Exhibit 2.5(h) Voting Agreement
Exhibit 7.3(a) Opinion of Counsel to Buyer
Exhibit 7.3(b) Opinion of Special Counsel to Buyer
Exhibit 7.6(a) Time Brokerage Agreement for Group I Stations
Exhibit 7.7(a) Group I Option Agreement
Exhibit 7.7(b) Columbus Option Agreement
Exhibit 7.8 New Employment Agreements
Exhibit 8.3 Opinion of Counsel to Seller
Exhibit 8.12 Marcus Non-Compete
Exhibit 10.5 Registration Rights Agreement
Schedules
Schedule 1.1(a) Tangible Personal Property
Schedule 1.1(b) Real Property
Schedule 1.1(c)(1) LMAs
Schedule 1.1(c)(2) JSAs
Schedule 1.1(c)(3) Option Agreement
Schedule 1.1(d) Program Contracts
Schedule 1.1(e) Other Contracts
Schedule 1.1(f) Trademarks, Etc.
Schedule 1.1(g) Programming Copyrights
Schedule 1.1(m) Affiliation Agreements, NewVenco and Alliance
Schedule 1.1(n) Other Assets
Schedule 1.2(d) Excluded Contracts
Schedule 1.2(f) License Assets
Schedule 1.2(l) Interests in Certain Subsidiaries
Schedule 1.3 Liabilities
Schedule 2.1(a) Anti-Dilution Adjustments
Schedule 2.2(a)(1) Other Acquisitions and Transactions
Schedule 2.2(a)(2) Add Backs
Schedule 2.2(a)(v) Other Adjustment
Schedule 2.5(d) Corporate Employees
Schedule 2.5(e) Station Employees
Schedule 3.1 Qualifications
Schedule 3.6 Title, Etc.
Schedule 3.8 Insurance
Schedule 3.10 Certain Employee Matters and Collective
Bargaining Agreements
Schedule 3.11 Litigation
Schedule 3.13 No Conflicts
Schedule 3.15 Retransmission Consent Agreements
Schedule 3.16 Environmental
<PAGE>
- ix -
Schedule 3.17 Employee Plans
Schedule 3.18 Compliance with ERISA
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Totality of Assets
Schedule 3.30 Affiliate Transactions
Schedule 4.6 Assignments
Schedule 4.8 Options, Warrants, Rights
Schedule 5.1 Maintenance of Business
Schedule 6.6 Changes in Capitalization of Buyer
Schedule 7.8 New Employment Agreements
Schedule 9.2 Indemnification of Buyer
Schedule 10.3 Employee Matters
<PAGE>
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
---------------------------------------------
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement")
is dated as of April 10, 1996, as Amended and Restated as of May 31, 1996, and
is by and between River City Broadcasting, L.P., a limited partnership duly
formed under the laws of the State of Delaware ("Seller"), and Sinclair
Broadcast Group, Inc., a Maryland corporation ("Buyer").
This Agreement amends and restates in its entirety the Asset Purchase
Agreement dated as of April 10, 1996 by and between Seller and Buyer (the
"Original Purchase Agreement"). All references herein to "date hereof" and "date
of this Agreement" shall mean April 10, 1996, and all representations and
warranties made herein shall be deemed to have been made as of April 10, 1996,
except to the extent that certain agreements listed in the amended and restated
schedules attached hereto have been updated to include certain updated
information. The exhibits and schedules attached to the Original Purchase
Agreement are hereby superceded by the exhibits and schedules attached hereto.
RECITALS
--------
WHEREAS, Seller (i) owns certain assets used in connection with the
business and operations of (a) Television Stations KOVR(TV), Stockton,
California, WTTV(TV), Bloomington, Indiana, WTTK(TV), Kokomo, Indiana, KDSM-TV,
Des Moines, Iowa, KDNL-TV, St. Louis, Missouri, WLOS-TV, Asheville, North
Carolina, WFBC(TV), Anderson, South Carolina, and KABB-TV, San Antonio, Texas
(collectively, the "TV Stations") and (b) Radio Stations KBLA(AM), Santa Monica,
California, WVRV(FM), East St. Louis, Illinois, WJCE-FM, Russellville, Kentucky,
KMEZ-FM, Belle Chasse, Louisiana, WSMB(AM), New Orleans, Louisiana, WLMG-FM, New
Orleans, Louisiana, WWL(AM), New Orleans, Louisiana, KPNT(FM), Sainte Genevieve,
Missouri, WBEN(AM), Buffalo, New York, WMJQ-FM, Buffalo, New York, WWKB(AM),
Buffalo, New York, WKSE-FM, Niagara Falls, New York, WGBI(AM), Scranton,
Pennsylvania, WGGY(FM), Scranton, Pennsylvania, WILK(AM), Wilkes Barre,
Pennsylvania, WKRZ-FM, Wilkes Barre, Pennsylvania, WOGY-FM, Germantown,
Tennessee, WJCE(AM), Memphis, Tennessee, WRVR-FM, Memphis, Tennessee, WLAC(AM),
Nashville, Tennessee, and WLAC-FM, Nashville, Tennessee (collectively, the
"Radio Stations"); (ii) operates pursuant to local marketing agreements listed
on Schedule 1.1(c)(1) (the "LMAs") Television Station KRRT(TV), Kerrville, Texas
and Radio Station WXPX(AM), West Hazelton, Pennsylvania (collectively, the "LMA
Stations"); (iii) sells advertising time pursuant to joint sales agreements
listed on Schedule 1.1(c)(2) (collectively, the "JSAs") with respect to Radio
Stations WGR(AM), Buffalo, New York, WWWS(AM), Buffalo, New York and WWSH(FM),
Pittston, Pennsylvania (collectively, the "JSA
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Stations"); and (iv) holds an option pursuant to that certain option agreement
listed on Schedule 1.1(c)(3) (collectively, the "Station Options") to purchase
the assets or stock of Keymarket of South Carolina, Inc., a South Carolina
corporation ("KMSC"), which owns Radio Stations WFBC(AM), Greenville, South
Carolina, WFBC-FM, Greenville, South Carolina, and WORD(AM), Spartanburg, South
Carolina (collectively, the "Option Stations"; the TV Stations and the Radio
Stations and any LMA Station or any Option Station that is purchased by Seller
prior to the Closing Date or any other television or radio station that is
purchased by Seller as contemplated in Schedule 2.2(a)(1), or with the consent
of Buyer, are hereinafter collectively referred to as the "Owned Stations" and
individually as an "Owned Station"; the Owned Stations together with the LMA
Stations are hereinafter collectively referred to as the "Stations" and
individually as a "Station"); and
WHEREAS, Seller owns all of the issued and outstanding stock of Sandia
Peak Broadcasters, Inc., a Delaware corporation ("Sandia"), a 40% general
partnership interest in Twin Peaks Radio, a New Mexico general partnership
("Twin Peaks"), and a 1% general partnership interest in Twin Peaks Radio
License Partnership, a Missouri general partnership ("Twin Peaks License
Partnership") (collectively, the "RCB Twin Peaks Equity Interest"), with the
remaining 60% general partnership interest in Twin Peaks Radio being owned by
Sandia and the remaining 99% general partnership interest in Twin Peaks License
Partnership being owned by Twin Peaks Radio; and Twin Peaks Radio owns certain
assets in connection with the business and operations of, and Twin Peaks License
Partnership holds certain FCC licenses for, Radio Stations KZSS(AM),
Albuquerque, New Mexico, KZRR(FM), Albuquerque, New Mexico and KLSK(FM), Santa
Fe, New Mexico (collectively, referred to herein as the "New Mexico Stations");
and pursuant to the terms of the Group I Option Agreement (as defined below),
Buyer will receive an option to acquire the RCB Twin Peaks Equity Interest
(although none of the assets of the New Mexico Stations shall be transferred
hereunder, for purposes of the representations and warranties set forth in this
Agreement, the New Mexico Stations shall be deemed to be "Radio Stations" and
the assets of the New Mexico Stations that are of the same type as those
described in Section 1.1 hereof shall be deemed to be "Station Assets");
provided, however, to the extent Seller has sold the New Mexico Stations or the
RCB Twin Peaks Equity Interest prior to Closing, no representations or
warranties shall be made hereunder or under the Group I Option Agreement with
respect to the New Mexico Stations or the RCB Twin Peaks Equity Interest as
contemplated hereunder, and Buyer acknowledges and agrees that it waives its
right to acquire the RCB Twin Peaks Equity Interest under the Group I Option
Agreement
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and Seller shall have no obligation to sell, and Buyer shall have no obligation
to purchase, the RCB Twin Peaks Equity Interest.
WHEREAS, Seller owns certain assets (the "Columbus Assets") used in
connection with the business and operations of WSYX(TV), Columbus, Ohio (the
"Columbus Station"), and pursuant to the terms of the Columbus Option Agreement
(as defined below), Buyer will receive an option to acquire certain of the
assets owned by Seller relating to the Columbus Station, including the License
Assets (as defined below) relating to the Columbus Station; although certain
assets of the Columbus Station are listed on the Schedules hereto, none of such
assets will be transferred hereunder; for purposes of the representations and
warranties, indemnification provisions and Sections 2.2 and 8.10 of this
Agreement, the Columbus Station shall be deemed to be a "TV Station" and the
Columbus Station Assets (such term, when used herein, to have the meaning set
forth in the Columbus Option Agreement) shall be deemed to be "Station Assets");
notwithstanding anything to the contrary herein, the Columbus Station shall be
deemed to be included in Section 2.2 hereof for purposes of calculating
prorations and adjustments, accordingly, prorations and adjustments relating to
the Columbus Station shall be made on the dates set forth in Section 2.2 hereof
and shall not be made under the Columbus Option Agreement, except as set forth
in Section 2.5 thereof; and
WHEREAS, Seller desires to sell, assign and transfer, and Buyer desires
to acquire, (i) certain assets used or held for use in connection with the
operation of the Owned Stations described in more detail below (other than the
assets specifically excluded as provided in this Agreement) and (ii) all of the
rights of Seller under each LMA, each JSA and each Station Option and all other
assets of Seller used or held for use in connection with any LMA Station and any
JSA Station;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows:
ARTICLE I
TRANSFER OF ASSETS
------------------
1.1 Transfer of Assets. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date (as defined in Section 2.3
hereof), Seller shall convey, transfer and deliver to Buyer, and Buyer shall
acquire from Seller, all of Seller's right, title and interest in and to all of
the assets
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and properties of Seller, real and personal, tangible and intangible, which are
owned and used by Seller in connection with the business and operations of the
Owned Stations, including, without limitation, rights under contracts and
leases, real and personal property, plant and equipment, inventories and
intangibles, contracts, rights and other assets owned by Seller relating to the
LMA Stations and the JSA Stations; the Station Options, but excluding the
Excluded Assets described in Section 1.2 hereof.
The rights, assets, property and business of Seller with respect to the
Stations to be transferred to Buyer pursuant to this Section 1.1 are hereinafter
referred to as the "Station Assets." The Station Assets include the following,
except to the extent excluded pursuant to Section 1.2:
(a) Tangible Personal Property. All equipment, vehicles,
furniture, office materials and supplies, spare parts and other tangible
personal property of every kind and description owned as of the date of this
Agreement by Seller and used in connection with the business and operations of
any Station, or any JSA Station, including, without limitation, those shown on
Schedule 1.1(a) to this Agreement, and any additions, improvements, replacements
and alterations thereto made between the date of this Agreement and the Closing
Date, but excluding all such property which is consumed, retired or disposed of
by Seller in the ordinary course of its business between the date of this
Agreement and the Closing Date or as otherwise permitted by this Agreement.
(b) Real Property. (i) Certain real property owned by Seller
listed on Schedule 1.1(b) to this Agreement (the "Real Property"); (ii) all
buildings, structures, improvements and transmitting towers and other fixtures
thereon (the "Real Property Improvements") owned by Seller and used in the
business and operations of any Station or any JSA Station; (iii) the leaseholds
and other interests in real property held by Seller (the "Leasehold Interests")
listed and so designated on Schedule 1.1(b) to this Agreement; and (iv) real
property, and all buildings, structures and improvements thereon and leasehold
interests that are acquired by Seller between the date hereof and the Closing
Date.
(c) LMA, JSAs and Option Agreements. All agreements to which
Seller is a party for the (i) local management of any LMA Station that are
listed on Schedule 1.1(c)(1) to this Agreement, (ii) joint sales of advertising
time on any JSA Station that are listed on Schedule 1.1(c)(2), (iii) purchase of
any Option Station that are listed on Schedule 1.1(c)(3) to this
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Agreement, each to the extent unperformed as of the Closing Date, and agreements
of Seller entered into in the ordinary course of business between the date
hereof and the Closing Date for the local management of, joint sales of
advertising time on, or purchase of, any television or radio station.
(d) Program Contracts. All program licenses and contracts
listed on Schedule 1.1(d), together with any usage reports, under which Seller
is authorized to broadcast film or radio product or programs on any Station,
other than the Excluded Contracts (as defined in Section 1.2(d)), together with
all program licenses and contracts that will have been entered into by Seller in
the ordinary course of business, between the date of this Agreement and the
Closing Date, and all other program licenses and contracts entered into between
the date of this Agreement and the Closing Date the making of which by Seller is
permitted by this Agreement, to the extent existing as of the Closing Date
(collectively, the "Program Contracts").
(e) Other Contracts. All contracts relating to any Station, any
JSA Station to which Seller, any Owned Station is a party, including trade or
barter arrangements (in addition to and not included in those set forth in
Sections 1.1(b), 1.1(c) and 1.1(d) hereof) (collectively, "Other Contracts"),
including all agreements, equipment leases and other leases listed on Schedules
1.1(e) and 3.10 (and on the list of employment agreements delivered to Buyer
pursuant to Section 3.10) (as may be entered into, amended, renewed or extended
pursuant to Section 5.1) to this Agreement, together with all such contracts
that will have been entered into by any Owned Station, by Seller or any JSA
Station in the ordinary course of business between the date of this Agreement
and the Closing Date, and all such other contracts that will have been entered
into by any Owned Station, by Seller relating to any Station or any JSA Station
between the date of this Agreement and the Closing Date, the making of which by
Seller is permitted by this Agreement to the extent existing as of the Closing
Date. As used in this Agreement, "Contract" means any agreement, lease,
arrangement, commitment or understanding, written or oral, expressed or implied,
to which an Owned Station, or Seller with respect to any Station or any JSA
Station, is a party or is bound.
(f) Trademarks, Etc. All trademarks, service marks, patents,
trade names, jingles, slogans and logotypes owned and used by Seller in
connection with the business and operations of any Owned Station or owned and
used by Seller in connection with the business and operations of any LMA Station
or any JSA Station as of the date hereof, listed on Schedule 1.1(f) to this
Agreement as well as any others acquired by Seller in connection
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with the operation of any Owned Station, any LMA Station or any JSA Station
between the date hereof and the Closing Date (collectively, "Trademarks, Etc.").
(g) Programming Copyrights. All program and programming
materials and elements of whatever form or nature owned by Seller and used in
connection with the business and operations of any Station as of the date
hereof, whether recorded on tape or any other substance or intended for live
performance, and whether completed or in production, and all related common law
and statutory copyrights owned by or licensed to Seller and used in connection
with the business and operations of any Station, including, without limitation
those set forth on Schedule 1.1(g) to this Agreement together with all such
programs, materials, elements and copyrights acquired by Seller between the date
hereof and the Closing Date (collectively, the "Programming Copyrights").
(h) Files and Records. All files and other records of Seller
relating solely to the business and operations of any Station, any JSA Station,
any Option Station and any other Station Assets prior to the Closing, other than
account books of original entry and such files and records that are maintained
at the corporate offices of Seller's general partner for tax and accounting
purposes.
(i) Prepaid Items. All deposits and prepaid expenses of Seller
with respect to items that are prorated in Section 2.2 below.
(j) Financial Statements, Books and Records. Copies of all
financial statements (whether internal, compilation, reviewed or audited),
including all books, records, accounts, checks, payment records, tax records
(including payroll, unemployment, real estate and other tax records) and other
such similar books and records, of Seller (or, to the extent Seller owns such
materials, of any previous owner) with respect to any Owned Station for the
three (3) fiscal years immediately preceding the date hereof in the case of any
Owned Station that has been owned by Seller for a period of three years or more
and for which such financial statements have been prepared prior to the date
hereof and for each of the years (under three years) to the extent reasonably
available to Seller in the case of Owned Stations that have been owned by Seller
for a period of less than three years prior to the date hereof and all interim
periods following the date hereof through and including the Closing.
(k) Agreements for Sale of Time. All orders and agreements now
existing or entered into by the Stations or by
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Seller relating to the Stations, the LMA Stations or the JSA Stations in the
ordinary course of business between the date hereof and the Closing Date for the
sale of advertising time on the Stations, the LMA Stations or the JSA Stations
to the extent unperformed as of the Closing Date.
(l) News Materials. All news files, archives, tapes, and other
materials stored or used by Seller relating to the news operation of the Owned
Stations and owned by Seller relating to the news operation of the LMA Stations,
including, but not limited to, any raw film footage and other similar materials,
existing as of the date of this Agreement and through the Closing Date, except
for any such materials that may be disposed of or consumed in the ordinary
course of business.
(m) Television Affiliation Agreements, NewVenco and Alliance.
All television network affiliation agreements relating to the Stations (the
"Affiliation Agreements"), as listed on Schedule 1.1(m), if any, together with
all television Affiliation Agreements that will have been entered into by Seller
in the ordinary course of business between the date hereof and the Closing Date,
and any interest set forth in Schedule 1.1(m) relating to NewVenco, Inc. and
Television Alliance Group, Inc. in connection with the applicable affiliation
agreement, if any, but excluding any such interest relating to the Columbus
Station (the "Other Assets").
(n) Other Assets. All of the assets listed on Schedule 1.1(n)
and, except to the extent referenced in Section 1.2(f) below, all of the assets
owned by Seller relating to the business and operations of the LMA Stations and
the JSA Stations.
1.2 Excluded Assets. Buyer hereby acknowledges and agrees that
there shall be excluded from the Station Assets and retained by Seller, to the
extent in existence on the Closing Date, the following assets (the "Excluded
Assets"):
(a) Personal Property Disposed Of. All tangible personal
property disposed of or consumed in the ordinary course of the business of
Seller between the date of this Agreement and the Closing Date.
(b) Insurance, Bonds, Etc. All contracts of insurance and all
insurance plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto.
(c) Claims. Any and all claims of Seller with respect to
transactions occurring prior to the Closing Date, including,
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without limitation, rights and interests of Seller in and to any claims for tax
refunds (including, but not limited to, federal, state or local franchise,
income or other taxes) and all causes of action and claims of Seller under
contracts and with respect to other transactions with respect to events
occurring prior to the Closing Date and all claims for other refunds of monies
paid to any governmental agency and all claims for copyright royalties for
broadcast prior to the Closing Date.
(d) Certain Contracts. The agreements listed on Schedule 1.2(d)
hereof and the Leases and the Subleases (as defined in Section 7.5 hereof) (the
"Excluded Contracts").
(e) Certain Books and Records. Seller's partnership recrds and
other books and records that pertain to internal partnership matters of Seller
and Seller's account books of original entry with respect to any Station, any
JSA Station, any Option Station and any other Station Assets, and all original
accounts, checks, payment records, tax records (including payroll, unemployment,
real estate and other tax records) and other similar books, records and
information of Seller relating to Seller's operation of the business of any
Station, any JSA Station, any Option Station and any other Station Assets prior
to Closing, with the proviso that Buyer shall receive on the Closing Date and be
allowed to maintain copies of all such records relating to any Station, JSA
Station, Option Station or other Station Assets and/or upon a written request
for same shall be allowed further access to all excluded records to the extent
retained by Seller, at all reasonable times for a period of three (3) years
after the Closing Date.
(f) License Assets. All (i)(1) licenses and (2) antennae,
transmitters, engineering equipment, etc., which are necessary and required by
the Federal Communications Commission (the "FCC") or otherwise and as referenced
on Schedule 1.2(f) hereof (and which are included in the Option Agreements
referred to in Sections 7.7 and 8.5 hereof), for the proper, legal and effective
operation of any Owned Station as a broadcast facility, (ii) FCC authorizations
of Seller or River City License Partnership, a Missouri general partnership
("Licensee"), all of which have been transferred to, or are held by, Licensee
with respect to any Owned Station and are referenced on Schedule 1.2(f), and all
applications therefor, together with any renewals, extensions, or modifications
thereof and additions thereto (the "FCC Authorizations"), (iii) all real
property owned by Seller referenced on Schedule 1.2(f) to this Agreement, and
all buildings, structures and improvements thereon, used in the business and
operations of any Station or any JSA Station and all other leaseholds and other
interests in real property held by
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Seller referenced on Schedule 1.2(f) to this Agreement and real property, and
all buildings, structures and improvements thereon (the "Excluded Real
Property"), (iv) interests in certain entities referenced on Schedule 1.2(f),
(v) call signs referenced on Schedule 1.2(f), (vi) retransmission consent
agreements referenced on Schedule 1.2(f), (vii) other assets and contracts
referenced on Schedule 1.2(f) and (viii) FCC logs and other FCC- related records
that relate to the operations of the Stations ((i)-(viii) above, together with
any other items more particularly described and defined in the Option Agreements
as "License Assets" are sometimes collectively referred to herein as "License
Assets").
(g) Group I Receivables. Except as set forth in Section 10.20,
all notes and accounts receivable and other receivables of Seller relating to or
arising out of the operation of any Station or any JSA Station prior to Closing,
including, without limitation, under network affiliation agreements
(collectively, the "Group I Receivables" and together with the "Columbus
Receivables," which term when used herein shall have the meaning assigned to
such term in the Columbus Option Agreement, the "Receivables").
(h) Certain Prepaid Expenses. The deposits and prepaid expenses
of Seller with respect to the items that are not subject to adjustment under
Section 2.2 hereof.
(i) Cash. All cash, cash equivalents and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank balances,
and rights in and to bank accounts, Treasury bills and marketable securities and
other securities of Seller.
(j) Pension Assets, Etc. Except as otherwise provided in
Section 10.3, pension, profit sharing, retirement, bonus, stock purchase,
savings plans and trusts, 401(k) plans, health insurance plans (including any
insurance contracts or policies related thereto), and the assets thereof and any
rights thereto, and all other plans, agreements or understandings to provide
employee benefits of any kind for employees of Seller.
(k) River City Name. All rights to and goodwill in the name
"River City Broadcasting" or any logo, variation or derivation thereof.
(l) Interests in Certain Subsidiaries. All of Seller's
interests in the subsidiaries of Seller described on Schedule 1.2(l).
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(m) Columbus Station Assets. The assets owned by Seller
relating to the Columbus Station, including without limitation, those which are
the subject of the Columbus Option Agreement.
(n) Goodwill. All of Seller's goodwill in and going concern
value associated with the Stations.
1.3 Liabilities. (a) Liens. The Station Assets shall be sold and
conveyed to Buyer free and clear of all liens, security interests and
encumbrances except (i) all matters of record including, without limitation,
those matters disclosed on Schedules 1.3 and 3.6 hereto as "continuing" and,
including, without limitation, the rights of lessors with respect to any
leasehold interests in real property or operating leases for personal property
as disclosed in Schedules 1.1(b) and 1.1(e); (ii)(1) liens or encumbrances on
the Real Property, Real Property Improvements and Leasehold Interests, currently
of record; and (2) other liens or encumbrances on the Real Property, Real
Property Improvements and Leasehold Interests included in the Station Assets
that with respect to clause (ii)(2) hereof do not materially affect the value or
the current or continued use and enjoyment (to the extent such continued use and
enjoyment conforms with current use and enjoyment) thereof in the operation of
the Station Assets; (iii) liens for taxes not yet due and payable; and (iv) the
Assumed Liabilities (as hereinafter defined) (all of the foregoing in clauses
(i) through (iv) are sometimes collectively referred to herein as "Permitted
Encumbrances" but shall be deemed to exclude any judgment liens, mortgages,
capital leases or security interests or trust arrangements providing for similar
effect (including, without limitation, purchase money mortgages or purchase
money interests granted by Seller in favor of any third party securing
obligations for borrowed money)).
(b) Assumption of Liabilities. (i) Buyer agrees that, on the Closing
Date, Buyer shall assume, undertake and agree to pay, satisfy, perform,
discharge and be liable for and Seller shall not be liable for (1) the
liabilities and obligations of Seller as the same shall exist on the Closing
Date that arise out of and related to the ownership and operation of the Station
Assets (including under the contracts assigned pursuant to Sections 1.1(b), (c),
(d), (e) and (m), including the collective bargaining agreements referenced on
Schedule 3.10, and any contracts that are entered into after the date hereof as
permitted by this Agreement and those liabilities and obligations referred to in
Section 10.3 hereof) on and after the Closing Date; (2) any liability or
obligation of Buyer for any federal, state or local income or other taxes or, to
the extent of any
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prorations pursuant to Section 2.2 hereof, for real estate or payroll taxes
attributable to any period of time on or after the Closing Date and any
liability or obligation for real estate and payroll taxes of Seller to the
extent a proration was provided for in Section 2.2 hereof attributable to the
period of time prior to the Closing; (3) any liability or obligation to any
former employee of Seller who has been hired by Buyer, including any employee of
any Station or any JSA Station who has been hired by Buyer, attributable to any
period of time on or after the Closing Date; (4) any liability or obligation
arising out of any litigation, proceeding or claim by any person or entity
relating to the business or operations of any Station, JSA Station or any of the
Station Assets with respect to any events or circumstances that happen or exist
on or after the Closing Date; (5) any severance or other liability arising out
of the termination of any employee's employment with or by Buyer on or after the
Closing Date; and (6) any duty, obligation or liability relating to any pension,
401(k) or other similar plan, agreement or arrangement provided by Buyer to any
employee or former employee of Seller on or after the Closing Date (all of the
foregoing, together with other liabilities or obligations expressly assumed by
Buyer hereunder, are referred to herein collectively as the "Assumed
Liabilities").
(ii) Buyer shall not assume or be liable for (1)
any liability or obligation arising out of the management, operation or sales or
other obligations in connection with any LMA Station or any JSA Station, or any
of the Station Assets or the License Assets prior to the Closing Date (except
for the Assumed Liabilities); (2) any liability or obligation under any
contracts not (except for Assumed Liabilities) expressly assumed by Buyer
hereunder (subject to Section 1.3(c) below with respect to Consent Contracts);
(3) any liability or obligation of Seller for any federal, state or local income
or other taxes (subject, in the case of real estate or payroll taxes, to the
proration provided for in Section 2.2 hereof) attributable to any period of time
prior to the Closing; (4) any liability or obligation with respect to the
Excluded Contracts; (5) any liability or obligation to any employee or former
employee of Seller attributable to any period of time prior to the Closing Date
(except as otherwise set forth herein); and (6) any liability or obligation of
Seller arising out of any litigation, proceeding or claim by any person or
entity relating to the Station Assets with respect to events or circumstances
that happened or exist prior to the Closing Date, whether or not such
litigation, proceeding or claim is pending, threatened, or asserted before, on
or after the Closing Date. It is agreed and understood by the Parties that the
post-closing liability of Seller to Buyer is limited in the manner described in
Section 9.4 hereof and shall be paid
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solely through the mechanism of the off-set against the Option Exercise Price as
more specifically described in Section 9.4 hereof. All liabilities and
obligations arising out of the Station Assets that do not constitute Assumed
Liabilities shall be retained by Seller and are referred to herein as "Retained
Liabilities".
To the extent, if any, Seller makes a payment to Buyer as a result of
any proration or adjustment pursuant to Section 2.2 hereof, Buyer shall then
assume and shall be obligated to pay such obligations and liabilities for which
such proration or adjustment was made pursuant to Section 2.2.
(c) Consents to Contracts. (i) If any required approval of or consent
to the transfer and assignment to Buyer of any contract or equity interest
included in the Station Assets is not obtained on or before the Closing Date,
obtaining such consent shall not constitute a condition precedent to Buyer's
obligations to close hereunder. Unless Buyer otherwise requests of Seller, all
such contracts shall be assigned on the Closing Date. If Buyer requests, Seller
shall retain such contracts in respect of which consents have not been obtained
(the "Consent Contracts") until the earlier of (1) the expiration thereof
(without any extension thereunder) and (2) the later of the final Option Closing
Date (as defined in the Group I Option Agreement) and the Columbus Option
Closing Date (as defined in the Columbus Option Agreement), or to the extent any
such Consent Contract does not relate to the Stations, Seller shall retain such
Consent Contract until the earlier of (1) the expiration thereof (without any
extension thereunder) and (2) until the Columbus Option Closing Date (as defined
in the Columbus Option Agreement). Buyer agrees that on such date, Seller will
assign to Buyer, and Buyer will assume from Seller, such Consent Contracts that
have not yet been transferred to Buyer regardless of whether consent has been
obtained in connection therewith, all without any liability or obligation of
Seller. Between the Closing Date and the date on which such Consent Contract is
assumed as set forth above in this paragraph, to the extent requested by Buyer,
Seller shall use its commercially reasonable efforts to obtain all required
consents (which, except as provided in clause (c)(ii) below shall not require
the expenditure by Seller of any expenses, except for ministerial processing
fees in connection with assignment of such contracts as set forth in such
contracts and Seller's out-of-pocket expenses to its attorney or other agents
incurred in connection with obtaining such consents). To the extent Seller is
unable to obtain such consents, Seller shall retain such Consent Contract, and
Buyer shall, by making payments to Seller (which Seller shall then pay to the
contracting party under such Consent Contract), pay, satisfy, perform and
discharge Seller's
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liabilities and obligations in connection with the Consent Contracts which are
related to the period on or after the Closing Date, and Buyer shall indemnify
and hold Seller harmless with respect to any other liabilities which arise with
respect to the Consent Contracts which are related to the period on or after the
Closing Date, including, without limitation, liabilities that arise due to the
assignment of such Consent Contracts to Buyer or the retention by Seller of such
Consent Contracts and the use thereof by Buyer, without consent. Such
liabilities and obligations in connection with the Consent Contracts shall also
constitute "Assumed Liabilities" for purposes of this Agreement.
(ii) If as a condition to the grant of consents to the real property
leases set forth on Schedule 1.1(b), the party to such lease whose consent is
required requires any cash payment to be made or any changes under such lease
resulting in material increases in the economic terms thereunder (collectively
"Consent Costs"), Seller shall be responsible for the first $150,000 (with
respect to any such single lease) and $300,000 (with respect to all such leases
collectively) of Consent Costs. Buyer shall be responsible for the next $150,000
(with respect to any single lease) and $300,000 (with respect to such leases
collectively) of Consent Costs. With respect to the Consent Costs in excess of
such amounts, Seller and Buyer will each bear one half. The parties agree to
negotiate in good faith with respect to changes under leases that result in
material increases in the economic terms thereunder. The parties agree to
promptly notify the other, and to maintain a record, with respect to all Consent
Costs requested, and paid by either party. Nothing herein shall be construed to
limit Buyer's obligation to accept as a condition to the grant of such consents
the imposition of any reasonable non-economic changes under the applicable
contracts.
ARTICLE 2
PURCHASE; CLOSING
2.1 Purchase Price. In consideration of Seller's performance of this
Agreement and the transfer and delivery of the Station Assets to Buyer at the
Closing, (a) Buyer will pay to Seller Eight Hundred Four Million Two Hundred
Nine Thousand Two Hundred Ninety Five Dollars ($804,209,295) (the "Cash Purchase
Price"), plus or minus the amount of any adjustments made pursuant to Section
2.2 below and (b) Buyer will issue to Seller the number of shares of Series A
Exchangeable Preferred Stock of Buyer, par value $.01 per share, having an
aggregate Agreed Value (as defined in the Articles Supplementary referred to
below) as of the Closing Date of One Hundred Fifteen Million Dollars
<PAGE>
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($115,000,000) (the "Exchangeable Preferred Stock"), which shares shall be
exchangeable after the Closing, on the terms and conditions set forth herein,
into an equivalent number of shares of Buyer's Series B Convertible Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"), having an
aggregate Agreed Value (as defined in the Articles Supplementary referred to
below) of $115,000,000 (the "Stock Purchase Price," and together with the Cash
Purchase Price, collectively, the "Purchase Price").
The Convertible Preferred Stock shall be issued by Buyer in exchange
for the Exchangeable Preferred Stock immediately after the filing by Buyer with
the Maryland Department of Assessments and Taxation, as contemplated by Section
10.4 hereof, of an amendment of Buyer's charter, which shall be in the form of
the Amended Charter (as defined below). The shares of Convertible Preferred
Stock to be issued by Buyer in exchange for the Exchangeable Preferred Stock
hereunder shall be convertible, in the aggregate, into Four Million One Hundred
Eighty-One Thousand Eight Hundred Eighteen (4,181,818) shares of Buyer's Class A
Common Stock, par value $.01 per share ("Buyer Common Stock"), subject to
adjustment upon any split, reorganization, recapitalization, combination or
dividend and certain other events affecting the Common Stock of Buyer prior to
the Closing as described in Schedule 2.1(a) (the "Anti-Dilution Adjustments")
and subject to such other adjustments from and after the Closing as may be set
forth in the Articles Supplementary.
The Exchangeable Preferred Stock shall have the designations,
preferences and relative participating, optional and other special rights and
qualifications, limitations and restrictions as set forth in the Articles
Supplementary to Buyer's existing charter, which shall be in the form of the
Articles Supplementary attached as Exhibit 2.1(b) hereof (the "Articles
Supplementary").
The Convertible Preferred Stock shall have the designations,
preferences and relative participating, optional and other special rights and
qualifications, limitations and restrictions as set forth in the Articles
Supplementary.
At the Closing, Buyer will assume the Assumed Liabilities. The Cash
Purchase Price shall be paid by Buyer to Seller on the Closing Date, except as
otherwise provided in the following paragraph, by wire transfer of immediately
available federal funds in United States dollars to such bank accounts as are
designated by Seller on or prior to the Closing Date.
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In the event that the Buyer elects to extend the Termination Date for
Extended Periods (as defined herein) pursuant to Section 2.3(d) hereof, the Cash
Purchase Price shall be increased by Ten Million Dollars ($10,000,000) for each
such Litigation Extended Period and Five Million Dollars ($5,000,000) for the
Cure Extended Period, and Buyer shall be required to pay to Seller such
additional Cash Purchase Price, in increments of Ten Million Dollars
($10,000,000), on the first day of each such Litigation Extended Period and Five
Million Dollars ($5,000,000) on the first day of the Cure Extended Period, by
wire transfer of immediately available federal funds in United States dollars to
such accounts as are designated by Seller; provided that to the extent the final
Extended Period is to be for less than 30 (in the case of a Litigation Extended
Period) or 15 (in the case of the Cure Extended Period) days, as provided for in
Section 2.3(d) below, such $10,000,000 or $5,000,000, as applicable, amount
payable with respect to such Extended Period shall be reduced by an amount equal
to the product of (a) a fraction whose numerator is equal to the difference
between 30 (in the case of a Litigation Extended Period) or 15 (in the case of a
Cure Extended Period) and the number of days in such final Extended Period, and
whose denominator is 30 (in the case of a Litigation Extended Period) or 15 (in
the case of the Cure Extended Period), multiplied by (b) $10,000,000 (in the
case of a Litigation Extended Period) and $5,000,000 (in the case of a Cure
Extended Period). Such payments to extend the Termination Date shall be retained
by Seller irrespective of whether Closing occurs hereunder and shall be
non-refundable to Buyer except to the extent expressly set forth in Section
10.2(c). To the extent that the Closing occurs on a Closing Date prior to the
expiration of a then current Extended Period, the Purchase Price shall be
subject to further adjustment as provided in Section 2.2(a)(vii) hereof.
2.2 Adjustments.
(a) (i) Operations. The items set forth in this Section 2.2(a)
relating to the operation of the Owned Stations, and to the management,
operations, sales or other obligations, as applicable, in connection with the
LMA Stations and the JSA Stations, and the income, expenses and liabilities
attributable thereto through 11:59 p.m. on the Closing Date (the "Adjustment
Date") shall be for the account of Seller and, thereafter, for the account of
Buyer, and shall be prorated accordingly. Items including, but not limited to,
power and utilities charges, ad valorem property taxes upon the basis of the
most recent assessment available, business and license fees, charges for
utilities, water/sewer and natural gas, time sales agreements, property and
equipment rentals, commissions, wages, payroll
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taxes, accrued vacation pay of employees of Seller who are hired by Buyer(all
such vacation pay accrued prior to the Closing Date to be the responsibility of
Seller), and rents and similar prepaid and deferred items, shall be prorated
between Seller and Buyer, the proration to be made as of the Adjustment Date.
There shall be no prorations and/or adjustments with respect to any sick leave
and personal days accrued on or prior to the Closing Date by any employees of
Seller, and the Buyer shall assume and be responsible for all liabilities in
respect thereof. All special assessments and similar charges or liens imposed
against the Real Property, Leasehold Interests or Real Property Improvements in
respect of any period of time through the Adjustment Date, whether payable in
installments or otherwise, shall be the responsibility of Seller, and amounts
payable with respect to such special assessments, charges or liens in respect of
any period of time after the Adjustment Date shall be the responsibility of
Buyer and shall be adjusted as required hereunder.
(ii) Trades. All trade, barter or similar
arrangements for the sale of advertising time other than for cash (with the
exception of film or program barter agreements and media barter agreements)
("Trades") shall be prorated between Buyer and Seller as of the Adjustment Date.
If, on the Closing Date, the aggregate value of the performance obligations of
the Stations on or after the Closing Date under all such Trades, less the
aggregate value of the goods, services or other items to be received thereunder
on or after the Closing Date, exceeds (1) $50,000 for any Station, or (2)
$250,000 in the aggregate for all Stations, then Buyer shall receive a credit
against the Cash Purchase Price for the amount of such excess relating to the
Stations. If on the Closing Date, the aggregate value of the goods, services or
other items to be received on or after the Closing Date less the aggregate value
of the performance obligation of the Stations on or after the Closing Date
exceeds (1) $50,000 for any Station, or (2) $250,000 in the aggregate for all
Stations, then the Cash Purchase Price shall be increased by the amount of such
excess. Trades shall be valued in accordance with the valuation method currently
used by Seller, which for purposes of the preceding sentence, means that the
liability for performance obligations shall be valued according to the
applicable Station's prevailing rates as of the Closing Date, and goods,
services or other items being received shall be valued based on the fair market
value of such goods, services or other items on the Closing Date with respect to
the Stations. There shall be no other proration or adjustment with respect to
Trades, and there shall be no proration or adjustment with respect to any film
or program barter agreements, media barter agreements or program contracts all
of which (except for the Add Back
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Programming Liabilities) shall be assumed by Buyer as part of the Assumed
Liabilities.
(iii) Station Options and Other Acquisitions and
Transactions. To the extent that prior to the Closing Date (1) any Station
Option is consummated, or (2) Seller acquires any other television or radio
station or has entered into or enters into any other transaction contemplated in
Schedule 2.2(a)(1), the Cash Purchase Price shall be increased by (A) the
non-recurring out-of-pocket costs incurred by Seller with respect to the
consummation of the Station Options and (B) the corresponding amount relating to
such other television or radio station as set forth in Schedule 2.2(a)(1), or if
not listed therein, as may be agreed to by the parties hereto, plus the
non-recurring out-of-pocket costs incurred by Seller with respect to the
consummation of such other acquisition or transaction. To the extent that Seller
has not consummated the acquisitions contemplated on Schedule 2.2(a)(1) but has
made any deposits in respect thereof, the Cash Purchase Price shall be increased
by the amount of each such deposit. To the extent that the Station Options have
not been consummated on or before the Closing Date, the Cash Purchase Price
shall be decreased in the amount of the Option Price, as adjusted, as set forth
in Section 1(c) of the Option Agreement listed on Schedule 1.1(c)(3), as
amended, in connection with the assumption of the Station Options by Buyer
hereunder.
(iv) Rich JSA. To the extent that, as of the Closing
Date, WWWS(AM) and WGR(AM), Buffalo, New York have not yet been sold by Rich
Communications Corporation ("Rich") and Seller has not received the amount that
would otherwise be payable by Rich to Seller under Section 13 of the Joint Sales
Agreement with Rich listed on Schedule 1.1(c)(2) hereof if such stations had
been sold by such date, the Cash Purchase Price shall be increased by such
amount.
(v) Other. The Cash Purchase Price shall be adjusted
in accordance with Schedule 2.2(a)(v).
(vi) Bock Note. The Cash Purchase Price shall be
increased by $34,376.90 in connection with the assignment of the Promissory Note
dated September 13, 1995 in favor of Seller made by Eric J. Bock, Guy W. Bock
and Susan Bock-Dean, which is being endorsed (without recourse to Seller) to
Buyer hereunder.
(vii) Payment for Extended Period. The Cash Purchase
Price shall be decreased by the amount equal to the product of (A) a fraction
whose numerator is equal to the difference between 30 (in the case of a
Litigation Extended Period) or 15 (in the case of a Cure Extended Period) and
the
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number of days elapsed in the then-current Extended Period as of the Closing
Date, if any, and whose denominator is equal to 30 (in the case of a Litigation
Extended Period) or 15 (in the case of a Cure Extended Period), multiplied by
(B) $10,000,000 (in the case of a Litigation Extended Period) and $5,000,000 (in
the case of a Cure Extended Period); provided that where an Extended Period is
less than 30 (in the case of a Litigation Extended Period) or 15 (in the case of
a Cure Extended Period) days, a corresponding adjustment shall be made based
upon the number of days remaining in such Extended Period, the original number
of days in such Extended Period and the additional Cash Purchase Price payment
made in respect of such Extended Period under Section 2.1.
(viii) Alliance. The Cash Purchase Price shall be
increased by Twenty-Five Thousand Nine Hundred Sixty-Five Dollars and Seventy
Cents ($25,965.70) as reimbursement for Seller's investment in Television
Alliance Group, Inc.
(ix) New Mexico Stations. To the extent Seller has
sold the New Mexico Stations or the RCB Twin Peaks Equity Interest prior to the
Closing Date, the Cash Purchase Price for all of the Stations shall be reduced
by the amount paid to Seller in connection therewith, minus (1) the
non-recurring out-of-pocket costs incurred by Seller in respect of consummation
of such sale, (2) the total amount of all federal, state and local taxes (other
than income taxes) incurred in connection with such sale and (3) the total
amount of all federal, state and local income taxes incurred by Sandia in
connection with such sale. In connection with any such sale, Seller shall
provide a certificate to Buyer as to the amount of the adjustment hereunder
together with appropriate documentation supporting Seller's calculations.
(x) $200,000. The Cash Purchase Price shall be
decreased by Two Hundred Thousand Dollars ($200,000).
(b) (i) Prorations Certificate. For the purpose of determining
the prorations and adjustments required pursuant to Section 2.2(a), Seller shall
deliver to Buyer, not less than three (3) days prior to the Closing Date, a
certificate (the "Prorations Certificate"), to be signed at Closing by an
appropriate official of Seller after due inquiry by such official, but without
any personal liability to any such official, which specifies Seller's good faith
determination of the dollar amount of the prorations and adjustments under
Section 2.2(a), including, without limitation, appropriate documentation
supporting Seller's determinations and calculations under Section 2.2(a).
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(ii) Pre-Closing Dispute; Escrow. If Buyer, acting in
good faith, does not agree with any amount set forth in the Prorations
Certificate, then on or prior to the second business day prior to the Closing
Date, Buyer may deliver to Seller a written report (the "Buyer's Estimate
Report") setting forth in reasonable detail Buyer's good faith reasonable
estimate(s) of the amount(s) with which Buyer disagrees. Any estimated amount
which is set forth in the Prorations Certificate and as to which Buyer does not
deliver its own estimate on or prior to such second business day will be the
"estimated amount" of the prorations and adjustments under Section 2.2(a) (the
"Adjustment Amount") on the Closing Date. In the case of any such estimated
amount as to which Buyer delivers its own estimate, Seller and Buyer will
endeavor in good faith to agree prior to the Closing on the appropriate amount
of such estimate, and any amount so agreed upon by them in writing prior to the
Closing will be the "estimated amount" of the Adjustment Amount on the Closing
Date. In the case of any such estimated amount as to which Buyer delivers its
own estimate and Seller and Buyer do not so agree, the estimate set forth in the
Prorations Certificate will be the "estimated amount" of the Adjustment Amount,
on the Closing Date, and at the Closing the difference (if any) between the
amount of the Cash Purchase Price that would be determined using the amount set
forth in the Prorations Certificate and the amount of the Cash Purchase Price
determined using the estimated Adjustment Amount set forth in the Buyer's
Estimate Report (such amount, the "Post-Closing Estimate Fund Deposit") will be
transferred by Buyer to Magna Trust Company, St. Louis, Missouri or such other
bank as mutually agreed to by the parties (the "Prorations Escrow Agent"), to be
held by the Prorations Escrow Agent, pursuant to the Post-Closing Escrow
Agreement substantially in the form of Exhibit 2.2(b) (with such changes as the
Prorations Escrow Agent may request), and pending final determination of the
disputed amount(s) in question pursuant to this Section 2.2(b) as set forth
below, as a fund in escrow (the "Post-Closing Estimate Fund") to provide
security for the payment of any additional amount which may be payable by Buyer
pursuant to Section 2.1.
(iii) Adjustment at Closing. At Closing, the Cash
Purchase Price shall be decreased to the extent Seller owes Buyer funds or
increased to the extent Buyer owes Seller funds, based upon the amount set forth
in the Prorations Certificate herein.
(iv) Closing Prorations Certificate. Within one
hundred and twenty (120) days after the Closing Date, Buyer shall prepare a
closing prorations certificate regarding prorations and adjustments required
pursuant to Section 2.2(a) (the "Closing Prorations Certificate") as of the
close of business on the
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Adjustment Date and submit it to Seller for review. To the extent Seller does
not agree with any amount set forth in the Closing Prorations Certificate,
Seller shall deliver written notice of such disagreement to Buyer. Within one
hundred and fifty (150) days after the Closing Date, final adjustments pursuant
to Section 2.2 shall be determined, and any required refund or payment shall be
made in accordance with subsection (vi) below on the basis of the Closing
Prorations Certificate, subject to the provisions relating to disputes provided
for herein. Upon acceptance, payment hereunder will be remitted within five (5)
days thereafter. If any dispute arises over the amount to be refunded or paid,
such refund or payment shall nonetheless be made to the extent such amount is
not in dispute.
(v) Post-Closing Dispute. If any dispute cannot be
resolved by Buyer and Seller or their respective independent public accountants
within one hundred and eighty (180) days after the Closing Date, the disputed
matters shall be referred to a mutually satisfactory independent public
accounting firm of national stature which has not been employed by any party
hereto for the two (2) years preceding the date of such referral; such firm to
be selected by the independent public accountants of Seller and Buyer. The
determination of such firm shall be conclusive and binding on each party and not
subject to dispute or review. One-half of the fees of such firm shall be paid by
Seller, and one-half shall be paid by Buyer.
(vi) Disbursement of Post-Closing Estimate Fund. If
any funds are transferred to the Prorations Escrow Agent to be held in the
Post-Closing Estimate Fund, then any amount which becomes payable to Buyer or
Seller pursuant to Section 2.2(b), together with interest accrued on such
amount, will be paid to Buyer or Seller from the Post-Closing Estimate Fund, to
the extent of the funds therein. If no funds are transferred to the Prorations
Escrow Agent to be held in the Post-Closing Estimate Fund or the entire amount
so transferred has theretofore been paid pursuant to this paragraph of Section
2.2(b), then any remaining amount payable to Seller pursuant to Section 2.2(b)
will be paid by Buyer and any remaining amount payable to Buyer pursuant to
Section 2.2(b) will be paid by Seller. Any amount payable by Seller or Buyer
pursuant to Section 2.2(b) (other than to the extent that funds are available
from the Post-Closing Estimate Escrow to pay such amount) will bear interest at
the prime or reference rate of interest announced by Chemical Bank as in effect
from time to time, from the third business day after the adjusted Cash Purchase
Price is determined in accordance with Section 2.2(b) through and including the
date upon which such amount and all such interest are paid in full.
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2.3 The Closing. The closing of the transactions provided for in this
Agreement (the "Closing") shall be held in the offices of Dow, Lohnes &
Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036 or
such other mutually agreeable location at 10:00 a.m. on a date (the "Closing
Date") as shall be mutually agreed upon by Buyer and Seller which, subject to
the other provisions of this Section 2.3, shall not be later than the date (the
"Originally Scheduled Termination Date" and such date, as the same may be
extended pursuant to, and subject to, the provisions of this Section 2.3, the
"Termination Date") that is sixty (60) days after the date of this Agreement
(unless such sixtieth day is not a business day in Maryland, in which case on
the first business day thereafter) and, failing mutual agreement of the parties,
the Closing Date shall be on such sixtieth day (or, if not a business day in
Maryland, on the first business day thereafter); provided, however, that to the
extent Seller is not able to deliver any item set forth in Section 2.4(a) by
such sixtieth day, the Closing Date may be extended at Buyer's option without
payment of any additional consideration by Buyer, for up to an additional
fifteen (15) day period.
(b) Notwithstanding the foregoing, if on the Originally
Scheduled Termination Date the condition precedent set forth in Sections 7.4 or
8.6 hereof has not been satisfied, either Buyer or Seller may elect to postpone
the Originally Scheduled Termination Date for up to an additional thirty (30)
days plus the number of days during the period from the date of this Agreement
through the earlier of (1) the date on which Sections 7.4 and 8.6 hereof have
been satisfied and (2) the Closing Date, during which the Federal Trade
Commission or the Department of Justice closes due to an unscheduled shutdown
(not including weekends or scheduled holidays) (together, the "Additional
Period" and the number of days in such period being referred to herein as the
"Additional Days"), and the Closing shall thereafter take place on a date
specified by written notice from such party, which date shall be not less than
five (5) days nor more than fifteen (15) days after the satisfaction of such
condition precedent, but in no event later than the date which occurs a number
of days after the Originally Scheduled Termination that is equal to the number
of Additional Days.
(c) If at the end of such Additional Period, either condition
precedent set forth in Section 7.4 or Section 8.6 has not been satisfied, either
Buyer or Seller may terminate this Agreement and the provisions of Section 10.2
shall be applicable.
(d) To the extent that, as of the Originally Scheduled
Termination Date (or, if applicable, as extended pursuant to
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Section 2.3(b) hereof), (1) any injunction of a court or other governmental
authority restrains or enjoins the consummation of the transactions contemplated
hereby, or any proceeding of the sort falling within the provisions of Section
8.2 is pending, Buyer shall provide copies of the documentation relating thereto
to Seller and Buyer may extend such Termination Date for additional thirty (30)
day periods (or to the extent extended on or after December 2, 1996 for the
lesser period to and including December 31, 1996) (each a "Litigation Extended
Period") to and including December 31, 1996 or (2) Buyer has received notice
from Seller as specified in the proviso in Section 10.1(a)(ii), Buyer may extend
such Termination Date for an additional fifteen (15) day period (or to the
extent extended on or after December 17, 1996 for the lesser period to and
including December 31, 1996) (the "Cure Extended Period") and together with a
Litigation Extended Period, sometimes hereafter referred to collectively as the
"Extended Periods", as applicable and individually as an "Extended Period"). The
right to extend the Termination Date pursuant to the preceding sentence shall
only be available to Buyer to the extent Buyer delivers to Seller written notice
(an "Extension Notice") on or prior to such Termination Date or any then current
Extended Period, of Buyer's intent to extend the Termination Date and Buyer
makes the payments referred to in Section 2.1 with respect to extension of the
Termination Dates on the dates specified therein. During such Extended Period,
Buyer may deliver written notice to Seller specifying that the Closing shall
take place on a specified date, within the applicable Extended Period, which
date shall not be less than five (5) business days from receipt of such notice
by Seller.
(e) Notwithstanding anything to the contrary set forth in
Articles 7, 8 or 10, or otherwise herein, Buyer agrees that, if the Termination
Date has been extended by Buyer pursuant to Section 2.3(d), then
(1) Sections 8.2, 8.4, 8.6 and 8.10 shall be deemed
to have been satisfied as of the date Buyer elects to extend
the Termination Date and shall thereafter no longer constitute
conditions precedent to Buyer's obligation to close hereunder;
(2) On the Originally Scheduled Termination Date (or,
if applicable, as extended pursuant to Section 2.3(b) hereof),
determination shall be made as to the satisfaction of the
condition set forth in Section 8.1(a) (and, if such condition
is satisfied, the general partner of Seller shall deliver to
Buyer a certificate of the general partner of Seller
certifying to the fulfillment of such condition) and if such
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condition is satisfied as of such date and such certificate is
delivered, Section 8.1(a) (and the delivery of the certificate
applicable thereto referred to in Section 8.1(c)) shall no
longer constitute conditions precedent to Buyer's obligation
to close hereunder and any determination of Seller's
compliance with such representations and warranties for
purposes of indemnification hereunder or under the Group I
Option Agreement or the Columbus Option Agreement for purposes
of indemnification thereunder shall be made only as of the
Originally Scheduled Termination Date (or, if applicable, as
extended pursuant to Section 2.3(b) hereof);
(3) No changes in the representations and warranties
of Seller set forth herein that are attributable to the period
after the Originally Scheduled Termination Date (or, if
applicable, as extended pursuant to Section 2.3(b) hereof),
shall be taken into account for purposes of determining
whether the changes in the representations and warranties of
Seller set forth herein would cause a Material Adverse Change
pursuant to Section 7.7.
(4) Satisfaction of the conditions precedent set
forth in Sections 8.1(b) (and the delivery of the certificate
applicable thereto referred to in Section 8.1(c)), and
delivery of documents to be delivered at Closing under
Sections 8.5, 8.7, 8.8, 8.9 and 8.11, shall be determined as
of the actual date of Closing;
(5) Satisfaction of the condition precedent set forth
in Section 8.3 shall be determined as of the actual date of
Closing, except that such opinion may be modified to take into
account circumstances arising after the Originally Scheduled
Termination Date (or, if applicable, as extended pursuant to
Section 2.3(b) hereof); and
(6) If the Buyer elects to extend the Termination
Date, thereafter until the Closing Date Seller covenants that
it shall not negligently, grossly negligently, or
intentionally and wrongfully take, or omit to take, any action
that would cause Seller's representations and warranties
hereunder or under the Group I Option Agreement or the
Columbus Option Agreement to be breached; provided it is
understood and agreed that this covenant shall be treated, as
are all
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other covenants of Seller, as a covenant subject to
Section 8.1(b).
2.4 Deliveries at Closing. All actions at the Closing shall be deemed
to occur simultaneously, and no document or payment shall be deemed to be
delivered or made until all documents and payments are delivered or made to the
reasonable satisfaction of Buyer, Seller, and each of their respective counsel;
provided, however, the execution and delivery of the Option Agreements and the
Group I Time Brokerage Agreement, each more fully described below, will be
deemed to occur immediately after the Closing of this Agreement.
(a) Deliveries by Seller at Closing. At the Closing, Seller
shall deliver to Buyer such instruments of conveyance and other customary
documentation as shall in form and substance be reasonably satisfactory to Buyer
and its counsel, including, without limitation, the following:
(i) one or more bills of sale conveying the personal
property included in the Station Assets;
(ii) any mortgage discharges or releases of liens
that are necessary in order for the Station Assets to be free and clear of all
liens, mortgages or security interests, other than the Permitted Encumbrances;
(iii) certificates of the general partner of Seller
as required by Section 8.1(c);
(iv) a certified copy of the resolutions or
proceedings of the general partner of Seller authorizing the transactions
contemplated by this Agreement;
(v) a certificate as to the formation and good
standing of Seller issued by the Secretary of State (the "SOS") of the State of
Delaware, dated not more than ten (10) days before the Closing Date, and
certificates issued by an appropriate governmental authority as to the
qualification of Seller to do business in the jurisdictions listed in Schedule
3.1, to the extent such certificates are available;
(vi) a receipt for the Cash Purchase Price and a
receipt for the stock certificates delivered in payment of the Stock Purchase
Price;
(vii) the opinion of counsel required by Section 8.3;
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(viii) all consents received by Seller through the
Closing Date to the assignment of the Program Contracts, the Other Contracts and
the other non-FCC licenses, contracts and leases included in the Station Assets;
(ix) the Group I Time Brokerage Agreement
contemplated by Sections 7.6 and 8.8;
(x) the Leases or Subleases contemplated by Sections
7.5 and 8.7;
(xi) the Option Agreements contemplated by Sections
7.7 and 8.5 (as modified by Seller as permitted under Section 7.7 hereof);
(xii) documents of conveyance reasonably acceptable
to Buyer evidencing the transfer of the Real Property;
(xiii) the Registration Rights Agreement contemplated
by Section 10.5;
(xiv) certificates of insurance showing Buyer named
as an additional insured as contemplated in Section 5.1;
(xv) to the extent (1) consent is obtained for the
transfer thereof and (2) made available by NewVenco, Inc. and Television
Alliance Group, Inc., (a) all stock certificates of NewVenco, Inc. and
Television Alliance Group, Inc. representing all of Seller's interest and
investments in the Other Assets (together with stock powers endorsed in blank
for such stock certificates of NewVenco, Inc. and Television Alliance Group,
Inc., respectively) or (b) a stock certificate of NewVenco, Inc. and Television
Alliance Group, Inc. representing Buyer's interest in the Other Assets;
(xvi) to the extent consent is obtained to the
transfer thereof, a stock certificate of Transtower, Inc. representing all of
Seller's interest in Transtower, Inc. (together with a stock power endorsed in
blank for such stock of Transtower, Inc.);
(xvii) a bill of sale and general assignment and
assumption agreement, which Seller shall cause RCB Kids Fair, Inc. ("Kids Fair")
to execute in favor of Buyer, conveying the assets of Kids Fair to Buyer;
(xviii) the list of Qualified Beneficiaries entitled
to Continuation Coverage as of the Closing Date, as contemplated under Section
10.3(b);
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(xix) a Consent and Agreement in the form of Exhibit
2.4, executed by Seller; and
(xx) such other documents as Buyer shall reasonably
request.
(b) Deliveries by Buyer at Closing. At the Closing, Buyer shall
deliver to Seller the Cash Purchase Price and the Stock Purchase Price, and
Buyer shall deliver to Seller such instruments and other customary documentation
as shall in form and substance be reasonably satisfactory to Seller and its
counsel, including without limitation, the following:
(i) the Cash Purchase Price, which shall be delivered
to Seller, in the manner set forth in Section 2.1;
(ii) stock certificates of Buyer issued to Seller
representing the shares of Exchangeable Preferred Stock, which shares shall be
duly and validly issued, fully paid and nonassessable;
(iii) a certificate of Buyer as required by Section
7.1(c);
(iv) a certified copy of the resolutions or
proceedings of Buyer authorizing the transactions contemplated by this
Agreement;
(v) a certificate as to the existence and good
standing of Buyer issued by the Maryland Department of Assessments and Taxation
not more than ten (10) days before the Closing Date and a certificate as to the
qualification of Buyer or an appropriate wholly-owned operating subsidiary of
Buyer to do business in the States of California, Illinois, Indiana, Iowa,
Louisiana, Missouri, New Mexico, New York, North Carolina, Ohio, Pennsylvania,
South Carolina, Tennessee, Texas and any other state in which an Owned Station
is based, from the Secretary of State or analogous entity of each of such
states;
(vi) the opinion of counsel required by Section 7.3;
(vii) the Leases or Subleases contemplated by
Sections 7.5 and 8.7;
(viii) the Group I Time Brokerage Agreement
contemplated by Sections 7.6 and 8.8;
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(ix) the Option Agreements contemplated by Sections
7.7 and 8.5, together with evidence of payment in full of the Option Grant Price
(as defined in the Group I Option Agreement) to the Seller and Licensee under
the Group I Option Agreement, as specified in the Group I Option Agreement;
(x) Buyer's charter, as amended by the Articles
Supplementary as contemplated by Section 7.9, certified as being in effect as of
a date shortly before the Closing Date by the Maryland Department of Assessments
and Taxation;
(xi) the Registration Rights Agreement contemplated
by Section 10.5;
(xii) certificates of insurance contemplated in
Section 6.9;
(xiii) the New Employment Agreements contemplated by
Section 7.8; and
(xiv) such other documents as Seller shall reasonably
request.
2.5 Deliveries by Seller Prior to Closing and Upon Execution. Title
Policies. Seller shall deliver to the Buyer copies of all currently existing
owners and leasehold policies of title insurance and surveys that Seller has
received with respect to the Real Property, Leasehold Interests and Excluded
Real Property.
(b) Employment Agreement, Consulting Agreement, Voting
Agreement and Stock Option Agreements. Contemporaneously with the date of this
Agreement, (i) Buyer and Barry Baker ("Baker") shall each have executed and
delivered to the other an employment agreement, in the form attached as Exhibit
2.5(a) (the "Employment Agreement"); (ii) Buyer and Baker shall have each
executed and delivered to the other a consulting agreement in the form attached
as Exhibit 2.5(b) (the "Consulting Agreement"); (iii) Buyer and Baker shall have
each executed and delivered to the other a stock option agreement in the form
attached as Exhibit 2.5(c) (the "Baker Stock Option Agreement"); (iv) a stock
option agreement in favor of each of the employees listed on Schedule 2.5(d)
(the "Corporate Employees") in the form attached as Exhibit 2.5(d) (the
"Corporate Employee Stock Option Agreement") shall have been duly executed and
delivered by the Buyer and the options relating to the Corporate Employees set
forth in the Letter Agreement between Buyer and Seller dated the date hereof
shall have been granted to the Corporate Employees (the "Employee Letter
Agreement"); (v) a stock option agreement
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in favor of each of the employees listed on Schedule 2.5(e) (the "Station
Employees") in the form attached as Exhibit 2.5(e) (the "Station Employee Stock
Option Agreement") shall have been duly executed and delivered by Buyer; (vi)
the Board of Directors of Buyer shall have adopted, and the compensation
committee (and any other committee that is required to so approve) shall have
approved the awards under, the First Amendment to Incentive Stock Option Plan in
the form attached as Exhibit 2.5(f) (the "ISO Amendment") and the 1996 Long
Term-Incentive Plan in the form attached as Exhibit 2.5(g) (the "LTIP") and the
Employee Letter Agreement; (vii) a voting agreement among David D. Smith,
Frederick G. Smith, J. Duncan Smith and Robert E. Smith, in the form attached as
Exhibit 2.5(h) (the "Voting Agreement") shall have been executed and delivered
by all of the parties thereto; and (viii) Buyer and Seller shall each have
executed and delivered the Employee Letter Agreement. Buyer will not take any
action, or omit to take any action, that would cause any of the agreements
listed in (i) through (viii) of this Section 2.5(b) to be ineffective on or
before the Closing Date.
2.6 Effect of Laws or Proceedings. The parties hereto acknowledge and
agree that notwithstanding anything in this Agreement or any other documents
related hereto to the contrary (including, without limitation, any
representations or warranties made by Seller, covenants of the Seller made
herein, any condition precedent to the obligations of Buyer set forth in this
Agreement, or any provisions relating to indemnification to be made by Seller
hereunder), matters relating to, in connection with or resulting or arising
from: (a) the effect, for purposes of any laws, statutes, ordinances, rules,
regulations, orders or other actions, whenever promulgated or enacted, including
any communications or communications-related laws, statutes, ordinances, rules,
regulations, orders or other actions, whenever promulgated or enacted, and any
licenses, permits or authorizations issued by any governmental authority
(including, without limitation, the FCC) (collectively, "Laws") or any contract
or agreement to be conveyed to or assumed, directly or indirectly, by Buyer or
Option Holder pursuant hereto or under the Option Agreements (collectively,
"Conveyed Contracts"), of (1) the transfer of the Station Assets to Buyer and
the retention by Seller of the License Assets; (2) the grant by Seller and River
City License Partnership of the options under the Option Agreements; (3) the
execution, delivery and performance of any of the Transaction Documents (as
defined below); or (4) the consummation of the other transactions contemplated
hereby or by the Option Agreements; (b) any conflict with, violation of, or
breach or default under, or termination of any Laws or Conveyed Contracts as a
result of the consummation of any of the transactions contemplated hereby
(including, without limitation,
<PAGE>
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the Transaction Documents) or by the Option Agreements; or (c) any claims,
actions, suits or other proceedings of any nature whatsoever ("Proceedings"), by
any person or entity (including, without limitation, any governmental entity) by
or before any court, administrative agency or otherwise, alleging a conflict,
violation of, breach or default under, termination of, or other inconsistency
with Laws or Conveyed Contracts as a result of the consummation of any of the
transactions contemplated hereby (including, without limitation, the Transaction
Documents) or by the Option Agreements, shall not:
(i) cause or constitute, directly or indirectly, a breach by
Seller of any of its representations, warranties, covenants or
agreements set forth in this Agreement or any other document related
hereto (and such representations, warranties, covenants and agreements
shall hereby be deemed to be modified appropriately to reflect and
permit the impact and existence of such Laws, Conveyed Contracts and
Proceedings and to permit any action by Seller to comply with or
attempt in good faith to comply with such Laws, Conveyed Contracts and
Proceedings);
(ii) otherwise cause or constitute, directly or indirectly, a
default or breach by Seller under this Agreement or any other documents
related hereto;
(iii) result in the failure of any condition precedent to the
obligations of Buyer under this Agreement or any other document related
hereto to be satisfied;
(iv) otherwise excuse Buyer's performance of its obligations
under this Agreement or any other document related hereto; or
(v) give rise to any claim for indemnification or other
compensation by Buyer or any adjustment of the Purchase Price;
provided that the foregoing clauses (i) through (v) shall not apply to (1) any
claim brought by a partner of Seller alleging a violation of Seller's
partnership agreement or any claim brought by any partner, officer, director,
agent or Affiliate of Seller; (2) any breach by Seller of its covenants set
forth in this Agreement; or (3) any action instituted by the Federal Trade
Commission or the Department of Justice under the HSR Act, in each case which
shall be governed by other applicable provisions of this Agreement.
<PAGE>
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Formation. Seller is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Delaware. Seller
has the requisite partnership power and authority to carry on the business of
the Owned Stations now being conducted by it and to own and operate the Station
Assets owned and operated by it and is qualified to conduct the business of the
Owned Stations now being conducted by it in each jurisdiction listed in Schedule
3.1.
3.2 Partnership Action. All requisite partnership actions and
proceedings necessary to be taken by or on the part of Seller in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and necessary to make the same effective have
been duly and validly taken. This Agreement has been duly and validly
authorized, executed and delivered by or on behalf of Seller and constitutes the
valid and binding agreement of Seller enforceable against Seller in accordance
with and subject to its terms, except as enforceability may be limited by laws
affecting the enforcement of creditors' rights or contractual obligations
generally and by the application of general principles of equity.
3.3 Financials. Seller has delivered to Buyer copies of (i) the
internally prepared unaudited consolidated balance sheet of Seller and its
subsidiaries as of December 31, 1995 and the related statement of operations for
the twelve-month period ended December 31, 1995 (the "1995 Internal Financial
Statements"); (ii) the internally prepared unaudited consolidated balance sheet
of Seller and its subsidiaries as of January 31, 1996 and February 29, 1996 and
the related consolidated statement of operations for the one-month and
two-month, respectively, period then ended (the "1996 Internal Financial
Statements"); and and (ii) the audited balance sheets of Seller and its
subsidiaries as of December 31, 1993 and December 31, 1994 and related
statements of operations and cash flows, and partners' equity for Seller and its
subsidiaries for the years then ended (the "1993 and 1994 Year-End Financial
Statements").
Except as set forth on Schedule 3.27, the 1995 Internal Financial
Statements and the 1993 and 1994 Year-End Financial Statements are, and the 1995
Year-End Audited Financial Statements (as defined below) and the Closing
Financial
<PAGE>
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Statements (as defined below), each to be delivered to Buyer pursuant to Section
5.3(a) hereof will be, in all material respects, (a) in agreement with the books
and records regularly maintained by Seller with respect to Seller and its
subsidiaries and (b) prepared in accordance with generally accepted accounting
principles applied on a consistent basis in all material respects (except, to
the extent not applied on a consistent basis in all material respects, as noted
thereon) and except as set forth on Schedule 3.27, and except with respect to
the 1995 Internal Financial Statements and the Closing Financial Statements the
absence of notes thereto throughout the year or period involved, and the 1995
Internal Financial Statements and the 1993 and 1994 Year-End Audited Financial
Statements present, and the 1995 Year- End Financial Statements will present,
fairly in all material respects, the financial position of Seller and its
subsidiaries as at the respective dates of the balance sheet and the results of
the operations and the cash flow of Seller and its subsidiaries for the year and
period then ended (subject, in the case of unaudited statements to normal
year-end adjustments).
December 31, 1995 is sometimes referred to herein as the "Balance
Sheet Date."
3.4 Business Since the Balance Sheet Date. From the Balance Sheet Date
to the date of this Agreement, there has been no Station Material Adverse Change
(as defined in Section 3.6), or Material Adverse Change and the business of
Seller has been conducted in the ordinary course of business and in the same
manner as it was before the Balance Sheet Date except to the extent that any
differing conduct would not cause a Station Material Adverse Change.
3.5 Condition of Assets. The material tangible assets included in the
Station Assets and the Leasehold Interests are being maintained in accordance
with general industry practices in good operating condition and repair, wear and
tear in ordinary usage, insured casualty and condemnation excepted.
3.6 Title, Etc. Seller owns the Real Property and Real Property
Improvements designated as owned by Seller and leases the Leasehold Interests
designated as leased by Seller set forth on Schedule 1.1(b) in connection with
the operation of the Stations and the JSA Stations. Seller is not in default
under any of the material Leasehold Interests. Except as set forth on Schedules
3.6 and 1.3, and except to the extent that any such noncompliance would not
cause a Station Material Adverse Change (as defined below), to Seller's actual
knowledge, the Real Property and the Leasehold Interests listed on Schedule
1.1(b) and their present uses comply in all material respects with all
<PAGE>
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applicable zoning laws and ordinances; and to Seller's actual knowledge, there
exists no written notice of any uncorrected material violations of housing,
building, safety or fire ordinances with respect to the Real Property, Real
Property Improvements, or the Leasehold Interests listed on Schedule 1.1(b)
except where such violation would not cause a material adverse change in the
financial condition or business of any TV Station individually or the Radio
Stations, taken as a whole (provided that the foregoing shall not include any
material adverse change attributable to (i) factors affecting the television or
radio industries generally, (ii) general national, regional or local economic or
financial conditions, (iii) governmental or legislative laws, rules or
regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Buyer thereof or (v) actions taken by Buyer or any Affiliate of
Buyer) (a "Station Material Adverse Change"). For purposes of this Agreement,
"Affiliate" means with respect to a party, any Person, directly or indirectly,
controlling or controlled by such party, or any Person under direct or indirect
common control with such party (as such terms are interpreted from time to time
pursuant to the Securities Act of 1933, as amended); "Person" means and includes
natural persons, corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof;
and "actual knowledge" with respect to Seller means the conscious awareness of
facts of Seller's Station general managers and the officers of the general
partner of Seller, after reasonable inquiry by such Station general managers and
such officers with respect to the matters referred to herein as to which the
Seller is stating its knowledge. Seller has not received any written notice with
respect to, and Seller has no actual knowledge of, any pending or threatened
condemnation proceeding affecting the Real Property or Leasehold Interests
listed on Schedule 1.1(b) or any part thereof or of any sale or other
disposition of the Real Property or Leasehold Interests or any portion thereof
in lieu of condemnation, that would cause a Station Material Adverse Change.
Except as set forth on Schedules 3.6 and 1.3, Seller has good, insurable and
marketable (only, with respect to insurability and marketability, as to tangible
property constituting Real Property) and indefeasible title to the tangible
assets included in the Station Assets owned by it, and all such assets will on
the Closing Date be free and clear of all security interests, mortgages,
pledges, liens, encumbrances, or charges of any nature whatsoever except for
Permitted Encumbrances.
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3.7 Trademarks, Etc. Except as set forth on Schedules 1.1(f) and
1.1(g), Seller possesses adequate rights, licenses or other authority to use all
trademarks and trade names necessary to conduct the business of the Owned
Stations as presently conducted by Seller, including without limitation the
intellectual property described in Sections 1.1(f) and (g) hereof and the
respective Schedules thereto, except where the failure to so possess would not
cause a Station Material Adverse Change. Except as set forth on Schedules 1.1(f)
and 1.1(g) hereto, Seller has not received any notice with respect to any
alleged infringement or unlawful or improper use of any copyright, trademark,
trade name or other intangible property right owned by others and used in
connection with the Owned Stations. Seller represents and warrants that, except
as set forth on Schedule 1.1(f) hereto, none of the trademarks listed thereon
has been registered.
3.8 Insurance. The Owned Stations and the Station Assets are, as of
the date of this Agreement, insured by Seller against loss or damage by fire and
other hazards and risks of the character usually insured against by persons
operating similar properties and businesses under policies issued by insurers of
recognized responsibility, as described on Schedule 3.8 hereof.
3.9 Contracts. Schedules 1.1(b), 1.1(c)(1),(2) and (3), 1.1(d),
1.1(e), 1.1(m) and 3.10 to this Agreement contain a complete list of the
following contracts as to which the Owned Stations or Seller with respect to the
Station Assets is a party or by which either of them is bound as of the date of
this Agreement, other than the Excluded Contracts:
(a) contracts evidencing time sales to advertisers or
advertising agencies that are "trade" or "barter" transactions that require the
furnishing of advertising time on any Owned Station or, to the extent Seller is
a party thereto, on any LMA Station or any JSA Station, at any time after the
Closing Date, and that individually involve annual payments of more than
$250,000;
(b) sales agency or advertising representation contracts ending
more than one year after the date of this Agreement;
(c) employment contracts that individually involve annual base
salaries of more than $100,000;
(d) material licenses or agreements under which Seller is
authorized to broadcast on any Station filmed or taped programming supplied by
others;
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(e) leases of personal property which have a term, including
renewal options exercisable by any party thereto, ending more than one year
after the date of this Agreement and which involve annual payments of more than
$50,000 individually or $250,000 in the aggregate;
(f) material contracts not made in the ordinary and usual
course of business;
(g) any other contracts which are material to the business and
operations of the Station Assets and involve annual payments of more than
$100,000 individually; and
(h) any television or radio network affiliation agreements.
Notwithstanding anything to the contrary in the foregoing, it is
understood and agreed that Seller is not required to list contracts entered into
in the ordinary course of business for the sale or sponsorship of advertising
time on any Station or JSA Station for cash at such Station's or JSA Station's
prevailing rate with not more than one year remaining in their terms. All
information listed on Schedule 1.1(d) regarding the Program Contracts for TV
Stations is correct and accurate in all material respects including, without
limitation, the term of such contract and the amount of any unpaid payments due
thereunder as of December 31, 1995.
3.10 Employees. Seller has heretofore delivered to Buyer a list of all
its employees as of the date of this Agreement and their respective salaries and
dates of hire. Except as noted on such list or on Schedule 3.10, Seller has no
written contracts of employment with any employee. Except as described on
Schedule 3.10, Seller is not a party to or subject to any collective bargaining
agreements with respect to any Station nor, except as described on Schedule
3.10, does Seller have any other contracts with any labor union or other labor
organization with respect to any Station. Except as set forth on Schedules 3.10
and 3.11, Seller is not a party to any pending or, to Seller's actual knowledge,
threatened labor dispute affecting any Station that would cause a Station
Material Adverse Change.
3.11 Litigation. Except as set forth on Schedule 3.11 hereto: (i)
Seller, with respect to the Owned Stations, has not been operating under or
subject to or in default with respect to any order, writ, injunction or decree
of any court or federal, state, municipal or other governmental department,
commission, board, agency or instrumentality which has or could reasonably be
expected to cause a Station Material Adverse Change; (ii) Seller
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is not a party to any litigation pending or, to Seller's actual knowledge,
threatened litigation affecting any of the Station Assets that would cause a
Station Material Adverse Change. There creditors or voluntary or involuntary
proceedings in bankruptcy pending against or contemplated by Seller, and to
Seller's actual knowledge, no such actions have been threatened against Seller
or any Station or any subsidiary of Seller. On the date hereof, except for
ongoing or planned FCC rulemakings affecting the television or radio industry
generally, there is no litigation or proceeding pending or, to Seller's actual
knowledge, threatened against or affecting Seller that would affect Seller's
ability to carry out the transactions contemplated by this Agreement or
restrain, enjoin, prohibit or render illegal the consummation of the
transactions contemplated by this Agreement.
3.12 Compliance with Laws. Seller, with respect to the Station Assets,
is to Seller's actual knowledge, in compliance, except where failure to so
comply would not cause a Station Material Adverse Change, with all applicable
laws, regulations and orders, and the present uses by Seller of the Station
Assets do not, to Seller's actual knowledge, violate any such laws, regulations
or orders, except to the extent that any such violation would not result in a
Station Material Adverse Change.
3.13 No Conflicts. Except as set forth on Schedule 3.13, on the
Closing Date, neither the execution and delivery by Seller of this Agreement,
nor the consummation by Seller of the transactions contemplated hereby would
constitute or, with the giving of notice or the passage of time or both, would
constitute a material violation of or would conflict in any material respect
with or result in any material breach of or any material default under, any of
the terms, conditions or provisions of any law or regulation to which Seller is
subject, or of the partnership agreement of Seller, or of any contract,
agreement or instrument that is required by the terms hereof to be listed on the
Schedules hereto to which Seller is a party or by which Seller is bound.
3.14 Brokers. Except for the fees payable to Communications Equity
Associates, Inc., which fees shall be paid by Seller, there is no broker or
finder or other person who would have any valid claim against any of the parties
to this Agreement for a commission or brokerage fee in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by Seller.
3.15 Retransmission Consent Agreements. Schedule 3.15 hereto
references a list of all material retransmission consent
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agreements entered into by Seller with respect to any Station and in effect on
the date hereof.
3.16 Environmental. To Seller's actual knowledge and except (a) as
stated in Schedule 3.16, (b) as may be revealed by any Phase I or Phase II
environmental audit performed or caused to be performed by Buyer or (c) where
such matters would not cause a Station Material Adverse Change, neither Seller
nor the Owned Stations, (nor the LMA Stations or the JSA Stations, but without
any inquiry with respect to the LMA Stations or the JSA Stations) are subject to
any (i) "Superfund" evaluation; or (ii) any investigation or proceeding of any
governmental authority evaluating whether any remedial action is necessary to
respond to release of any chemicals, materials, substances or wastes that are
now or hereafter become defined as, or included in the definition of, "hazardous
wastes," "hazardous substances," "extremely hazardous substances," "toxic
substances," "toxic" or "hazardous pollutants," "hazardous" or "toxic
materials," "contaminants," "pollutants," or words of similar import under the
Resource Conservation and Recovery Act of 1980, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, the
Hazardous Materials Transportation Act, as amended, the Clean Air Act, as
amended, the Clean Water Act, as amended, the Toxic Substances Control act, as
amended, the Safe Drinking Water Act, as amended, the Oil Pollution Act, as
amended, and their state or local counterparts or equivalents; or (iii) any
requirement to remove asbestos material or polychlorinated biphenyls based on
Seller's present use of the applicable property. To Seller's actual knowledge
except as stated in Schedule 3.16, Seller has complied with all applicable
federal, state and local environmental laws and regulations, except where
failure to do so would not cause a Station Material Adverse Change. Except (a)
as stated in Schedule 3.16, (b) as may be revealed by any Phase I or Phase II
environmental audit performed or caused to be performed by Buyer or (c) where
such matters would not cause a Station Material Adverse Change, to Seller's
actual knowledge, but without any independent environmental assessment (except
to the extent any environmental assessment may have previously been undertaken
by Seller), as of the Closing Date, the Real Property, the Leasehold Interests
and Real Property Improvements contain no condition or substance which under the
aforesaid environmental laws and regulations thereunder, as interpreted as of
this date by judicial and regulatory authorities, will result in recovery by any
person of material remedial or removal costs, expenses or damages, or
expenditures by Buyer for abatement or remedial actions. Seller does not have
any reason as of the date of this Agreement to believe that an independent
environmental assessment
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would lead to the discovery of any such condition or substance that would cause
a Station Material Adverse Change.
3.17 Employee Plans. Copies of all employee benefit plans, all
employee welfare benefit plans, all employee pension benefit plans, all
multi-employer plans and all multi-employer welfare arrangements (as defined in
Sections (3), (1), (2), (37), and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which are currently
maintained and/or sponsored by Seller, or to which Seller currently contributes,
or has an obligation to contribute in the future, including, without limitation,
any agreements containing "golden parachute" provisions and deferred
compensation agreements), together with any trusts related thereto and a
classification of employees covered thereby (collectively, the "Plans") have
previously been delivered to Buyer, and all of the Plans are listed on Schedule
3.17. Except to the extent listed on Schedule 3.17, no such Plan has been
terminated by Seller within the past three (3) years.
3.18 Compliance with ERISA. To the actual knowledge of Seller, except
as set forth on Schedule 3.18, neither Seller nor any Controlled Group Member
(as defined in the Internal Revenue Code of 1986, as amended (the "Code"),
Section 414(n)(6)(B)), has ever maintained or sponsored, or contributed to, an
employee pension benefit plan (as defined in ERISA Section 3(2)) which is
subject to the provisions of Title IV of ERISA. All Plans are in substantial
compliance with all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other laws applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents. All Plans that are intended to qualify
(the "Qualified Plans") under Section 401(a) of the Code have been determined by
the Internal Revenue Service to be so qualified (except for any prototype plans
for which the Internal Revenue Service has issued a determination letter to the
creator of such plans), and copies of all current Plan determination letters,
most recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to
each such qualified Plan or employee welfare benefit plan, and any attachments
to such forms have previously been delivered to Buyer by Seller. Based on
estimates prepared by Plan actuaries, the amount of unfunded benefit liabilities
(within the meaning of ERISA Section 4001(a)(18)) determined as of January 1,
1996 for all Plans subject to Title IV of ERISA does not exceed $300,000.
Neither Seller nor any Plan has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA that could
reasonably be expected to result in any liability to Buyer. Except as disclosed
in Schedule 3.18, no
<PAGE>
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Plan has incurred an accumulated funding deficiency, as defined in Section
412(a) of the Code and Section 302(l) of ERISA. Further, except to the extent
provided in Schedule 3.18,
(i) there have been no terminations, partial terminations, or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(ii) with respect to Plans which qualify as "Group Health
Plans" under Section 4980B of the Code and Section 607(1) of ERISA and related
regulations (relating to the benefit continuation rights imposed by "COBRA"), to
the actual knowledge of Seller, Buyer does not have (and will not incur as a
result of this transaction) any direct or indirect liability or is (or will be
as a result of this transaction) subject to any loss, assessment, excise tax,
penalty, loss of federal income tax deduction, or other sanction arising on
account of or in respect of any direct or indirect failure by Seller at any time
prior to the Closing Date to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Closing Date directly or indirectly against Seller with respect to
such Group Health Plan;
(iii) a copy of the claims history of each Group Health Plan of
Seller for the past three (3) years has previously been provided to Buyer;
(iv) Seller has no retiree health care obligations to any of
its employees; and
(v) no severance pay will be due to any employee of Seller as a
result of the transaction contemplated herein.
3.19 Taxes. Each of Seller, Sandia, Twin Peaks and Twin Peaks License
Partnership has filed or will file all requisite federal, state, local and other
tax returns and paid all taxes due thereunder (including withholding tax
returns) due for all fiscal periods ended on or before the date hereof which, if
not filed, could result in the imposition of any lien or encumbrance on or
against the Station Assets and, as of the Closing Date, shall have filed or will
file all such returns due for such periods ended on or before the Closing Date
(except any such returns for which the filing date has been extended in
accordance with normal extension procedures or for which such extension period
has not expired). To the actual knowledge of Seller, there are no examinations
in progress or claims against Seller, Sandia, Twin Peaks or Twin Peaks License
Partnership for any federal, state, local and other taxes (including withholding
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taxes and any penalties and interest) for any period or periods and no notice of
any claim, whether pending or threatened, for taxes has been received. The
amount shown and accrued for taxes on the 1995 Year-End Financial Statements as
of the respective date thereof are sufficient in accordance with GAAP as of such
date for the payment of all taxes of the kinds indicated (including penalties
and interest) for all fiscal periods ended on or before such date.
3.20 Certificates of Incorporation, Bylaws and Capitalization of
Sandia. A true, correct and complete copy of the certificates of incorporation
and bylaws of Sandia, as amended to date, have been provided to Buyer. The
authorized capital stock of Sandia consists solely of: (i) 1,000 shares of
Common Stock, $.01 par value per share, 110 shares of which are issued and
outstanding (the "Sandia Stock") and none of which is held as treasury stock on
the date of this Agreement. Seller has good and valid title to the Sandia Stock,
and on the Closing Date and on the Option Closing Date (as defined in the Group
I Option Agreement) with respect to the RCB Twin Peaks Equity Interest, the
Sandia Stock will be free of any liens or encumbrances other than Permitted
Encumbrances; provided, however, the Sandia Stock may be subject to such
restrictions on transfer as may arise under state and/or federal securities or
communications laws. All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable and to
Seller's actual knowledge, have been issued in all material respects in
compliance with all applicable state and federal laws concerning the issuance of
securities and none of such shares were issued in violation of the preemptive
rights of past or present stockholders. There are no shares reserved for
issuance.
3.21 Options, Warrants, Rights re: Sandia. There are no outstanding
warrants, options (including inactive and nonqualified stock options),
agreements to subscribe for or purchase any capital stock or other securities
from Sandia or other similar rights (including conversion and preemptive
rights). There are no voting trusts or voting agreements among, or irrevocable
proxies executed by, Seller, as sole stockholder of Sandia. There are no
existing rights of Seller, as sole stockholder to require Sandia to register any
securities of Sandia or to participate with Sandia in any registration by Sandia
of its securities. There are no agreements of Seller, as sole stockholder of
Sandia providing for the purchase or sale of Sandia's capital stock.
3.22 Validity of Sandia Stock. The Sandia Stock, when transferred in
compliance with the provisions of the Group I Option Agreement, will be validly
issued, will be fully paid and
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nonassessable, will be free of any preemptive rights, duties or other
governmental charges, will be free of any liens or encumbrances other than
Permitted Encumbrances and will vest in Buyer 100% of the issued and outstanding
stock of Sandia; provided, however, the Sandia Stock may be subject to such
restrictions on transfer as may arise under state and/or federal securities or
communications laws.
3.23 Partnership Agreements and Partnership Interests in Twin Peaks
and Twin Peaks License Partnership. True, correct and complete copies of the
partnership agreements of Twin Peaks Radio and Twin Peaks License Partnership,
as amended to date, have been provided to Buyer. Sandia owns a 60% general
partnership interest and Seller owns a 40% general partnership interest in Twin
Peaks (collectively, the "Twin Peaks Partnership Interest"). Twin Peaks owns a
99% general partnership interest and Seller owns a 1% general partnership
interest in Twin Peaks License Partnership (collectively, the "Twin Peaks
License Partnership Interest"). Sandia and Seller have good and valid title to
the Twin Peaks Partnership Interest, and Twin Peaks and Seller have good and
valid title to the Twin Peaks License Partnership Interest, and on the Closing
Date and on the Option Closing Date (as defined in the Group I Option Agreement)
with respect to the RCB Twin Peaks Equity Interest, the Sandia Stock, the Twin
Peaks Partnership Interest and the Twin Peaks License Partnership Interest will
be free of any liens or encumbrances other than Permitted Encumbrances;
provided, however, that the Twin Peaks Partnership Interest and the Twin Peaks
License Partnership Interest may be subject to such restrictions or transfer as
may arise under state and/or federal securities or communications laws. The Twin
Peaks Partnership Interest and the Twin Peaks License Partnership Interest have
been duly authorized and validly issued pursuant to the respective partnership
agreements of Twin Peaks and Twin Peaks License Partnership and are fully paid
and nonassessable and none of such Twin Peaks Partnership Interest or Twin Peaks
License Partnership Interest have been issued in violation of the preemptive
rights of past or present partners. The Twin Peaks Partnership Interest to be
transferred to Buyer constitute all of the issued and outstanding partnership
interests in Twin Peaks. The Twin Peaks License Partnership Interest to be
transferred to Buyer constitute all of the issued and outstanding partnership
interests in Twin Peaks License Partnership.
3.24 Options, Warrants, Rights re: Twin Peaks and Twin Peaks License
Partnership. There are no outstanding warrants, options (including inactive and
nonqualified partnership unit options), agreements to subscribe for or purchase
any partnership interest or other securities from Twin Peaks or Twin Peaks
License
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Partnership or other similar rights (including conversion and preemptive
rights). There are no voting trusts or voting agreements among, or irrevocable
proxies executed by, the partners of Twin Peaks or Twin Peaks License
Partnership. There are no existing rights of the partners of Twin Peaks or Twin
Peaks License Partnership to require Twin Peaks or Twin Peaks License
Partnership to register any securities of Twin Peaks or Twin Peaks License
Partnership to participate with Twin Peaks or Twin Peaks License Partnership in
any registration by Twin Peaks or Twin Peaks License Partnership of its
securities. There are no agreements among the partners of Twin Peaks or Twin
Peaks License Partnership providing for the purchase or sale of partnership
units of Twin Peaks or Twin Peaks License Partnership.
3.25 Validity of Twin Peaks Partnership Interest and Twin Peaks
License Partnership Interest. The Twin Peaks Partnership Interest and Twin Peaks
License Partnership Interest, when transferred in compliance with the provisions
of the Group I Option Agreement, will be validly issued, will be fully paid and
nonassessable, will be free of any preemptive rights, duties or other
governmental charges, and will be free of any liens or encumbrances other than
Permitted Encumbrances; provided, however, the Twin Peaks Partnership Interest
and Twin Peaks License Partnership Interest may be subject to such restrictions
on transfer as may arise under state and/or federal securities or communications
laws.
3.26 Undisclosed Liabilities. Except (i) as set forth in the 1995
Year-End Financial Statements, (ii) as set forth in Schedule 3.26 and the other
Schedules hereto and the Option Agreements and (iii) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, since the date of the most recent consolidated balance sheet of
Seller's and its subsidiaries, none of Sandia, Twin Peaks or Twin Peaks License
Partnership has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be recognized or
disclosed on a consolidated balance sheet of Seller and its subsidiaries or in
the notes thereto.
3.27 Totality of Assets. Except as set forth on Schedule 3.27, the
assets to be conveyed to and acquired by Buyer hereunder at Closing and the
Consent Contracts, together with the assets subject to the Option Agreements,
constitute all of the assets owned by Seller or its Affiliates that (i)
contributed to the generation of revenues and cash flow from operations of the
Stations as of December 31, 1995 or (ii) are used in the business of owning and
operating the Stations as presently conducted.
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3.28 Complete Disclosure. The representations and warranties in this
Article 3 do not include any untrue statements of material fact or omit to state
a material fact required to be stated therein necessary to make the statements
not misleading in light of the circumstances under which they were made. If
prior to the Closing, Seller becomes aware of any material fact or circumstance
which changes in any material respect a representation or warranty of Seller set
forth or made in this Agreement, the party with such knowledge shall promptly
give written notice of such fact or circumstance to Buyer. None of (i) such
notification or (ii) any pre-closing investigation made by Buyer of Seller, its
properties, businesses, or assets, shall relieve Seller of its obligations under
this Agreement, including its representations and warranties made in this
Section 3.
3.29 Acquisition of Exchangeable Preferred Stock. With respect to the
acquisition at Closing by Seller of the Exchangeable Preferred Stock as
contemplated in Section 2.1 hereof, Seller (i) has made its own independent
investigation thereof; (ii) has been afforded reasonable access to Buyer and its
executive officers with respect thereto; and (iii) is acquiring these securities
for investment purposes only and without the intent to effect a public
distribution thereof.
3.30 Affiliate Transactions. Except for certain employment agreements
set forth on Schedule 3.10 and except as specified in Schedule 3.30, no Station
is a party to or bound by any material agreement with or has any obligation to
Seller or any officer, director, partner or Affiliate of Seller, other than
agreements and obligations on market terms entered into on an arm's length
basis.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Incorporation. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, and has
the corporate power and authority to enter into and consummate the transactions
contemplated by this Agreement. Buyer or an appropriate wholly-owned subsidiary
of Buyer is qualified (or will be qualified as of the Closing Date) to do
business in the States of California, Illinois, Indiana, Iowa, Louisiana,
Missouri, New Mexico, New York, North Carolina, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas and any other state in which an Owned Station is
doing business.
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4.2 Corporate Action. All corporate actions and proceedings necessary
to be taken by or on the part of Buyer in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and necessary to make the same effective have been duly and validly
taken. This Agreement has been duly and validly authorized, executed and
delivered by Buyer, and constitutes the valid and binding agreement of Buyer,
enforceable in accordance with and subject to its terms, except as
enforceability may be limited by laws affecting the enforcement of creditors'
rights or contractual obligations generally and by the application of general
principles of equity.
4.3 No Conflicts. Neither the execution and delivery by Buyer of this
Agreement, nor the consummation by Buyer of the transactions contemplated
hereby, would constitute or, with the giving of notice or the passage of time or
both, would constitute a material violation of or would conflict with or result
in any material breach of or any material default under, any of the terms,
conditions or provisions of any law or regulation to which Buyer is subject, or
Buyer's articles of incorporation or bylaws, or any contract, agreement or
instrument to which Buyer is a party or by which it is bound.
4.4 Brokers. Except for the fees payable to Smith Barney Inc., which
fees shall be paid by Buyer, there is no broker or finder or other person who
would have any valid claim against any of the parties to this Agreement for a
commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement or understanding
of or action taken by Buyer, after reasonable inquiry by such officers of the
matter referred to.
4.5 Litigation. There is no litigation, proceeding or investigation of
any nature pending or, to Buyer's actual knowledge, threatened against or
affecting Buyer's ability fully to carry out the transactions contemplated by
this Agreement or which has or could reasonably be expected to restrain, enjoin,
prohibit or render illegal the consummation of the transactions contemplated by
this agreement. There are no attachments, executions or assignments for the
benefit of creditors or voluntary or involuntary proceedings in bankruptcy
pending against or contemplated by Buyer, and no such actions have been
threatened against Buyer. For purposes of this Agreement, "actual knowledge"
with respect to Buyer means the conscious awareness of facts of the officers of
Buyer, after reasonable inquiry by such parties with respect to the matters
referred to herein as to which the Buyer is stating its knowledge.
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4.6 Assignments. To the actual knowledge of Buyer, except as set forth
on Schedule 4.6, Buyer does not know of any reason why any party, other than
Seller, to a Program Contract or to any other contract (a "Distributor") will
not consent to the assignment of, or assumption by, Buyer of such contract.
4.7 Articles of Incorporation, Bylaws and Capitalization of Buyer. A
true, correct and complete copy of the articles of incorporation and bylaws of
Buyer, as amended to date, have been provided to Seller. The authorized capital
stock of Buyer consists solely of: (i) 35,000,000 shares of Class A Common
Stock, $.01 par value per share, 5,960,000 shares of which are issued and
outstanding and none of which is held as treasury stock on the date of this
Agreement; (ii) 35,000,000 shares of Class B Common Stock, $.01 par value per
share, 28,789,981 shares of which are issued and outstanding and none of which
is held as treasury stock on the date of this Agreement; and (iii) 5,000,000
shares of Preferred Stock, $.01 par value per share, none of the shares of which
is issued and outstanding and none of which is held as treasury stock on the
date of this Agreement. All such issued and outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable and to
Buyer's actual knowledge, have been issued in all material respects in
compliance with all applicable state and federal laws concerning the issuance of
securities and none of such shares were issued in violation of the preemptive
rights of past or present stockholders. Except as set forth on Schedule 4.8
hereto, the only shares Buyer has reserved for issuance are the shares required
for the transfer of the Exchangeable Preferred Stock pursuant to this Agreement
and for shares reserved pursuant to certain stock option plans set forth on
Schedule 4.8 hereto.
4.8 Options, Warrants, Rights. To the actual knowledge of Buyer,
except as listed on Schedule 4.8, there are no outstanding warrants, options
(including inactive and nonqualified stock options), agreements to subscribe for
or purchase any capital stock or other securities from Buyer or other similar
rights (including conversion and preemptive rights). Except as set forth in
Schedule 4.8, there are no voting trusts or voting agreements among, or
irrevocable proxies executed by, the Class B stockholders of Buyer and to the
actual knowledge of Buyer, there are no voting trusts or voting agreements
among, or irrevocable proxies created by, the stockholders of Buyer. There are
no existing rights of stockholders to require Buyer to register any securities
of Buyer or to participate with Buyer in any registration by Buyer of its
securities. There are no agreements among the Class B stockholders of Buyer
providing for the purchase or sale of Buyer's capital stock, and to the actual
knowledge of Buyer, there are no agreements among any other
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stockholders providing for the purchase or sale of Buyer's capital stock.
4.9 Validity of Stock of Buyer. The Exchangeable Preferred Stock and
the Convertible Preferred Stock, when issued in compliance with the provisions
of this Agreement, will be validly issued, will be fully paid and nonassessable,
will have been issued in compliance with all applicable state and federal laws
concerning the issuance of securities and free of any preemptive rights, duties
or other governmental charges, and will be free of any liens or encumbrances;
provided, however, the Exchangeable Preferred Stock and the Convertible
Preferred Stock may be subject to such restrictions on transfer as may arise
under state and/or federal securities laws.
4.10 Offering. To the actual knowledge of Buyer, and assuming Seller's
representations in Section 3.29 hereof to be true, all offers, sales or
issuances by Buyer of its capital stock or other securities have been made in
compliance in all material respects with federal securities laws and applicable
state securities laws.
4.11 Buyer SEC Documents; Financial Statements. To Buyer's actual
knowledge, Buyer has filed all material reports, forms and other documents
required to be filed with the SEC since January 1, 1994 (such documents as filed
and amended through the date this representation is made or deemed made being
called the "Buyer SEC Documents"). As of their respective dates, the Buyer SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Buyer SEC Documents, and none of the
Buyer SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading. Except to the extent that
information contained in any Buyer SEC Document has been revised or superseded
by a later-filed Buyer SEC Document filed and publicly available prior to the
date this representation is made or deemed made, none of the Buyer SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. The financial statements of Buyer included in the Buyer
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
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consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Buyer
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end adjustments). Except as
set forth in the Buyer SEC Documents, and except for liabilities and obligations
incurred in the ordinary course of business consistent with past practice since
the date of the most recent consolidated balance sheet included in the Buyer SEC
Documents, neither Buyer nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be recognized or disclosed on a consolidated
balance sheet of Buyer and its consolidated subsidiaries or in the notes
thereto.
4.12 Capitalization. As of May 22, 1996, Buyer contributed all of the
capital stock of each subsidiary of Buyer that carries on any business related
to the broadcast industry (collectively, the "Broadcasting Subsidiaries") to SCI
(as defined below).
ARTICLE 5
COVENANTS OF SELLER PENDING AND AFTER THE CLOSING DATE
Seller covenants and agrees, from the date hereof to and including the
Closing Date and thereafter where so indicated, that it will act as follows:
5.1 Maintenance of Business. Seller shall, through the Closing Date,
with respect to the Station Assets and the License Assets, continue to conduct
its business and operations and keep its books of account, records and files in
the ordinary and usual course of business. Seller shall from this date forward
and at all times thereafter (subject to the provisions of the Option Agreements
and the Group I Time Brokerage Agreement) continue to operate the Owned Stations
in all material respects in accordance with the terms of the FCC Authorizations
and in compliance in all material respects with all applicable laws and FCC
rules and regulations and published policies. Seller will promptly execute, or
cause Licensee to execute, as appropriate, any necessary applications for the
renewal of the FCC Authorizations.
Seller will maintain in full force and effect through the Closing Date
property damage, liability and other insurance with respect to the Station
Assets and the License Assets consistent with Seller's present practices, and on
and after the Closing Date through the Option Closing Date (as defined in the
Option
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Agreements) with respect to each Station for which Buyer is entitled to exercise
an Option (as defined in the Option Agreements), Buyer shall be named as an
additional insured as its interests may appear on the insurance policies carried
by Seller with respect to the Station and the License Assets in connection with
such Station.
Nothing contained in this Agreement shall give Buyer any right from
this date forward or at any time thereafter to control the programming,
operations or any other matter relating to any Station, any JSA Station or any
Option Station, and Seller shall have complete control of the programming,
operations and all other matters relating to the Stations and, to the extent
applicable, the JSA Stations, subject to the effect of the Group I Time
Brokerage Agreement.
Prior to the Closing Date, except as set forth in Schedule 5.1 or as
otherwise permitted by the last paragraph of this Section 5.1, Seller will not
without the prior written consent of Buyer (to the extent the following
restrictions are permitted by the FCC and all applicable law):
(a) sell, lease, transfer or agree to sell, lease or transfer
any Station Assets or License Assets which are material to the operation of any
Station, considered as a whole, or which have individually a value in excess of
$50,000 or in the aggregate have a value in excess of $250,000 without
replacement thereof with a substantially equivalent asset of substantially
equivalent kind, condition, and value;
(b) enter into (i) any written contract of employment or any
collective bargaining agreement which will be binding on Buyer, or (ii) permit
any increases in the compensation of any of the employees of any Owned Station
or to the extent any employee is employed by Seller, of any LMA Station or any
JSA Station, except in the case of (i) and (ii) to the extent consistent with
past practices, consistent with the Employee Letter Agreement, as the Employee
Letter Agreement may have been amended (as so amended, together, the "Amended
Employee Letter Agreement"), or as required by law or existing contract, in
which case such contracts and agreements shall be assumed by Buyer and treated
as Assumed Liabilities hereunder (except as otherwise contemplated under Section
6.8); provided, however, that Seller may pay bonuses to any of its employees so
long as such bonuses do not create a binding obligation upon Buyer after the
Closing Date;
(c) enter into any contracts under which Seller is authorized
to broadcast programming on any Station except to the extent consistent with
past practices;
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(d) apply to the FCC for any construction permit that would
materially restrict any Station's present operations or make any material change
in the Real Property or Leasehold Interests;
(e) modify in any material respect any Plan (except as required
by law after consultation with Buyer) to the detriment of Buyer;
(f) violate, breach or default under, in any material respect,
or take or fail to take any action that (with or without notice or lapse of time
or both) would constitute a material violation or breach of, or default under,
any term or provision of any material contract or license of any Station, other
than as a result of this Agreement, the Option Agreements, the Group I Time
Brokerage Agreement and the transactions contemplated hereby and thereby;
(g) incur, purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date with
respect to, or waive any right of Seller under, any liability of or owing to
Seller in connection with any Station, other than (i) in the ordinary course of
business consistent with past practice, (ii) as contemplated pursuant to this
Agreement, (iii) the pay-off of any debt of Seller on or prior to the Closing,
or (iv) in an aggregate amount not to exceed $1,000,000;
(h) engage with any Person in any business combination, except
as otherwise contemplated hereunder (including without limitation, as
contemplated under Section 2.2 and the schedules related thereto);
(i) engage in any transaction with respect to any Station with
any officer, director, or Affiliate of Seller (or any Affiliate thereof), either
outside the ordinary course of business consistent with past practice or other
than on an arm's- length basis;
(j) make capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets on behalf of any
Station outside the ordinary course of business; provided, however, that Seller
shall consult with Buyer to be extent Seller seeks to make significant capital
expenditures prior to making such capital expenditures;
(k) enter into any contract, agreement or commitment to do or
engage in any of the foregoing; or
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(l) enter into and record any easements or restrictive
covenants that would materially adversely affect the value or the current or
continued use and enjoyment (to the extent such continued use and enjoyment
conforms with current use and enjoyment) of the property to which they relate
without the consent of Option Holder, which consent will not be unreasonably
withheld.
Notwithstanding anything in this Agreement to the contrary, Seller
shall be entitled to (i) renew or extend the term of any contract listed on
Schedules 1.1(b), 1.1(c)(1), (2) and (3), 1.1(d), 1.1(e), 1.1(m) and 3.10 (and
on the list of employment agreements delivered to Buyer pursuant to Section
3.10) which, by its terms, expires or will expire prior to December 31, 1996
and, in connection therewith, agrees not to increase the amounts payable
thereunder during any such renewal term except in accordance with the usual
practices of the related Station and except as set forth above in Section
5.1(b), (ii) take any action specified in subsections (b), (c), (d), (e), (f),
(g), (h), (j) and (k) of this Section 5.1 in connection with any acquisition of
a television or radio station (including the consummation of any Station Option)
or other transaction, as contemplated under Section 2.2(a)(iii) above and (iii)
take any action specified in subsections (a), (e), (f), (g), (h), (j) and (k)
and enter into a local management agreement in connection with the sale of the
New Mexico Stations or the RCB Twin Peaks Equity Interest (the "Twin Peaks
Sale") at the time of entry into any agreement of sale for the New Mexico
Stations or the RCB Twin Peaks Equity Interest.
5.2 Organization/Goodwill. Seller shall from this date forward and at
all times thereafter diligently make all commercially reasonable efforts to
preserve the Station Assets and the business organization of the Owned Stations
and preserve the goodwill of the Owned Stations' suppliers, customers and others
having business relations with it.
5.3 Reports; Access to Facilities, Files and Records.
(a) Seller will, as soon as practicable after completion and
receipt of the auditors report, provide to Buyer a copy of the audited
consolidated balance sheet of Seller and its subsidiaries as of December 31,
1995 and the related consolidated statements of operations and cash flows and
partners' equity for Seller and its subsidiaries for the year then ended (the
"1995 Year-End Financial Statements"). In addition, Seller will, as soon as
practicable after the Closing, deliver to Buyer internally prepared unaudited
consolidated balance sheet of Seller and its subsidiaries as of the Closing Date
and the
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related consolidated statement of operations for the period January 1, 1996
through the Closing Date (the "Closing Financial Statements")
(b) Seller will, within thirty (30) days after completion,
provide to Buyer, for informational purposes only (and without making any
representation or warranty with respect thereto), copies of Seller's monthly
consolidated balance sheet and operating statement which, in each case, are
prepared internally for management purposes in the ordinary course between the
date hereof and the Closing Date.
(c) At the request of Buyer, Seller shall from time to time
give or cause to be given to the officers, employees, accountants, counsel and
representatives of Buyer (i) access (in the presence of a representative
designated by Seller), upon reasonable prior notice, during normal business
hours to the Station Assets and to all books and records relating thereto, and
(ii) all such other information concerning the affairs of the Owned Stations
and, to the extent reasonably available to Seller, concerning the affairs of the
LMA Station, as Buyer may reasonably request, provided that the foregoing does
not disrupt or interfere with the business and operations of any of the
Stations.
5.4 Consents. Seller shall diligently make and cooperate with Buyer in
making all commercially reasonable efforts (without being required to make any
payment except as expressly provided for in Section 1.3(c) hereof) to obtain or
cause to be obtained prior to the Closing Date consents to the assignment to, or
assumption by, Buyer of all material licenses (other than the License Assets),
leases and other contracts included in the Station Assets that require the
consent of any third party by reason of the transactions provided for in this
Agreement. To the fullest extent practicable without causing a default under the
Consent Contract and without any expense to Seller, Seller shall cooperate with
Buyer in any reasonable arrangement deemed necessary or desirable by Buyer to
provide to Buyer, after the Closing Date, the economic and other benefits of the
Consent Contracts, including the enforcement of Seller's rights against third
parties under the Consent Contracts.
5.5 Notice of Proceedings. Seller shall promptly notify Buyer in
writing upon becoming aware of 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 department, court, agency or commission of its intention to
institute an investigation into or to institute a
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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.
5.6 Confidential Information. Seller shall not use or disclose to
third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Buyer,
including delivery of a copy of the subpoena or request, if applicable), this
Agreement or any information received from Buyer or its agents in the course of
investigating, negotiating and performing the transactions contemplated by this
Agreement; provided, however, that Seller may disclose such information to
Seller's officers, directors, partners, employees, lenders, advisors, attorneys
and accountants who need to know such information in connection with the
consummation of the transactions contemplated by this Agreement and who are
informed by Seller of the confidential nature of such information. Nothing shall
be deemed to be confidential information that: (a) is known to Seller at the
time of the disclosure of such information to it; (b) becomes publicly known or
available other than as a result of disclosure by or through Seller; (c) is
rightfully received by Seller from a third party; or (d) is independently
developed by Seller. In the event this Agreement is terminated and the
transactions contemplated hereby abandoned, Seller will return to the Buyer all
copies of documents, work papers and other written confidential material
obtained by Seller in connection with the transactions contemplated hereby.
5.7 Consummation of Agreement. Subject to the express terms and
conditions of this Agreement, and without expanding such terms and conditions,
Seller shall diligently cooperate with Buyer in making all commercially
reasonable efforts in connection with any steps to be taken as part of its
respective obligations under this Agreement, and Seller shall diligently make
and cooperate in making commercially reasonable efforts to fulfill and perform
all conditions and obligations on its part to be fulfilled and performed under
this Agreement and to cause all terms and conditions set forth herein to be
fulfilled and to cause the transactions contemplated by this Agreement to be
fully carried out.
5.8 Notice of Certain Developments. Seller shall give prompt written
notice to Buyer (a) if the Station Assets shall have suffered damage on account
of fire, explosion or other cause of any nature that (i) is sufficient to
prevent operation of any
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Owned Station or any LMA Station or JSA Station in any material respect for more
than twenty-four (24) consecutive hours or (ii) causes a Material Adverse
Change; (b) if the regular broadcast transmission of any Owned Station in the
normal and usual manner in which it heretofore has been operating is interrupted
in any material manner for a period of twenty-four (24) consecutive hours or
more; (c) if the Stations, or any one of them, receives notice from any market
cable system currently carrying the Station's signal of such market cable
system's intention to delete any of the Stations from carriage or change any
Station's channel position on such market cable system; (d) if Seller enters
into any contract or agreement entered into after the date hereof to be assumed
by Buyer hereunder or under the Option Agreements that would be required to be
listed on the schedules hereto or under the Option Agreements; or (e) if Seller
acquires any other television or radio station or enters into any other
transaction contemplated in Schedule 2.2(a)(1).
5.9 Hart-Scott-Rodino. On May 13, 1996, the parties submitted a
revised filing to the Federal Trade Commission and the United States Department
of Justice, to comply with the Hart- Scott-Rodino Antitrust Improvements Act of
1976, as amended ("HSR Act"). Seller shall promptly furnish all materials
thereafter requested by any of the regulatory agencies having jurisdiction over
such filings. In such event, the parties shall cooperate fully and shall use
their commercially reasonable efforts to expedite compliance with the HSR Act.
Any filing fees (including, by Seller and Buyer, and to the extent necessary, BV
and Baker) with respect to the transaction under the HSR Act shall be borne
one-half (1/2) by Seller and one-half (1/2) by Buyer.
5.10 Updated Information. Seller shall provide to Buyer on or shortly
prior to the Closing Date a list of any additional material leases or contracts
entered into subsequent to May 30, 1996 that would have been required to be
listed on Schedules 1.1(b), (d) or (e) hereto pursuant to Article 3 hereof if
such leases or contracts existed on the date of this Agreement and a list of any
real property acquired between May 30, 1996 and the Closing Date.
5.11 Environmental Audit. Seller shall permit the Buyer and Buyer's
agents, as soon as practical after the date hereof and upon Buyer's request
therefor, access to the Real Property and the Real Property Improvements and
except to the extent prohibited by the applicable leases, to the Leasehold
Interests for the purpose of conducting, at Buyer's expense, Phase I and Phase
II environmental audits. Any such environmental audits shall be conducted by a
reputable environmental investigatory
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firm of the Buyer's choice subject to the reasonable approval of Seller and in a
manner as will not unreasonably interfere with the normal business and
operations of any of the Stations.
5.12 Programming. Seller shall write down and fully amortize,
effective as of December 31, 1995, and shall cause to be paid and discharged in
full on or prior to the Closing, all programming liabilities with regard to
Program Contracts and Program Contracts (as defined in the Columbus Option
Agreement) that are subject to the "add back" adjustments set forth on Schedule
2.2(a)(2) (the "Add Back Programming Liabilities").
5.13 Film Payments and Capital Leases. Except as provided under
Section 2.2 with respect to Add Back Programming Liabilities, on or prior to
Closing Date, Seller shall bring current as of the Closing Date all payments
under film contracts relating to the Stations and the Columbus Station including
any sports rights fees or payments in accordance with the terms of such film
contracts or agreements to broadcast any sporting events (as originally
contracted, or in the case of the contract with respect to M*A*S*H at
WTTV-TV/WTTK-TV, as may have been modified and in existence on the date hereof).
On or prior to the Closing Date, Seller shall retire and pay in full any and all
capital lease payments relating to the Stations and the Columbus Station owed by
Seller and pay any and all related option prices relating to capital leases held
by Seller.
5.14 Down Payment. Seller shall not distribute the Down Payment to its
partners prior to the earlier of (i) the Closing Date or (ii) the termination of
this Agreement where Seller is entitled to retain the Down Payment. Upon receipt
of the Down Payment, until the earlier of (i) the Closing Date or (ii) the
termination of this Agreement where Seller is entitled to retain the Down
Payment, Seller shall take one or more of the following actions: (1) place the
Down Payment (or any portion thereof) in a bank account of Seller which permits
Seller to have immediate access thereto; (2) use the Down Payment (or any
portion thereof) to make payments under Seller's bank debt; provided that at all
times Seller shall have the ability, subject to the terms thereof, to reborrow
funds under revolving or other line of credit or similar lending facility in the
total amount of the Down Payment used to make payments under the Seller's bank
debt; (3) have cash, marketable securities or other assets readily convertible
into cash in an amount that is at least equal to the amount of the Down Payment;
or (4) any combination of (1) - (3) above so long as the aggregate amount
accessible in such account, such revolving or other line of credit or similar
facility and such liquid assets shall be at least equal to the Down Payment.
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5.15 No Solicitation. Until this Agreement is terminated by its terms,
Seller will not (i) solicit, initiate or encourage the submission of any
proposal or offer from any Person relating to any (A) merger or consolidation
with or into, (B) acquisition or purchase of substantially all of the assets of
or substantially all of the equity interest in or (C) similar transaction or
business combination involving the Seller or all of the Stations or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any other Person to do or seek any of the
foregoing. Until this Agreement is terminated by its terms, Seller will notify
Buyer if any Person makes any proposal or offer with respect to any of the
foregoing. Seller will not enter into any agreement to transfer, or grant any
option or right to acquire, substantially all of the partnership interests of
Seller to any Person other than Buyer prior to the termination of this
Agreement. It is understood and agreed by Buyer that, notwithstanding anything
in this Agreement to the contrary, no breach of this Section 5.15 by Seller will
excuse Buyer from its obligation, if any, to consummate the transactions
contemplated hereunder.
ARTICLE 6
COVENANTS OF BUYER
Buyer covenants and agrees that from the date hereof to and including
the Closing Date and thereafter where so indicated, that it will act as follows:
6.1 Confidential Information. Buyer shall not use or disclose to third
parties (except as may be necessary for the consummation of the transactions
contemplated hereby, or as required by law, including, without limitation, in
connection with legal proceedings relating to this Agreement and the
transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to the
other parties hereto, including delivery of a copy of the subpoena or request,
if applicable) this Agreement or any information (including, without limitation,
financial information and information regarding program contracts and revenue)
received from the other parties hereto or their agents in the course of
investigating, negotiating and performing the transactions contemplated by this
Agreement; provided, however, that the Buyer may disclose such information to
Buyer's officers, directors, employees, lenders, advisors, attorneys and
accountants who need to know such information in connection with
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the consummation of the transactions contemplated by this Agreement and who are
informed by Buyer of the confidential nature of such information. Nothing shall
be deemed to be confidential information that: (a) is known to Buyer at the time
of its disclosure to it; (b) becomes publicly known or available other than as a
result of disclosure by or through Buyer; (c) is rightfully received by Buyer
from a third party; or (d) is independently developed by Buyer. In the event
this Agreement is terminated and the purchase and sale contemplated hereby
abandoned, Buyer will return to Seller all copies of documents, work papers and
other written confidential material obtained by Buyer in connection with the
transactions contemplated hereby.
6.2 Consummation of Agreement. Subject to the express terms and
conditions of this Agreement, and without expanding such terms and conditions,
Buyer shall diligently make and cooperate with Seller in making all commercially
reasonable efforts in connection with any steps to be taken as part of its
obligations under this Agreement, and Buyer shall diligently make and cooperate
with Seller in making all commercially reasonable efforts to fulfill and perform
all conditions and obligations on its part to be fulfilled and performed under
this Agreement and to cause all terms and conditions set forth herein to be
fulfilled and to cause the transactions contemplated by this Agreement to be
fully carried out. Buyer agrees to diligently cooperate with Seller in
connection with obtaining consents to the assignment to, or assumption by, Buyer
of licenses, leases and other contracts included in the Station Assets, and to
execute such assumption instruments as may be required in connection with
obtaining such consents on monetary terms no less favorable to Buyer than those
of Seller under such licenses, leases and other contracts on the date of such
assumption; provided, however, that Buyer's cooperation and actions pursuant
hereto shall not limit Seller's obligations with respect to the Consent
Contracts set forth in Sections 1.3 and 5.4 hereof, or Buyer's obligations with
respect to the Consent Contracts set forth in Section 1.3 hereof, or be deemed a
waiver of any rights of Buyer or Seller with respect thereto.
6.3 Notice of Proceedings. Buyer will promptly notify Seller in
writing upon becoming aware of 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 department, court, agency or commission 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.
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6.4 Hart-Scott-Rodino. On May 13, 1996, the parties submitted a
revised filing to the Federal Trade Commission and the United States Department
of Justice to comply with the HSR Act. Buyer shall promptly furnish all
materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any related filing fees under the HSR Act shall be paid in
accordance with Section 5.9 hereof.
6.5 Consents and Assignments. Buyer covenants and agrees that it shall
provide, on request, to a Distributor such financial or other information as the
Distributor may reasonably request in order for the Distributor to consent to
the assignment to, and assumption by, Buyer of any Program Contract or other
contract.
6.6 Capitalization of Buyer. Prior to the Closing Date, Buyer will not
without the prior written consent of Seller (to the extent the following
restrictions are permitted by the FCC and all applicable Law):
(a) amend its articles of incorporation or by-laws, as
applicable, except for the filing of the Articles Supplementary;
(b) effect any stock split or otherwise change its
capitalization as it exists on the date hereof except as set forth in the
Articles Supplementary and as set forth on Schedule 6.6 hereto;
(c) issue any stock or make any filing with the SEC, other than
any filings required hereunder or made in the ordinary course of business as a
public reporting company; or
(d) circulate to potential investors any materials in
connection with any proposed securities offering.
6.7 Notice of Material Impact. Buyer will promptly notify Seller in
writing of any significant developments that have, or could reasonably be
expected to have, a material adverse impact on the condition (financial or
otherwise) of the business or any material asset of Buyer.
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6.8 New Employment Agreements. On or prior to the Closing Date, Buyer
shall have caused Sinclair Communications, Inc. ("SCI"), or the SBG Entity, as
defined in, and specified under, the Amended Employee Letter Agreement, as the
case may be, to have executed and delivered to Seller the New Employment
Agreements (as defined in Section 7.8).
6.9 Insurance. On the Closing Date and at all times thereafter, Buyer
shall cause all parties currently named as "additional insured" on RCB's
policies (a list of which has been previously provided to Buyer) to be named as
additional insured parties as their interests may appear, under all insurance
policies carried by Buyer with respect to the Stations and the JSA Stations.
6.10 Stock Options. On or prior to the Closing Date, Buyer shall have
granted the options contemplated under the Amended Employee Letter Agreement.
6.11 Amended Charter. On or prior to Closing Date, Buyer will submit
to Seller a form of an amendment of Buyer's charter, which shall be in the form
of Articles of Amendment to the Articles of Incorporation of Buyer which shall
permit the issuance of the Convertible Preferred Stock as contemplated under
Section 2.1 and performance by the Buyer of all obligations in respect thereof,
including, without limitation, the authorization of additional shares of Class A
Common Stock, and which shall be in form and substance reasonably satisfactory
to Seller (the "Amended Charter").
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
by this Agreement to occur on the date scheduled for Closing are, at its option,
subject to the fulfillment of the following conditions prior to or at the
Closing Date:
7.1 Representations, Warranties, Covenants.
(a) The representations and warranties of Buyer contained in
this Agreement shall have been true and accurate in all material respects as of
the date when made and shall be true and accurate in all material respects as of
the Closing Date, except to the extent any such representation or warranty is
expressly stated only as of a specified earlier date or dates, in which case
such representation or warranty shall be true and accurate in all material
respects as of such earlier date or
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dates and except to the extent changes are permitted or contemplated pursuant to
this Agreement;
(b) Buyer shall have performed and complied in all material
respects with the covenants and agreements required by this Agreement to be
performed or complied with by them prior to or at the Closing Date, including,
without limitation, delivery in full of the Purchase Price; and
(c) Buyer shall have delivered to Seller a certificate of an
officer of Buyer dated the Closing Date certifying to the fulfillment of the
conditions set forth in Sections 7.1(a) and 7.1(b).
7.2 Proceedings.
(a) As of the Closing Date, no action or proceeding shall have
been instituted and be pending before any court or governmental body to
materially restrain or prohibit, or to obtain material damages in respect of,
the consummation of this Agreement that may reasonably be expected to result in
a permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render ineffective
this Agreement or such transactions or the recovery against Seller of such
material damages; and (b) As of the Closing Date, none of the parties to this
Agreement shall have received written notice (other than a letter of inquiry)
from any governmental body of its intention to institute any action or
proceeding to materially restrain or enjoin or nullify, or to obtain material
damages in respect of, this Agreement or the transactions contemplated hereby
that may reasonably be expected to result in a permanent injunction against such
consummation or, if the transactions contemplated hereby were consummated, an
order to nullify or render ineffective this Agreement or such transactions or
the recovery against Seller of such material damages; provided, however, that
the foregoing (a) and (b) shall not be deemed to fall within the provisions
hereof or qualify as a condition hereunder to the extent such action or
proceeding is (1) brought or caused to be brought (i) by any partner, officer,
director, agent, Affiliate or creditor of Seller, or any other party claiming
by, through or against Seller that is not related to Buyer, (ii) any third party
or agent of such party to any Contract relating to any consent required to
convey any such Contract or (iii) by any party or agent of such party, who is
currently a party to any such affiliation agreement with Seller, Licensee or any
Affiliate of Seller or Licensee or in any way relating to any television or
radio network affiliation agreement of Seller, Licensee, any
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Affiliate of Seller or Licensee, Buyer or any Affiliate of Buyer or (2) a
Proceeding referred to in Section 2.6 hereof.
7.3 Opinion of Counsel. Seller shall have received opinions of counsel
to Buyer dated the Closing Date, in substantially the forms attached to this
Agreement as Exhibits 7.3(a) and 7.3(b).
7.4 Hart-Scott-Rodino. The waiting period under the HSR Act shall have
expired or been terminated, and there shall not be pending any action instituted
by the Federal Trade Commission or the Department of Justice under the HSR Act,
and there shall not be outstanding any order of a court relating thereto,
restraining the transactions contemplated hereby.
7.5 Leases/Subleases. Seller shall have received copies from Buyer of
certain leases (the "Leases") or subleases (the "Subleases") for the Real
Property and the Leasehold Interests fully executed by the Buyer, which will
enable Seller to continue to operate the Owned Stations consistent with (i)
previous operating expenses and practices, (ii) its FCC Authorizations, and
(iii) all FCC rules, regulations and procedures. The Leases and/or Subleases to
be delivered hereunder and which are contemplated hereby shall be reasonably
acceptable to Seller, and the Subleases shall be consistent in all material
terms with the material terms of the existing leases for the Leasehold
Interests. The term of each Lease and Sublease shall be coterminous with the
term of the Option relating to the Owned Station to which such Lease or Sublease
applies.
7.6 Group I Time Brokerage Agreement. Buyer shall have entered into
and delivered to Seller a time brokerage agreement with Seller and Licensee for
the Group I Stations (as defined in the Group I Option Agreement but not
including the New Mexico Stations) in substantially the form of Exhibit 7.6(a)
hereto (the "Group I Time Brokerage Agreement") fully executed by Buyer. Exhibit
7.6(b) is hereby deemed to be deleted.
7.7 Option Agreement. Seller shall have received from Buyer an option
agreement for the Group I Stations substantially in the form of Exhibit 7.7(a)
hereto and an option agreement substantially in the form of Exhibit 7.7(b)
hereto for the Columbus Station, as such agreements may be modified after the
date hereof by Seller to give effect to changes in the representations and
warranties of Seller and Licensee (including the exhibits and schedules thereto)
appropriate to reflect changes occurring or arising after the date hereof that,
together with any changes to the representations and warranties of Seller set
forth herein, would not cause a Material Adverse Change (as
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defined in Section 8.10) (the "Group I Option Agreement and the "Columbus Option
Agreement", respectively, and together the "Option Agreements"), fully executed
by Buyer.
7.8 New Employment Agreements. Buyer shall have caused SCI, or the SBG
Entity, as defined in, and specified under, the Amended Employee Letter
Agreement, as the case may be, to have executed and delivered employment
agreements with the persons listed on Schedule 7.8 (or any replacement person
designated by Seller, including any person designated to fill a "TBD" position,
to fill such position) substantially in the form of Exhibit 7.8 and subject to
the limitations set forth in the Amended Employee Letter Agreement (the "New
Employment Agreements").
7.9 Articles Supplementary. The Articles Supplementary shall have been
filed as an amendment to the existing charter of Buyer with the Maryland
Department of Assessments and Taxation.
7.10 Material Adverse Change. There shall not have been a material
adverse change in Buyer's financial condition or business taken as a whole
(provided that the foregoing shall not include any material adverse change
attributable to (i) factors affecting the television or radio industries
generally, (ii) general national, regional or local economic or financial
conditions, (iii) governmental or legislative laws, rules or regulations or (iv)
actions taken by Seller or any Affiliate of Seller).
7.11 Approval of Stock Options. All necessary consents of the
directors (including any committees thereof) of Buyer to approve all of the
stock options described in the Baker Stock Option Agreement, the Corporate
Employee Stock Option Agreements contemplated by the Amended Employee Letter
Agreement and the Station Employee Stock Option Agreement shall not have been
rescinded or revoked and shall be in full force and effect.
7.12 Stock Options. Buyer shall have granted the options contemplated
under the Amended Employee Letter Agreement.
7.13 Amended Charter. The Buyer shall have submitted to Seller the
Amended Charter, in form and substance reasonably satisfactory to Seller.
7.14 RCB Loans. The Chase Manhattan Bank, N.A. or another lender that
is satisfactory to Seller shall have entered into a Credit Agreement with Seller
on terms and conditions reasonably satisfactory to Seller, including, without
limitation (i) providing for loans to Seller to be made, at Seller's option, on
the Closing Date and/or thereafter in an amount of up to One
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Hundred Eight Million Dollars ($(108,000,000); (ii) the proceeds of such loans
may be distributed to the partners of Seller and such loans (and obligations
thereunder) shall be non-recourse to the partners of Seller (including without
limitation, the general partner of Seller, and each partner's officers,
directors, equity holders, employees, agents and Affiliates) and the lender
shall waive and shall have no claim against any such partners and none of such
partners shall have any obligation to restore such proceeds distributed to them
to Seller, lender or otherwise; and (iii) none of Seller's assets, other than
the Columbus Assets, shall be available for satisfaction of such loans and
obligations and the lender's sole recourse shall be against the Columbus Assets
(the "RCB Loans").
7.15 Evidence of Capitalization. Buyer shall have provided evidence
reasonably satisfactory to Sellers that Buyer has contributed all of the capital
stock of its Broadcasting Subsidiaries to SCI.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated
by this Agreement to occur on the date scheduled for Closing are, at its option,
subject to the fulfillment of the following conditions prior to or at the
Closing Date; provided that it is understood and agreed by Buyer that the
provisions hereof shall be subject to the provisions of Section 2.3(e) hereof:
8.1 Representations, Warranties, Covenants.
(a) The representations and warranties of Seller contained in
this Agreement shall have been true and accurate as of the date when made and
shall be true and accurate as of the Closing Date, except to the extent (i) any
such representation or warranty is expressly stated only as of a specified
earlier date or dates, in which case such representation and warranty shall be
true and accurate as of such earlier specified date or dates except as set forth
in (iii) below of this Section 8.1(a), (ii) changes are permitted or
contemplated pursuant to this Agreement or (iii) the consequence of the matter
set forth in such representation and warranty having failed to be true and
accurate as of the date when made, on the Closing Date or on such earlier
specified date would not result in a Material Adverse Change.
(b) Seller shall have performed and complied in all respects
with the covenants and agreements required by this
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Agreement to be performed or complied with by it prior to or at the Closing
Date, except to the extent that the consequence of the failure of Seller to have
so performed or complied would not result in a Material Adverse Change.
(c) The general partner of Seller shall have delivered to Buyer
a certificate of an officer of the general partner of Seller dated the Closing
Date certifying to the fulfillment of the conditions set forth in Section 8.1(a)
and 8.1(b).
8.2 Proceedings.
(a) As of the Closing Date, no action or proceeding shall have
been instituted and be pending before any court or governmental body to restrain
materially or prohibit, or to obtain material damages in respect of, the
consummation of this Agreement that may reasonably be expected to result in a
permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render ineffective
this Agreement or such transactions or for the recovery against Buyer of such
material damages; and (b) as of the Closing Date, none of the parties to this
Agreement shall have received written notice (other than a letter of inquiry)
from any governmental body of its intention to institute any action or
proceeding to materially restrain, enjoin or nullify, or to obtain material
damages in respect of, this Agreement or the transactions contemplated hereby
that may reasonably be expected to result in a permanent injunction against such
consummation 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 such material damages; provided, however, that the
foregoing (a) and (b) shall not be deemed to fall within the provisions hereof
or qualify as a condition hereunder to the extent such action or proceeding is
(1) brought or caused to be brought by (i) any stockholder, bondholder, officer,
director, agent, Affiliate or creditor of Buyer or any other party claiming by,
through or against Buyer that is not related to Seller,(ii) any third party or
agent of such party to any Contract relating to any consent required to convey
any such Contract, or (iii) any party or agent of such party, who is currently a
party to any such affiliation agreement with Buyer or any Affiliate of Buyer or
in any way relating to any television or radio network affiliation agreement of
Seller, Licensee, any Affiliate of Seller or Licensee or Buyer or any Affiliate
of Buyer; or (2) a Proceeding referred to in Section 2.6 hereof.
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8.3 Opinion of Counsel. Buyer shall have received an opinion of
counsel to Seller dated the Closing Date in substantially the form attached to
this Agreement as Exhibit 8.3.
8.4 Damage to the Assets. The Station Assets shall not have suffered
damage on account of fire, explosion or other similar cause of any nature that
causes a Material Adverse Change; provided, however, that if, after Seller has
duly notified Buyer of such damage, Buyer does not notify Seller that Buyer is
terminating this Agreement pursuant to Section 10.1(b)(iii) hereof within the
time period specified therein, then Buyer shall be deemed to have waived this
condition of Closing.
8.5 Option Agreements. Buyer shall have received from Seller the
Option Agreements fully executed by Seller and Licensee.
8.6 Hart-Scott-Rodino. The waiting period under the HSR Act shall have
expired or been terminated, and there shall not be pending any action instituted
by the Federal Trade Commission or the Department of Justice under the HSR Act,
and there shall not be outstanding any order of a court relating thereto,
restraining the transaction contemplated hereby.
8.7 Leases/Subleases. Buyer shall have received from Seller, fully
executed by Seller, the Leases and/or Subleases referred to in Section 7.5
hereof.
8.8 Group I Time Brokerage Agreement. The Buyer shall have received
from Seller the Group I Time Brokerage Agreement, fully executed by Seller.
8.9 Add Back Programming Liabilities. Buyer shall have received
evidence that Seller has paid all Add Back Programming Liabilities.
8.10 Material Adverse Change. Since the date of this Agreement, there
shall not have been a material adverse change in Seller's and its subsidiaries'
financial condition or business taken as a whole, or of the Station Assets taken
as a whole (provided that the foregoing shall not include any material adverse
change attributable to (i) factors affecting the television or radio industries
generally, (ii) general national, regional or local economic or financial
conditions, (iii) governmental or legislative laws, rules or regulations, (iv)
any affiliation agreement or the lack thereof or the non-transfer to Buyer
thereof or (v) actions taken by Buyer or any Affiliate of Buyer) (a "Material
Adverse Change").
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8.11 Certain Financial Statements. Seller shall have delivered to
Buyer (a) on or prior to the Closing Date, unaudited financial statements (i)
for the period from January 1, 1994 to September 8, 1994 with respect to the
television stations acquired from Continental Broadcasting Company, (ii) for the
period from January 1, 1995 to July 7, 1995 with respect to the radio stations
acquired from Keymarket of New Orleans, Inc., Keymarket of NEPA, Inc.,
Lackazerne, Inc., Keymarket of Buffalo, Inc., Keymarket of Nashville, Inc.,
Keymarket of Los Angeles, and Keymarket Communications, and (b) not later than
ten (10) business days prior to the Closing Date, the 1995 Year-End Financial
Statements.
8.12 Marcus Non-Compete. Buyer shall have received the non-competition
letter agreement executed by Larry D. Marcus in substantially the form of
Exhibit 8.12 hereto.
ARTICLE 9
INDEMNIFICATION
9.1 Survival. The representations and warranties of Seller and Buyer
contained in this Agreement (including the Schedules hereto) or in any
certificate delivered by it or made pursuant to Sections 2.4, 7.1, and 8.1 of
this Agreement shall survive the Closing Date for a period of one (1) year after
the Closing Date. Except as provided below in this Section 9.1, the covenants of
Seller and Buyer under this Agreement to be performed on or before the Closing
Date shall survive the Closing Date for a period of one year after the Closing
Date. Buyer's obligation to pay, perform or discharge the Assumed Liabilities
shall survive until such Assumed Liabilities have been paid, performed or
discharged in full. Seller's obligations with respect to all obligations and
liabilities not assumed by Buyer pursuant to this Agreement shall survive until
such obligations and liabilities have been paid, performed or discharged in
full. The covenants and agreements contained in this Article 9 shall continue in
full force and effect until fully discharged. Any other covenants or agreements
contained herein or made pursuant hereto which by their terms are to be
performed after the Closing shall survive until fully performed and discharged
in full, including without limitation all obligations and liabilities with
respect to the Assumed Liabilities, the Retained Liabilities and the Consent
Contracts.
9.2 Indemnification of Buyer. Seller agrees that after the Closing,
subject to the limitations in Section 9.4 below, it
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shall indemnify and hold Buyer and its officers, directors, employees, agents
and Affiliates harmless from and against any and all damages, claims, losses,
expenses, costs, obligations and liabilities including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees and
expenses ("Loss and Expense") suffered (whether any such claim arises out of a
third party action or is made by Buyer against Seller) by Buyer resulting from
(i) any material breach of any representation or warranty made by Seller
pursuant to this Agreement; (ii) any material failure by Seller to perform or
fulfill any of its covenants or agreements set forth in this Agreement; (iii)
any failure by Seller to pay, perform or discharge any liabilities or
obligations not specifically assumed by Buyer pursuant to this Agreement; or
(iv) any litigation, proceeding or claim by any third party arising from the
business or operations of the Station Assets by Seller prior to the Closing
Date, except to the extent arising from obligations or liabilities that have
been disclosed to Buyer in this Agreement or the Option Agreements in the
Schedules hereto or thereto (other than those set forth on Schedule 9.2) and
except to the extent arising for obligations or liabilities of or assumed by
Buyer pursuant to this Agreement.
9.3 Indemnification of Seller. Buyer agrees that, after the Closing,
it shall indemnify and hold Seller and its officers, directors, partners,
employees, agents and Affiliates harmless from and against any and all Loss and
Expense suffered (whether any such claim arises out of a third party action or
is made by Seller against Buyer) by Seller resulting from (i) any material
breach of any representation or warranty made by Buyer pursuant to this
Agreement; (ii) any material failure by Buyer to perform or fulfill any of its
covenants or agreements set forth in this Agreement; (iii) any failure by Buyer
to pay, perform or discharge any Assumed Liabilities or any other obligations or
liabilities of or assumed by Buyer under this Agreement (including, without
limitation, those set forth in Section 10.3 hereof); or (iv) any litigation,
proceeding, or claim arising from the business or operations of the Station
Assets on or after the Closing Date.
9.4 Limitation of Liability. (i) Notwithstanding any other provision
of this Agreement, after the Closing, neither Seller nor Buyer shall indemnify
or otherwise be liable to the other unless (a) the party seeking indemnification
has complied with the terms of, including the time limits set forth in, Section
9.6 and (b) the aggregate amount of Buyer's Loss and Expense (in the case of
Seller's indemnification of Buyer) or Seller's Loss and Expense (in the case of
Buyer's indemnification of Seller) exceeds $500,000, in which event the
indemnified party shall be
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entitled to recover its aggregate Loss and Expense inclusive of such $500,000
threshold; provided that such limitation shall not apply to any indemnification
obligation of Buyer pursuant to Section 9.3(ii), (iii) or (iv) hereof or Seller
pursuant to 9.2(ii), (iii) or (iv) hereof. Notwithstanding any provision
contained herein, in no event shall Seller be liable for any amount, which, when
combined with any other amounts for which Seller previously has been liable
under Section 9.2 hereof and any amount for which Seller and Licensee are
liable, or previously have been liable, under Section 9.2 of the Group I Option
Agreement and Section 9.2 of the Columbus Option Agreement is in excess of
$50,000,000.
(ii) Notwithstanding anything in this Agreement to the
contrary, it is understood and agreed that any amounts owed to Buyer by Seller
for such Loss and Expense as determined in accordance with this Article 9 shall
be made solely and exclusively in the form of a deduction from the Columbus
Option Closing Price (as defined in the Columbus Option Agreement) that has not
yet been paid to Seller and Licensee under the Columbus Option Agreement and
that once the Columbus Option Closing Price has been paid in full to Seller and
Licensee or a portion thereof placed in the Indemnification Fund (as defined in
and pursuant to the terms of the Columbus Option Agreement) or if the Columbus
Option is terminated under the Columbus Option Agreement, Buyer shall have no
further recourse against Seller or Licensee, and no other payment by Seller
shall be required, hereunder, except for any then pending claims against the
amount of the Columbus Option Closing Price placed in the Indemnification Fund.
(iii) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither Seller (except to the extent expressly
provided for in Section 9.4(ii)) nor any partner, director, officer, employee,
agent or Affiliate of Seller (including any shareholder, director, officer,
employee, agent or Affiliate of the general partner of the Seller) shall have
any personal liability to Buyer as a result of the breach of any representation,
warranty, covenant or agreement of Seller contained herein or otherwise and
shall have no personal obligation to indemnify Buyer for any of Buyer's Losses
or Expenses.
9.5 Bulk Sales Indemnity. Buyer hereby waives compliance with the
provisions of any applicable bulk transfer laws. Subject to the limitations set
forth in Section 9.4 above, Seller further agrees to indemnify and hold Buyer
harmless from and indemnify Buyer against any and all Loss and Expense relating
to any claims made by creditors, with respect to non-compliance with any bulk
transfer law, except to the extent that such claims
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result from the Assumed Liabilities and other obligations or liabilities to be
paid or discharged by Buyer as a result of this Agreement and/or Buyer's failure
to pay the same when due.
9.6 Notice of Claims. If Buyer or Seller believes that it has suffered
or incurred any Loss and Expense, such party shall notify the other promptly in
writing and, in any event, within one year of the date of this Agreement,
describing such Loss and Expense, the factual basis for such claim, the amount
thereof, estimated in good faith, and the method of computation of such Loss and
Expense, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such Loss and Expense shall
have occurred. If any action at law or suit in equity is instituted by a third
party with respect to which any of the parties intends to claim any liability or
expense as Loss and Expense under this Article 9, such party shall within twenty
(20) days after receiving written notice thereof (or sooner to the extent the
indemnifying party would not have time to adequately take the actions
contemplated under Section 9.7), notify the indemnifying party of such action or
suit.
9.7 Defense of Third Party Claims. The indemnifying party under this
Article 9 shall have the right to conduct and control through counsel of its own
choosing the defense of any third party claim, action or suit (and the
indemnified party shall cooperate fully with the indemnifying party), but the
indemnified party may, at its election, participate in the defense of any such
claim, action or suit at its sole cost and expense provided that, if the
indemnifying party shall fail to defend any such claim, action or suit, then the
indemnified party may defend through counsel of its own choosing such claim,
action or suit, and (so long as it gives the indemnifying party at least fifteen
(15) days' notice of the terms of the proposed settlement thereof and permits
the indemnifying party to then undertake the defense thereof) settle such claim,
action or suit, and to recover from the indemnifying party the amount of such
settlement or of any judgment and the costs and expenses of such defense. The
indemnifying party shall not compromise or settle any third party claim, action
or suit without the prior written consent of the indemnified party, which
consent will not be unreasonably withheld or delayed.
9.8 Indemnity as Sole Remedy. After the Closing Date, indemnification
pursuant to this Article 9 shall be the sole and exclusive remedy of any party
to this Agreement for any breach of a representation, warranty or covenant made
or obligation undertaken by any other party, or for any Loss or Expense arising
out of or relating to the items listed in Sections 9.2 and 9.3 or
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otherwise related to the transactions contemplated hereby, other than in respect
of the Registration Rights Agreement, the Group I Time Brokerage Agreement, the
Option Agreements, the Employment Agreement, the Consulting Agreement, the Baker
Stock Option Agreement, the Corporate Employee Stock Option Agreement, the
Station Employee Stock Option Agreement, the Amended Employee Letter Agreement,
the Voting Agreement, the ISO Amendment, the LTIP, the Amended Charter or the
Articles Supplementary (collectively, the "Transaction Documents") which shall
be governed by their terms, whether such claim may be asserted as a breach of
contract, tort or otherwise.
9.9 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to Article 9 of this
Agreement, including the determination of the determination of the scope or
applicability of this Agreement to arbitrate, shall be settled by final and
binding arbitration in accordance with the rules then in effect of the American
Arbitration Association ("AAA"), as modified or supplemented under this section,
and subject to the Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16. The decision
of the arbitrators shall be final and binding provided that, where a remedy for
breach is prescribed hereunder or limitations on remedies are prescribed, the
arbitrators shall be bound by such restrictions, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
If any series of claims arising out of the same or related
transactions shall involve claims which are arbitrable under the preceding
paragraph and claims which are not, the arbitrable claims shall first be finally
determined before suit may be instituted upon the others and the parties will
take such action as may be necessary to toll any statutes of limitations, or
defenses based upon the passage of time, that are applicable to such
non-arbitrable claims during the period in which the arbitrable claims are being
determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 9.9, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. The
arbitration panel shall consist of three arbitrators, appointed in accordance
with the procedures set forth in this paragraph. Within ten (10) business days
of delivery of the notice of commencement of arbitration referred to above,
Seller, on the one hand, and Buyer, on the other hand, shall each appoint one
arbitrator, and the two arbitrators so appointed shall within ten (10) business
days of their appointment mutually agree upon and appoint one additional
arbitrator (or, if such arbitrators cannot agree on an additional
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arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules); provided, that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least 15 years as an attorney
specializing in either general commercial litigation or general corporate and
commercial matters and (iii) are experienced in matters involving the
broadcasting industry.
The arbitration hearing shall commence no later than thirty (30)
business days after the completion of the selection of the arbitrators.
Consistent with the intent of the parties hereto that the arbitration be
conducted as expeditiously as possible, the parties agree that (i) discovery
shall be limited to the production of such documents and the taking of such
depositions as the arbitrators determine are reasonably necessary to the
resolution of the controversy, claim or dispute and (ii) the arbitrators shall
limit the presentation of evidence by each side in such arbitration to not more
than ten (10) full days (or the equivalent thereof) or such shorter period as
the arbitrators shall determine to be necessary in order to resolve the
controversy, claim or dispute. The arbitrators shall be instructed to render a
decision within ten (10) business days of the close of the arbitration hearing.
If arbitration has not been completed within ninety (90) days of the
commencement of such arbitration, any party to the arbitration may initiate
litigation upon ten (10) days written notice to the other party(ies); provided,
however, that if one party has requested the other to participate in an
arbitration and the other has failed to participate, the requesting party may
initiate litigation before the expiration of such ninety-day period; and
provided further, that if any party to the arbitration fails to meet any of the
time limits set forth in this Section 9.9 or set by the arbitrators in the
arbitration, any other party may provide ten (10) days written notice of its
intent to institute litigation with respect to the controversy, claim or dispute
without the need to continue or complete the arbitration and without awaiting
the expiration of such ninety-day period. The parties hereto further agree that
if any of the rules of the AAA are contrary to or conflict with any of the time
periods provided for hereunder, or with any other aspect of the matters set
forth in this Section 9.9, that such rules shall be modified in all respects
necessary to accord with the provisions of this Section 9.9 (and the arbitrators
shall be so instructed by the parties).
The arbitrators shall base their decision on the terms of this
Agreement and applicable law and judicial precedent which a United States
District Court sitting in the District of Maryland (Southern Division) would
apply in the event the dispute were
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litigated in such court, and shall render their decision in writing and include
in such decision a statement of the findings of fact and conclusions of law upon
which the decision is based. Each party agrees to cooperate fully with the
arbitrator(s) to resolve any controversy, claim or dispute. The arbitrators
shall not be empowered to award punitive damages or damages in excess of actual
damages. The venue for all arbitration proceedings shall be Rockville, Maryland.
ARTICLE 10
TERMINATION/MISCELLANEOUS
10.1 Termination of Agreement. This Agreement may be terminated at any
time on or prior to the Closing Date as follows:
(a) By Seller:
(i) if Buyer fails to comply with Section 6.4 hereof
within ten (10) business days after Seller notifies Buyer that Buyer has not
complied with such Section; provided that, in the case termination is based on
Buyer's failure to comply with Section 6.4, Seller shall have complied with
Section 5.9; or
(ii) if any of the conditions provided in Article 7
have not been met by the Termination Date and have not been waived, provided
that Seller is not in default or breach in any material respect of its
representations and warranties, covenants or agreements under this Agreement and
that the failure to meet such conditions is not due to Seller's breach of the
Agreement; provided, however, that if on such date the conditions specified in
Section 7.1(a) and (b) hereof have not been satisfied, Seller shall deliver
written notice thereof to Buyer and Buyer's senior lenders ("Buyer's Lenders")
under its then existing senior credit facility (the name and notice information
regarding which Buyer shall provide to Seller), and Seller shall not be entitled
to terminate this Agreement until (1) after it has delivered such notice; (2)
after delivery of such notice, if Buyer fails to make the payment required
pursuant to Sections 2.1 and 2.3(d); or (3) if the payment is made pursuant to
Sections 2.1 and 2.3(d), if such conditions have not been satisfied in full
within fifteen (15) days following receipt of such notice.
(b) By Buyer:
(i) if Seller fails to comply with Section 5.9 hereof
within ten (10) business days after Buyer notifies Seller
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that Seller has not complied with such Section; provided that, in the case
termination is based on Seller's failure to comply with Section 5.9, Buyer shall
have complied with Section 6.4; or
(ii) subject to the provisions of Section 2.3(e)
hereof, if any conditions provided in Article 8 have not been met by the
Termination Date and have not been waived, provided that Buyer is not in default
or breach in any material respect of its representations and warranties,
covenants or agreements under this Agreement and that the failure to meet such
conditions is not due to Buyer's breach of the Agreement; or
(iii) no later than thirty (30) business days after
Seller has notified Buyer pursuant to Section 8.4 of the occurrence of any
damage or event as described in Section 8.4.
(c) By Either Buyer or Seller as follows:
(i) by mutual written consent of Buyer and Seller.
No party hereto shall have any liability to any other for costs,
expenses, damages, loss of anticipated profits or otherwise as a result of a
termination pursuant to this Section 10.1 except as provided in Section 10.2
hereof.
10.2 Liabilities Upon Termination.
(a) Concurrent with the date hereof, Buyer is delivering Sixty
Million Dollars ($60,000,000) (the "Down Payment") to Seller by wire transfer of
immediately available funds which will be held and disbursed pursuant to the
terms hereof. At Closing, the Cash Purchase Price shall be reduced by the Down
Payment. To the extent the Down Payment is applied to the Cash Purchase Price or
is paid to Buyer pursuant to Section 10.2(c), the Down Payment shall be deemed
to include the "Down Payment Interest", which means interest on the Down Payment
calculated at a rate of four percent (4%) per annum on the basis of a 365-day
year based on the actual number of days the Down Payment was held by Seller.
(b) The full amount of the Down Payment shall be retained by
Seller if the Agreement is terminated by Seller pursuant to Section 10.1(a),
except if termination is due to a failure of Section 7.4 to be satisfied and
Buyer is not in default of its obligations under this Agreement, then, and in
such event, the Down Payment shall be payable by Seller to Buyer, together with
the Down Payment Interest.
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(c) The full amount of the Down Payment shall be payable to
Buyer by Seller if the Agreement is terminated by Buyer pursuant to Section
10.1(b), and the full amount of any additional Cash Purchase Price payments
previously made by Buyer in connection with any Extended Periods pursuant to
Section 2.1 hereof shall be payable to Buyer by Seller only if the Agreement is
terminated by Buyer pursuant to Section 10.1(b)(ii) as a result of the Seller's
grossly negligent or willful and wrongful breach of its obligations under this
Agreement.
(d) The full amount of the Down Payment shall be payable
pursuant to the joint agreement of Buyer and Seller in the event that this
Agreement is terminated by Buyer and Seller pursuant to Section 10.1(c)(i).
(e) In the event of termination, as provided in Section 10.1,
the provisions of Section 3.14, 4.4, 5.6, 6.1, this 10.2, 10.7-10.15,
10.17-10.19 and 10.22 shall survive. The sole and exclusive remedy of Seller in
connection with its termination of this Agreement or a failure of performance or
compliance by Buyer with any covenant or agreement contained in this Agreement
prior to the Closing shall be the right of Seller to retain the Down Payment as
provided in this Section 10.2 and any additional Cash Purchase Price payments
previously made by Buyer hereunder. The sole and exclusive remedies of Buyer in
connection with Buyer's termination of this Agreement for any failure of
performance or compliance by Seller with any covenant or agreement contained in
this Agreement prior to the Closing shall be limited to (i) their right to a
return of the Down Payment, and under certain circumstances, additional Cash
Purchase Price payments made by Buyer hereunder, each as expressly provided in
this Section 10.2, (ii) their right to seek specific enforcement of this
Agreement against Seller; provided, that Buyer shall not be entitled to specific
performance unless it shall have complied with and shall not be in breach of the
material terms and conditions of this Agreement, and (iii) the right to bring
claim(s) for actual but not consequential or incidental damages; provided,
however, that notwithstanding anything to the contrary in the foregoing, to the
extent that Seller breaches its obligation to close hereunder after all
conditions provided in Article 7 have been met by Buyer or waived by Seller and
Buyer stands ready, willing and able to close hereunder, (x) Buyer shall have
the right to bring an action for specific performance and to the extent Buyer is
not granted specific performance or elects not to bring an action for specific
performance, Seller shall pay to Buyer Sixty Million Dollars ($60,000,000) but
Buyer shall have no other rights or remedies hereunder and (y) if Seller then
enters into a binding agreement within one year from the date of this Agreement
to sell substantially all of the
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assets of Seller or substantially all of the partnership interests in Seller for
an amount in excess of the value of the Purchase Price, Seller shall pay to
Buyer (1) the difference between the value of the Purchase Price and the value
of the total purchase price received by Seller in connection therewith minus (2)
$60,000,000. Buyer's remedies are cumulative and not intended to be limited by
the doctrine of election of remedies. Without limiting the generality of the
foregoing, neither Buyer nor Seller may rely on the failure of any condition
precedent set forth in Articles 7 and 8, as applicable, to be satisfied if such
failure was caused by such other party's (or parties') failure to act in good
faith, or a breach of or failure to perform its representations, warranties,
covenants or other obligations in accordance with the terms of this Agreement.
(f) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither Seller (except to the extent expressly
provided for in Section 10.2(e)) nor any partner, director, officer, employee,
agent or Affiliate of Seller (including any shareholder, director, officer,
employee agent or Affiliate of the general partner of the Seller) shall have any
personal liability to Buyer as a result of the breach of any representation,
warranty, covenant or agreement of Seller contained herein or otherwise and
shall have no personal obligation to Buyer for any of Buyer's remedies
hereunder.
10.3 Employee Matters. The following provisions shall act exclusively
for the benefit of the parties to this Agreement and not for the benefit of any
other person or entity:
(a) Effective as of the Closing Date, Buyer shall offer
employment to each employee of Seller who is employed at any Station or any JSA
Station immediately prior to the Closing Date (collectively, the "Assumed
Employees"), other than those employees designated by Seller that are to be
retained by Seller under the TBA. Except as otherwise provided in this Section
10.3 or as any employment agreement between Buyer and any Assumed Employee may
otherwise require, the Buyer shall offer employment to the Assumed Employees on
terms and conditions that are substantially similar in the aggregate to the
terms and conditions of employment of Buyer's employees as of the Closing Date,
including the provision of retirement and health care benefits. Buyer shall
assume all contracts of employment of the Assumed Employees and notwithstanding
anything in the foregoing to the contrary, to the extent such employment
contract or collective bargaining agreement assumed hereunder provides for terms
and conditions in addition to those referenced in the preceding sentence, Buyer
shall assume the terms thereof. Each
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Assumed Employee shall receive credit for past service with Seller for all
purposes under Buyer's benefits plans.
(b) Buyer shall assume full responsibility and liability for
offering and providing "Continuation Coverage" to any "Qualified Beneficiary"
who is covered by a "Group Health Plan" sponsored or contributed to by Seller or
any entity required to be combined with Seller (within the meaning of Sections
414(b), (c), (m) or (o) of the Code) and who has experienced a "Qualifying
Event" or is receiving "Continuation Coverage" on or prior to the Closing Date.
Schedule 10.3 identifies all Qualified Beneficiaries entitled to Continuation
Coverage under any Seller Group Health Plan on the date of this Agreement, and
Seller shall deliver on the Closing Date a list of Qualified Beneficiaries
entitled to Continuation Coverage as of such date. "Continuation Coverage,"
"Qualified Beneficiary," "Qualifying Event" and "Group Health Plan" all shall
have the meanings given such terms under Section 4980B of the Code and Section
601 et seq. of ERISA.
(c) Buyer shall offer health plan coverage to all Assumed
Employees under the terms and conditions generally applicable to Buyer's
employees as of the Closing Date. For purposes of providing such coverage, Buyer
shall waive all preexisting condition limitations for all Assumed Employees
covered by Seller's group health plan as of the Closing Date and shall provide
such health care coverage effective as of the Closing Date without the
application of any eligibility period for coverage. In addition, Buyer shall
credit all employee payments toward deductible and co-payment obligations limits
under Seller's health care plans for the plan year which includes the Closing
Date as if such payments had been made for similar purposes under Buyer's health
care plans during the plan year which includes the Closing Date, with respect to
the Assumed Employees.
(d) Buyer shall grant Assumed Employees credit for and shall
assume and be responsible for any liabilities with respect to sick leave and
personal days accrued but unused by any Assumed Employees as of the Closing
Date, and, subject to the proration provided for in Section 2.2(a)(i), Buyer
shall grant Assumed Employees credit for and shall assume and be responsible for
any liabilities with respect to any accrued but unused vacation for such
employees as of the Closing Date.
(e) Seller currently maintains the WLOS TV, Inc. Retirement
Plan (the "WLOS Plan"), a defined benefit pension plan for the benefit of
certain employees. The WLOS Plan has been frozen and all future benefit accruals
ceased, effective as of
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January 10, 1994. Buyer agrees, effective as of the Closing Date to fully assume
sponsorship of such plan including all obligations of the sponsor to contribute
to and administer the plan. Buyer and Seller agree to perform all acts necessary
or proper to consummate the assumption of the WLOS Plan, including, but not
limited to, the making of all proper filings with the Internal Revenue Service
and the Department of Labor and the receipt of all necessary notices or
approvals from governmental agencies.
(f) Within a reasonable period of time after the Closing Date,
Seller shall transfer from the River City Investment and Retirement Plan (the
"Seller 401(k) Plan") to the Sinclair Broadcast Group, Inc. 401(k) Profit
Sharing Plan and Trust ("Buyer's 401(k) Plan") an amount, in cash, equal to the
aggregate account balances held in the Seller 401(k) Plan as of the date of
transfer with respect to all Assumed Employees. Prior to the date of such
transfer, and as preconditions thereto: (i) Buyer shall use commercially
reasonable efforts to deliver to Seller a copy of the most recently issued
Internal Revenue Service ("IRS") determination letter (or other proof
satisfactory to counsel for Seller) that Buyer's 401(k) Plan is qualified under
the Code, and (ii) Seller shall use commercially reasonable efforts to deliver
to Buyer a copy of the most recently issued IRS determination letter (or other
proof satisfactory to counsel for the Buyer) that the Seller 401(k) Plan is
qualified under the Code (including, to the extent relevant, a determination
letter issued to a prototype plan adopted by Seller). Subsequent to the transfer
of assets to Buyer's 401(k) Plan, neither Seller nor the Seller 401(k) Plan
shall retain any liability with respect to such Assumed Employees to provide
them with benefits in accordance with the terms of the Seller 401(k) Plan. On or
prior to the Closing Date, Seller shall deliver to Buyer a list of all Assumed
Employees, indicating thereon the total amount deferred in pre-tax dollars to
the Seller 401(k) Plan by each Assumed Employee under the terms of Section
402(g) of the Code with respect to the plan year of the Seller 401(k) Plan in
which Closing occurs. Seller and Buyer agree to cooperate with respect to any
government filing, including, but not limited to, the filing of IRS Forms
5310-A, if necessary, to effect the transfer of assets contemplated by this
Section 10.3.
(g) Buyer agrees that Seller may inform its employees that
Buyer has agreed that the Assumed Employees will be offered employment as
provided in this Section 10.3; provided, however, that Buyer shall have the
right to approve any written statement to be made by Seller in connection
therewith.
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(h) Seller currently maintains retiree medical coverage for
certain employees and former employees listed on Schedule 10.3 (the "Retirees")
and Buyer hereby agrees to continue such retiree medical coverage for the
Retirees. Retiree coverage offered by Buyer under this Section 10.3(h) will be
under the same terms and conditions generally applicable to Buyer's current
employees, subject to offsets, at the option of Buyer, for any health care
benefits, whether from a governmental source or from other employers, payable to
the affected former employees of Seller.
10.4 Proxy Statement; Special Stockholders Meeting to Approve Amended
Charter. Buyer agrees that, as soon as practicable after the Closing Date but in
no event more than sixty (60) days after the Closing Date, it shall cause to be
filed with the Securities and Exchange Commission (the "SEC") proxy statement
materials for the purpose of soliciting proxies from the holders of Buyer Common
Stock in order to approve, at the next regularly scheduled or special meeting of
Buyer's stockholders (which meeting, in any event shall be scheduled to occur
not more than 90 days after the Closing Date), (i) the adoption of an amendment
and restatement of Buyer's charter in the form of the Amended Charter, which is
necessary in order to effect the issuance of the Convertible Preferred Stock as
contemplated under Section 2.1 hereof, and (ii) to approve the Consulting
Agreement, Employment Agreement, the ISO Amendment and the LTIP and the issuance
of all of the stock options described in the Baker Stock Option Agreement, the
Corporate Employee Stock Option Agreement, the Station Employee Stock Option
Agreement and to the extent approval is necessary, the Amended Employee Letter
Agreement. Buyer shall use its commercially reasonable efforts to obtain such
clearance by the SEC of such proxy statement materials as promptly as possible,
and as soon as is permissible under the rules and regulations of the SEC, Buyer
shall cause definitive copies of such proxy materials to be distributed to
Buyer's stockholders. Buyer thereafter shall use its commercially reasonable
efforts to obtain the approval of its stockholders to the adoption of Amended
Charter and the approval of the other matters described in this Section 10.4.
Buyer shall cause the Amended Charter to be filed with the Maryland Department
of Assessments and Taxation as soon as practicable after the adoption thereof by
its stockholders. Prior to such filing of the Amended Charter, Buyer will not,
without the prior written consent of Seller (to the extent the following
restrictions are permitted by the FCC and all applicable Law):
(a) amend its articles of incorporation or by-laws, as
applicable, except for the filing of the Articles Supplementary; or
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(b) effect any stock split or otherwise change its
capitalization as it exists on the date hereof except as set forth in the
Articles Supplementary and as set forth on Schedule 6.6 hereto.
Buyer shall issue the Convertible Preferred Stock to Seller in
exchange for the Exchangeable Preferred Stock immediately after the filing by
Buyer with the Maryland Department of Assessments and Taxation of the Amended
Charter. Thereafter, Seller shall be permitted to distribute such shares of
Convertible Preferred Stock to its partners and warrant holders and to the
stockholders of Seller's corporate general partner, and such transferees also
shall become parties to the Registration Rights Agreement with respect to the
shares of Buyer Common Stock underlying such Convertible Preferred Stock;
provided that if Seller has not received the Convertible Preferred Stock within
twelve (12) months after the Closing Date, it shall be permitted to distribute
the Exchangeable Preferred Stock to the same parties to whom the Convertible
Preferred Stock may be transferred. Buyer shall cooperate with Seller in all
respects in connection with such distribution of shares of Exchangeable
Preferred Stock (to the extent applicable) and Convertible Preferred Stock
(including, without limitation, in connection with the issuance to such
transferees of Seller of new share certificates for such Convertible Preferred
Stock in such share denominations (not to exceed in the aggregate the number of
shares issuable to Seller in exchange for the Exchangeable Preferred Stock) as
shall be designated by Seller to Buyer in writing); provided, however, that
prior to such distribution to such transferees, Seller shall have caused such
persons or entities to whom such shares are to be transferred to deliver to
Buyer such representation letters and stockholder questionnaires as Buyer may
reasonably request in order for Buyer to comply with the applicable requirements
of federal and state securities laws relevant to such distribution.
10.5 Registration Statement; Nasdaq Listing. Buyer agrees that, in no
event more than sixty (60) days after the date as of which it has filed the
Amended Charter with the Maryland Department of Assessments and Taxation, it
shall file with the SEC, in accordance with the Registration Rights Agreement,
substantially in the form of Exhibit 10.5 hereto (the "Registration Rights
Agreement"), and the applicable provisions of the Securities Act of 1933, as
amended, a registration statement on Form S-3 (or such other form as may be
appropriate) with respect to the resale by Seller or such partners of Seller or
stockholders of the corporate general partner of Seller (as shall be designated
in writing by Seller to Buyer) of the shares of Buyer Common Stock underlying
the Convertible Preferred Stock
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which is to be issued as contemplated under Section 2.1 hereof, which
registration statement shall be kept effective in accordance with the
Registration Rights Agreement (such registration statement is hereinafter
referred to as the "Registration Statement"). Buyer shall otherwise comply with
the applicable provisions of the Registration Rights Agreement in seeking to
obtain the effectiveness thereof as soon after the filing thereof as is
reasonably practicable. In connection with any such Registration Statement,
Seller shall furnish (and shall cause such partners of Seller or stockholders of
the corporate general partner of Seller as have been designated by Seller to
receive shares of Convertible Preferred Stock, as contemplated above, to
furnish) all information (financial and other) that is requested by the Staff of
the SEC or is reasonably required under the applicable SEC rules and forms on a
timely basis to enable Buyer to comply with its obligations under this Section
10.5 and the Registration Rights Agreement. Buyer also shall apply, prior to or
concurrently with the filing of the Registration Statement, to the Nasdaq
National Market System for the listing of the Buyer Common Stock underlying the
Convertible Preferred Stock and shall use commercially reasonably efforts to
obtain approval for the listing of such stock.
10.6 Expenses. Subject to the provisions of Sections 5.9, 3.14 and
4.4, each party hereto shall bear all of its expenses incurred in connection
with the transactions contemplated by this Agreement, including, without
limitation, accounting and legal fees incurred in connection herewith; provided,
however, that Seller on the one hand, and Buyer on the other hand, shall each
pay one-half of any sales or transfer taxes (including any real property
transfer taxes) arising from transfer of the Station Assets.
10.7 Assignments. This Agreement shall not be assigned by any party
hereto without the prior written consent of the other parties except that Buyer
may assign its rights and interests hereunder (in whole or in part as to any
Station or JSA Station) to a direct or indirect wholly-owned subsidiary of Buyer
or of Buyer in which event such assignee shall be responsible for all
representations, covenants and agreements of Buyer hereunder as if such assignee
was a party hereto provided that Buyer gives Seller written notice thereof and
that any such assignment above shall not relieve Sinclair Broadcast Group, Inc.
or any permitted assignee of any of its obligations or liabilities hereunder
(including, without limitation, the obligations of Buyer hereunder to issue
shares of its capital stock pursuant to Section 2.1 and the obligations
specified in Sections 10.4 and 10.5 hereof). To the extent of any such
assignment by Buyer in accordance with the terms of Section 10.5 hereof, Seller
shall
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deliver any such documents contemplated under Section 2.4(a) to such assignee
provided that once such delivery shall have been made to such assignee, Seller's
obligations hereunder with respect to such delivery shall be deemed to have been
discharged. It is understood and agreed that Seller may assign its rights to
receive hereunder, or otherwise distribute, the Stock Purchase Price to the
partners of Seller. It is understood and agreed that nothing herein shall be
deemed to prohibit a transfer of control of Seller or Licensee or the assignment
of any FCC Authorizations of the other License Assets by Seller or Licensee. Any
attempt to assign this Agreement without any required consent shall be void. It
is understood and agreed that nothing herein shall be deemed to expand the
rights granted hereunder to any permitted assignee, which rights shall be in
combination with, and not in addition to, the rights of Buyer. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
10.8 Further Assurances. Subject to the terms and conditions of this
Agreement, from time to time prior to, at and after the Closing Date, each party
hereto will use commercially reasonable efforts to take, or cause to be taken,
all such actions and to do or cause to be done, all things, necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the sale contemplated by this Agreement and the consummation of the other
transactions contemplated hereby, including executing and delivering such
documents as the other party being advised by counsel shall reasonably request
in connection with the consummation of this Agreement and the consummation of
the other transactions contemplated hereby, including, without limitation, the
execution and delivery of any and all confirmatory and other instruments, in
addition to those to be delivered on the Closing Date.
10.9 Notices. All notices, demands and other communications which may
or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid, or by registered or certified mail,
return-receipt requested, or by facsimile transmission, and shall be deemed to
have been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, when dispatched by facsimile
transmission, five (5) days after deposited in the mail, first class postage
prepaid, addressed as follows:
(a) If to Seller:
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River City Broadcasting, L.P.
1215 Cole Street
St. Louis, Missouri 63106
Telecopier: (314) 259-5709
Attn.: Mr. Barry Baker and
Mr. Larry D. Marcus
Telecopier: (314) 259-5709
with a copy to:
Dow, Lohnes & Albertson
A Professional
Limited Liability Company
1200 New Hampshire
Ave., N.W.
Suite 800
Washington, D.C. 20036-6802
Attn.: Leonard J. Baxt, Esq.
Telecopier: (202) 776-2222
and with a copy to:
Baker & Botts
800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2916
Attn.: Andrew M. Baker, Esq.
Telecopier: (214) 953-6503
or to such other address as Seller may from time to time
designate.
(b) If to Buyer:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn.: Mr. David D. Smith
Telecopier: (410) 467-5043
with a copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attn: Steven A. Thomas, Esq.
Telecopier: (410) 752-2046
<PAGE>
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or to such other address as Buyer may from time to time designate.
10.10 Captions. The captions of Articles and Sections of this
Agreement are for convenience only, and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
10.11 Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED,
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF MARYLAND WITHOUT REFERENCE TO ITS
PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE
UNITED STATES GOVERNS THE TRANSACTIONS CONTEMPLATED HEREBY.
10.12 Consent to Jurisdiction, Etc. EXCEPT AS SET FORTH IN SECTION 9.9
HEREOF, THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF ANY FEDERAL COURT LOCATED IN THE DISTRICT OF MARYLAND
(SOUTHERN DIVISION) OR TO THE EXTENT SUCH COURTS ARE NOT AVAILABLE, ANY COURT IN
THE STATE OF MARYLAND LOCATED IN THE COUNTY OF MONTGOMERY, MARYLAND, IN
CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. THE PARTIES HERETO HEREBY WAIVE PERSONAL SERVICE OF ANY PROCESS IN
CONNECTION WITH ANY SUCH ACTION OR PROCEEDING AND AGREE THAT THE SERVICE THEREOF
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL ADDRESSED TO OR BY PERSONAL DELIVERY
TO THE OTHER PARTY AT SUCH OTHER PARTY'S ADDRESS SET FORTH PURSUANT TO PARAGRAPH
10.9 HEREOF. IN THE ALTERNATIVE, IN ITS DISCRETION, ANY OF THE PARTIES HERETO
MAY EFFECT SERVICE UPON ANY OTHER PARTY IN ANY OTHER FORM OR MANNER PERMITTED BY
LAW.
10.13 Waiver of Provisions. The terms, covenants, representations,
warranties and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall in no manner affect the right at a later date to enforce the same. No
waiver by any party of any condition or the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.
10.14 Counterparts. This Agreement may be executed in two (2) or more
counterparts, and all counterparts so executed shall constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the same counterpart.
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10.15 Reference to Agreement, Entire Agreement, Amendments. Each
reference in any document related hereto (including, without limitation, the
documents referenced in Section 2.5 hereof) to the Asset Purchase Agreement
dated as of April 10, 1996 between Seller and Buyer, shall mean and be a
reference to this Amended and Restated Asset Purchase Agreement. This Agreement
(including the Exhibits and Schedules hereto) and the documents delivered
pursuant to the Agreement or other written agreements among the parties, dated
the date hereof or hereafter (including, without limitation to the extent
applicable, the Modification Agreement dated May 10, 1996 between the parties
and the letter dated May 10, 1996 from the parties' counsel to the Department of
Justice in connection therewith), constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede any and all prior
and contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, between them relating to the subject matter hereof. No
amendment or waiver of any provision of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
10.16 Access to Books and Records. Buyer shall preserve until the
later of (i) three (3) years after the Closing Date and (ii) the date on which
Buyer has no further obligations under the Option Agreements all books and
records of Seller. At the request of Seller, Buyer agrees to give to the
officers, partners, employees, agents, accountants and counsel of Seller access,
upon reasonable prior notice during normal business hours, to the property,
accounts, books, contracts, records, accounts payable and receivable, records of
employees of Seller (as Seller may have been reorganized) and other information
concerning the affairs of Seller, any Station, any JSA Station, any Option
Station or any of the Station Assets, except as may be prohibited by law, and to
the employees of Buyer as Seller may reasonably request. Subsequent to the
Closing Date, Seller shall have no obligation to retain books and records
relating to Seller or the Station Assets. To the extent any such books and
records are retained, then for a period not to exceed three (3) years after the
Closing Date, at the request of Buyer, Seller agrees to give the officers,
employees, accountants and counsel of Buyer access, upon reasonable prior notice
during normal business hours, to the books, records and files retained by Seller
with respect to the business and operation of Seller, any Station, any JSA
Station or any Option Station by Seller as Buyer may reasonably request in
connection with an audit of any Station, any JSA Station or any Option Station.
Each of Buyer and Seller shall be permitted at their own expense to make
extracts from or copies of the foregoing books, records and files of the other
party.
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10.17 Public Announcements and Press Releases. Neither Seller nor
Buyer shall, except by mutual agreement, make any press release or other public
announcement (written or oral) concerning this Agreement or the transactions
contemplated by this Agreement, except as may be required by any law, rule or
regulation (including, without limitation, filings and reports required to be
made with or pursuant to the rules of the SEC) or any by existing contract,
license, or agreement to which it is a party and provided that the party
required to make such announcement shall provide a draft copy thereof to the
other parties hereto, and consult with such other parties concerning the timing
and content of such announcement, before such announcement is made.
10.18 Recitals, Headings. The Recitals contained in this Agreement
shall be deemed to be a binding part of this Agreement. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
10.19 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid or unenforceable, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the greatest
extent possible.
10.20 Receivables. (a) For the Collection Period (as defined below),
Buyer, as agent for Seller, shall collect on behalf of Seller all Group I
Receivables with the same care and diligence as Buyer uses with respect to its
own accounts receivable, except that Buyer shall not be obligated to use any
extraordinary efforts for collection, including without limitation, institution
of litigation, and shall not refer any of the Group I Receivables to a
collection agency or to an attorney for collection, or compromise, settle or
adjust the amount of any Group I Receivable, except with the prior written
approval of Seller.
<PAGE>
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(b) To the extent that (i) Twenty Million Dollars ($20,000,000)
or more in Receivables from account debtors of Seller is outstanding on the
Closing Date, the Initial $20,000,000 Receivables Amount shall be divided
equally between Buyer and Seller and during the Collection Period, Buyer shall
remit to Seller one-half of all payments received by Buyer from account debtors
of Seller relating to the Group I Receivables up to the Initial $20,000,000
Receivables Amount and all payments in excess of the Initial $20,000,000
Receivables Amount; and (ii) less than Twenty Million Dollars ($20,000,000) in
Receivables from account debtors of Seller is outstanding on the Closing Date,
the amount in excess of Ten Million Dollars ($10,000,000) (the "Initial Excess
Amount") shall be divided equally between Buyer and Seller, and during the
Collection Period, Buyer shall remit to Seller one half of all payments received
by Buyer from account debtors of Seller relating to the Group I Receivables up
to the Initial Excess Amount and thereafter Buyer shall retain the difference
between one half of the Initial Excess Amount and Ten Million Dollars
($10,000,000). The parties acknowledge and agree that although the Columbus
Receivables are included for certain purposes herein, Buyer shall not receive
any rights, including collection rights, until the Columbus Option Closing Date,
and in all respects shall be limited to those rights expressly set forth in the
Columbus Option Agreement.
(c) To the extent the Collection Period has not yet ended
because one hundred twenty (120) days have not yet passed since the Closing Date
thereafter, all payments received from account debtors shall first be applied in
reduction of the oldest outstanding balance due from such account debtor, except
to the extent: (a) any account debtor specifically identifies the invoice being
paid, in which case, the account debtor's instructions shall govern; or (b) an
account is disputed by the account debtor as properly due, and the account
debtor has so notified Buyer in writing, in which case, all payments received
shall be applied as provided in (a) above, except to the extent of such dispute.
Buyer will promptly give Seller written notice of any such dispute with respect
to which Buyer has received notice from the account debtor.
(d) Buyer shall remit all payments owed to Seller (as set forth
in this Section 10.20) on the fifteenth day and the last day of each month.
(e) So long as Buyer is in compliance with this Section 10.20,
during the Collection Period none of Seller or any of its representatives or
agents, shall make any direct solicitation of the account debtors for collection
purposes or other direct attempts to collect from account debtors during such
<PAGE>
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Collection Period except as may be agreed to by Buyer, except with respect to
those accounts which may be or become more than ninety (90) days past due, and
except those accounts from which Buyer has received written notice of a dispute
from the account debtor.
(f) "Collection Period" means the period from the Closing Date
through the later of (i) one hundred twenty (120) days after the Closing Date,
and (ii) the date on which the Buyer shall have collected (a) the first Twenty
Million Dollars ($20,000,000) in payments from account debtors relating to the
Group I Receivables of Seller (the "Initial $20,000,000 Receivables Amount") or
(b) to the extent that less than Twenty Million Dollars ($20,000,000) in
Receivables from account debtors of Seller is outstanding on the Closing Date,
the Initial Excess Amount plus the difference between one-half of the Initial
Excess Amount and Ten Million Dollars ($10,000,000).
(g) Upon the conclusion of the Collection Period, Buyer shall
remit to Seller all amounts collected by Buyer from account debtors not
previously remitted to Seller that are in excess of the $10,000,000 to be
retained by Buyer hereunder, shall assign to Seller all uncollected Group I
Receivables and shall furnish Seller with a list of the amounts collected during
such period and all files concerning any uncollected Group I Receivables, and
Buyer shall have no further responsibilities hereunder except to remit promptly
to Seller any amounts subsequently received by it on account of the Group I
Receivables.
10.21 Board of Directors and Committees. From and after the Closing
Date, Buyer shall cause (i) each of (1) Baker and (2) Roy F. Coppedge (or such
other individual as may be designated by Boston Ventures Limited Partnership IV
and Boston Ventures Limited Partnership IVA (collectively, "Boston Ventures"))
(the "BV Designee") to receive notice of all meetings of the Board of Directors
of Buyer and to be permitted to attend such meetings, (ii) Baker to receive
notice of all meetings of any executive and finance committees and to be
permitted to attend such meetings, and (iii) the BV Designee to receive notice
of all meetings of any compensation and finance committees and to be permitted
to attend such meetings. In addition, if the Board of Directors or any
executive, finance or compensation committee of Buyer plans to take actions by
written consent in lieu of a meeting, then Buyer shall cause Baker (in the case
of the Board of Directors and any executive and finance committees) and the BV
Designee (in the case of the Board of Directors and any finance and compensation
committees) to receive a copy of the form of consent documents relating to such
actions at the same time that such
<PAGE>
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documents are circulated or distributed to the members of the Board of
Directors, executive, finance or compensation committees, as applicable. In
addition, as soon as permissible under the rules of the FCC and applicable laws,
Buyer shall cause (i) each of Baker and the BV Designee to be appointed as
members of the Board of Directors of Buyer, (ii) Baker to be appointed as a
member of any executive committee and, to the extent established, the finance
committee and (iii) the BV Designee to be appointed as a member of any finance
committee, to the extent established, and the compensation committee. Buyer's
Board of Directors (which presently consists of seven (7) directors) has duly
adopted resolutions which have fixed the number of members of (x) directors of
Buyer at nine (9) directors, (y) the executive committee at six (6) members, and
(z) the compensation committee at six (6) members and such resolutions also have
designated Baker and the BV Designee, as applicable, to fill the directorships
on the Buyer's Board of Directors and memberships on such committees pursuant to
the terms of this Agreement. To the extent that the Buyer or the Board of
Directors establishes a finance committee, it shall designate each of Baker and
the BV Designee as members of the finance committee. Baker shall be entitled to
be a director of Buyer and a member of the executive committee and, to the
extent established, the finance committee for so long as he remains an employee
of Buyer, and BV shall be entitled to have the BV Designee be a director of
Buyer and a member of the compensation committee and, to the extent established,
the finance committee until the first to occur of (i) the later of (a) the fifth
anniversary of the Closing Date and (b) the expiration of the initial five-year
term of Barry Baker's Employment Agreement with Buyer and (ii) such time, after
Buyer has issued the Convertible Preferred Stock to Seller or to its partners,
as Boston Ventures no longer owns, of record or beneficially to the extent of
its interest as a limited partner of Seller, at least 721,115 shares of Buyer
Common Stock, on an "as converted" basis, as such number may be adjusted
pursuant to stock splits, stock combinations, reclassifications or
recapitalizations of Buyer occurring after the date hereof.
10.22 List of Definitions. The following is a list of certain terms
used in this Agreement and a reference to the Section hereof in which such term
is defined:
Terms Section
----- -------
AAA Section 9.9
Add Back Programming Liabilities Section 5.12
Additional Days Section 2.3(b)
Additional Period Section 2.3(b)
Adjustment Amount Section 2.2(b)
<PAGE>
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Adjustment Date Section 2.2(a) (i)
Affiliate Section 3.6
Affiliation Agreements Section 1.1(m)
Agreement Preamble
Amended Charter Section 6.11
Amended Employee Letter Agreement Section 5.1(b)
Anti-Dilution Adjustments Section 2.1(i)
Articles Supplementary Section 2.1
Assumed Employees Section 10.3(a)
Assumed Liabilities Section 1.3
Balance Sheet Date Section 3.3
Baker Section 2.5(b)
Baker Stock Option Agreement Section 2.5(b)
Boston Ventures Section 10.21
Broadcasting Subsidiaries Section 4.12
Buyer Preamble
Buyer Common Stock Section 2.1
Buyer SEC Documents Section 4.11
Buyer's Estimate Report Section 2.2(b)
Buyer's 401(k) Plan Section 10.3(f)
Buyer's Lenders Section 10.1(a) (iii)
BV Designee Section 10.21
Cash Purchase Price Section 2.1
Closing Section 2.3(a)
Closing Balance Sheet Section 2.2(b)
Closing Date Section 2.3(a)
Closing Financial Statements Section 5.3(a)
Code Section 3.18
Collection Period Section 10.20
Columbus Assets Recitals
Columbus Option Agreement Section 7.7
Columbus Receivables Section 1.2(g)
Columbus Station Recitals
Consent Contracts Section 1.3
Consent Costs Section 1.3
Consulting Agreement Section 2.5(b)
Contract Section 1.1(e)
Convertible Preferred Stock Section 2.1
Conveyed Contracts Section 2.6
Corporate Employees Section 2.5(b)
Corporate Employee Stock Option Agreement Section 2.5(b)
Cure Extended Period Section 2.3(d)
Distributor Section 4.6
Down Payment Section 10.2(a)
Down Payment Interest Section 10.2(a))
Employee Letter Agreement Section 2.5(b)
Employment Agreement Section 2.5(b)
ERISA Section 3.17
Exchangeable Preferred Stock Section 2.1
<PAGE>
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Excluded Assets Section 1.2
Excluded Contracts Section 1.2(d)
Excluded Real Property Section 1.2(f)
Extended Periods Section 2.3(d)
Extension Notice Section 2.3(d)
FCC Section 1.2(f)
FCC Authorizations Section 1.2(f)
Group I Option Agreement Section 7.7
Group I Receivables Section 1.2(g)
Group I Time Brokerage Agreement Section 7.6
HSR Act Section 5.9
Initial Excess Amount Section 10.20
Initial $20,000,000 Receivables Amount Section 10.20
IRS Section 10.3(f)
ISO Amendment Section 2.5(b)
JSAs Recitals
JSA Stations Recitals
Kids Fair Section 2.4(a) (xvii)
KMSC Recitals
Laws Section 2.6
Leasehold Interests Section 1.1(b)
Leases Section 7.5
License Assets Section 1.2(f)
Licensee Section 1.2(f)
Litigation Extended Period Section 2.3
LMAs Recitals
LMA Stations Recitals
Loss and Expense Section 9.2
LTIP Section 2.5(b)
Material Adverse Change Section 8.10
New Employment Agreements Section 7.8
New Mexico Stations Recitals
1993 and 1994 Year-End Financial Statements Section 3.3
1995 Internal Financial Statements Section 3.3
1995 Year-End Financial Statements Section 5.3(a)
1996 Internal Financial Statements Section 3.3
Option Agreements Section 7.7
Option Stations Recitals
Original Purchase Agreement Preamble
Originally Scheduled Termination Date Section 2.3(a)
Other Assets Section 1.1(m)
Other Contracts Section 1.1(e)
Owned Stations Recitals
Permitted Encumbrances Section 1.3
Person Section 3.6
Plans Section 3.17
Post-Closing Estimate Fund Section 2.2(b)
Post Closing Estimate Fund Deposit Section 2.2(b)
Proceedings Section 2.6
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Program Contracts Section 1.1(d)
Programming Copyrights Section 1.1(g)
Prorations Escrow Agent Section 2.2(b)
Prorations Certificate Section 2.2(b)
Purchase Price Section 2.1
Qualified Plans Section 3.18
Radio Stations Recitals
Rich Section 2.2(a) (iv)
RCB Twin Peaks Equity Interest Recitals
Real Property Section 1.1(b)
Real Property Improvements Section 1.1(b)
Receivables Section 1.2(g)
Registration Rights Agreement Section 10.5
Registration Statement Section 10.5
Retained Liabilities Section 1.3
Retirees Section 10.3(h)
Sandia Recitals
Sandia Stock Section 3.20
SCI Section 6.8
SEC Section 10.4
Seller Preamble
Seller 401(k) Plan Section 10.3(f)
SOS Section 2.4(a) (v)
Station Assets Recital
Station Employee Stock Option Agreement Section 2.5(b)
Station Employees Section 2.5(b)
Station Material Adverse Change Section 3.6
Station Options Recitals
Stations Recitals
Stock Purchase Price Section 2.1
Subleases Section 7.5
Termination Date Section 2.3(a)
Trademarks, Etc. Section 1.1(f)
Trades Section 2.2(a) (ii)
Transaction Documents Section 9.8
TV Stations Recitals
Twin Peaks Recitals
Twin Peaks License Partnership Recitals
Twin Peaks License Partnership Interest Section 3.23
Twin Peaks Partnership Interest Section 3.23
Twin Peaks Sale Section 5.1(1)
Voting Agreement Section 2.5(b)
WLOS Plan Section 10.3(e)
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
BUYER:
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
--------------------------
Name: David B. Amy
Title: Chief Financial Officer
SELLER:
RIVER CITY BROADCASTING, L.P.
By: Better Communications,
Inc., its General Partner
By: /s/ Larry D. Marcus
---------------------------
Name: Larry D. Marcus
Title: Vice President
GROUP I
OPTION AGREEMENT
BY AND AMONG
RIVER CITY BROADCASTING, L.P.
AND
RIVER CITY LICENSE PARTNERSHIP,
AS SELLERS,
AND
SINCLAIR BROADCAST GROUP, INC.,
AS OPTION HOLDER
DATED AS OF May 31, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
OPTION TO ACQUIRE LICENSE ASSETS
1.1 Options...............................................................3
1.1.A. Option to Acquire License Assets......................................4
1.2 Excluded Assets.......................................................6
1.3 Liabilities...........................................................7
1.4 Option Exercise.......................................................9
1.5 Terms of Option. ....................................................9
ARTICLE 2
PAYMENTS AND CLOSING
2.1 Grant Price and Option Closing Price.................................10
2.1.A Payment for Option Grant.............................................10
2.1.B Payment Upon Option Closing and Option Extension Fees
.....................................................................10
2.2 Option Grant and Closing.............................................14
2.3 Deliveries at Option Grant...........................................14
2.4 Deliveries at Closing................................................16
2.5 Adjustments..........................................................19
2.6 Effect of Certain Laws or Proceedings................................21
2.7 Representations and Warranties of Sellers............................23
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Organization.........................................................24
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3.2 Approval/Authority...................................................24
3.3 No Conflicts.........................................................24
3.4 Brokers..............................................................25
3.5 FCC Authorizations...................................................25
3.6 Condition of Assets..................................................26
3.7 Title................................................................26
3.8 Call Letters, Trademarks, Etc........................................26
3.9 Insurance............................................................27
3.10 Contracts............................................................27
3.11 Employees............................................................28
3.12 Litigation...........................................................28
3.13 Compliance with Laws.................................................29
3.14 Complete Disclosure..................................................29
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
4.1 Incorporation........................................................29
4.2 Corporate Action.....................................................30
4.3 No Conflicts.........................................................30
4.4 Brokers..............................................................30
4.5 Litigation...........................................................30
ARTICLE 5
COVENANTS OF SELLERS PENDING THE CLOSING
5.1 Maintenance of Business until Closing................................31
5.2 Goodwill/Compliance with Agreements..................................35
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5.3 Reports; Access to Facilities, Files and Records.....................35
5.4 Notice of Proceedings................................................36
5.5 Confidential Information.............................................36
5.6 Consummation of Option Closing.......................................37
5.7 Notice of Certain Developments.......................................37
5.8 Covenants of Sellers After Option Exercise...........................37
5.9 Hart-Scott-Rodino....................................................38
5.10 Compliance with Group I TBA..........................................38
5.11 New Mexico Stations..................................................39
ARTICLE 6
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
6.1 Confidential Information.............................................39
6.2 Consummation of Agreement............................................40
6.3 Notice of Proceedings................................................40
6.4 Covenants of Option Holder After Option Exercise.....................40
6.5 Insurance............................................................41
6.6 Notice of Material Impact............................................41
6.7 Hart-Scott-Rodino....................................................42
6.8 Compliance with Group I TBA..........................................42
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLERS
7.1 Representations, Warranties, Covenants...............................42
7.2 Proceedings..........................................................43
7.3 Opinion of Counsel...................................................44
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7.4 FCC Authorization....................................................44
7.5 Hart-Scott-Rodino....................................................44
7.6 Termination of Certain Agreements....................................44
7.7 Group I TBA..........................................................44
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
8.1 Representations, Warranties, and Covenants...........................45
8.2 Proceedings..........................................................46
8.3 Opinion of Counsel...................................................46
8.4 FCC Authorizations...................................................47
8.5 Hart-Scott-Rodino....................................................47
8.6 Termination of Certain Agreements....................................47
8.7 Group I TBA..........................................................47
ARTICLE 9
INDEMNIFICATION
9.1 Survival.............................................................47
9.2 Indemnification of Option Holder.....................................48
9.3 Indemnification of Sellers...........................................48
9.4 Limitation of Liability..............................................48
9.5 Bulk Sales Indemnity.................................................50
9.6 Notice of Claims.....................................................50
9.7 Defense of Third Party Claims........................................50
9.8 Indemnity as Sole Remedy.............................................51
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9.9 Arbitration..........................................................51
ARTICLE 10
EMPLOYEE MATTERS
10.1 Employee Matters.....................................................53
ARTICLE 11
TERMINATION/MISCELLANEOUS
11.1 Termination of Options...............................................56
11.1.A Group I Options......................................................56
11.1.B Notice and Cure......................................................56
11.2 Effect of Termination and Other Limitations..........................57
11.3 Expenses.............................................................58
11.4 Assignments..........................................................58
11.5 Further Assurances...................................................59
11.6 Notices..............................................................59
11.7 Captions.............................................................60
11.8 Law Governing........................................................60
11.9 Consent to Jurisdiction, Etc.........................................60
11.10 Waiver of Provisions.................................................61
11.11 Counterparts.........................................................61
11.12 Entire Agreement/Amendments..........................................61
11.13 Access to Books and Records..........................................61
11.14 Waiver of Final Grant by FCC.........................................62
11.15 Recitals, Headings...................................................62
11.16 Severability.........................................................62
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11.17 Public Announcements and Press Releases..............................63
11.18 Board of Directors and Committees....................................63
11.19 List of Definitions..................................................64
11.20 No Third Party Beneficiaries.........................................66
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Exhibits
--------
Exhibit 2.5(b) Post-Closing Escrow Agreement
Exhibit 7.3(i) Opinion of Counsel to Option Holder
Exhibit 7.3(ii) Opinion of Counsel to Option Holder
FCC
Exhibit 8.3(i) Opinion of Counsel to Sellers
Exhibit 8.3(ii) Opinion of Counsel to Sellers (FCC)
Exhibit 9.4 Indemnification Escrow Agreement
Schedules
---------
Schedule 1.1.A(a) FCC Authorizations
Schedule 1.1.A(b) Tangible Personal Property
Schedule 1.1.A(c) Real Property
Schedule 1.1.A(d) Other Contracts
Schedule 1.1.A(e) Trademarks, Etc.
Schedule 1.1.B(a) Columbus Tangible Personal Property
Schedule 1.1.B(b) Columbus Real Property
Schedule 1.1.B(c) Columbus Other Contracts
Schedule 1.1.B(d) Columbus Trademarks, Etc.
Schedule 1.1.B(e) Columbus Programming Copyrights
Schedule 1.1.B(j) NewVenco Other Assets
Schedule 1.2(f) Excluded Contracts
Schedule 1.2(i) Interests in Certain Subsidiaries
Schedule 1.3 Liabilities
Schedule 2.1.A Allocation of Option Grant Price among
Stations
Schedule 2.1.B(a) Allocation of Option Closing Price among
Stations
Schedule 2.1.B(b) Columbus Station Excess Cash Flow
Schedule 3.1 Qualifications
Schedule 3.3 No Conflicts
Schedule 3.5 FCC Authorizations
Schedule 3.11 Certain Employee Matters
Schedule 3.12 Litigation
Schedule 5.1 Maintenance of Business
Schedule 9.2 Indemnification of Option Holder
Schedule 10.1 Employee Matters
Schedule 11.1.D Notice and Cure
<PAGE>
GROUP I OPTION AGREEMENT
------------------------
THIS OPTION AGREEMENT (this "Agreement") is dated as of May 31, 1996
(the "Option Grant Date"), and is by and among River City Broadcasting, L.P., a
limited partnership duly formed under the laws of the State of Delaware ("RCB"),
River City License Partnership, a general partnership duly formed under the laws
of the State of Missouri ("Licensee") (RCB and Licensee sometimes collectively
referred to herein as "Sellers" and individually as a "Seller"), and Sinclair
Broadcast Group, Inc., a corporation duly organized under the laws of the State
of Maryland ("Option Holder").
RECITALS
--------
WHEREAS, Licensee is the licensee of (i) Television Stations KOVR(TV),
Stockton, California, WTTV(TV), Bloomington, Indiana, WTTK(TV), Kokomo, Indiana,
KDSM-TV, Des Moines, Iowa, KDNL-TV, St. Louis, Missouri, WLOS-TV, Asheville,
North Carolina, WFBC(TV), Anderson, South Carolina and KABB-TV, San Antonio,
Texas (collectively referred to herein as the "Group I TV Stations"); and (ii)
Radio Stations KBLA(AM), Santa Monica, California, WVRV(FM), East St. Louis,
Illinois, WJCE-FM, Russellville, Kentucky, KMEZ-FM, Belle Chasse, Louisiana,
WSMB(AM), New Orleans, Louisiana, WLMG-FM, New Orleans, Louisiana, WWL(AM), New
Orleans, Louisiana, KPNT(FM), Sainte Genevieve, Missouri, WBEN(AM), Buffalo, New
York, WMJQ-FM, Buffalo, New York, WWKB(AM), Buffalo, New York, WKSE-FM, Niagara
Falls, New York, WGBI(AM), Scranton, Pennsylvania, WGGY(FM), Scranton,
Pennsylvania, WILK-AM, Wilkes Barre, Pennsylvania, WKRZ-FM, Wilkes Barre,
Pennsylvania, WOGY-FM, Germantown, Tennessee, WJCE(AM), Memphis, Tennessee,
WRVR-FM, Memphis, Tennessee, WLAC(AM), Nashville, Tennessee and WLAC-FM,
Nashville, Tennessee (collectively referred to herein as the "Radio Stations,"
and collectively as the "Stations" when referred to herein with the TV Stations
and any television or radio station with respect to which RCB or Licensee
becomes a licensee (as described in Schedule 2.2(a)(1) to the Asset Purchase
Agreement as defined below, or with the consent of Option Holder) prior to the
Asset Purchase Agreement Closing Date (the "After-Acquired Stations")), pursuant
to certain authorizations (the "FCC Authorizations") issued by the Federal
Communications Commission (the "FCC")(the Group I TV Stations, the Radio
Stations and any After-Acquired Stations being collectively referred to herein
as "Group I Stations" or the "Stations"); and
WHEREAS, RCB owns all of the issued and outstanding capital stock (the
"Sandia Stock") of Sandia Peak Broadcasters, Inc., a Delaware corporation
("Sandia"), a 40% general partnership
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interest (the "Twin Peaks Partnership Interest") in Twin Peaks Radio, a New
Mexico general partnership ("Twin Peaks"); a 1% general partnership interest
(the "Twin Peaks License Partnership Interest") in Twin Peaks Radio License
Partnership, a Missouri general partnership, with the remaining 60% general
partnership interest in Twin Peaks being owned by Sandia and the remaining 99%
general partnership interest in Twin Peaks License Partnership being owned by
Twin Peaks; and Twin Peaks License Partnership is the licensee of Radio Stations
KZSS(AM), Albuquerque, New Mexico, KZRR(FM), Albuquerque, New Mexico and
KLSK(FM), Santa Fe, New Mexico (collectively referred to herein as the "New
Mexico Stations"), pursuant to certain FCC Authorizations, and Twin Peaks owns
certain assets used or useful in connection with the operation of the New Mexico
Stations (the Sandia Stock, the Twin Peaks Partnership Interest and the Twin
Peaks License Partnership Interest being sometimes collectively referred to
herein as the "RCB Twin Peaks Equity Interests") and for purposes of the
representations and warranties, indemnification provisions and nomenclature of
the Options, the New Mexico Stations being deemed to be "Group I Stations" and
the assets of the New Mexico Stations that are of the same type as those
identified in Section 1.1.A hereof being deemed to be "License Assets";
provided, however, to the extent RCB sells the New Mexico Stations or the RCB
Twin Peaks Equity Interest (the "Twin Peaks Sale") prior to the Option Grant
Date or prior to the date Option Holder has consummated the acquisition of the
RCB Twin Peaks Equity Interest, no representations or warranties shall be made
hereunder with respect to the New Mexico Stations or the RCB Twin Peaks Equity
Interest as contemplated hereunder, and Option Holder acknowledges and agrees
that it waives its right to acquire the RCB Twin Peaks Equity Interest and any
Option with respect thereto shall immediately terminate, and RCB shall have no
obligation to sell and Option Holder shall have no obligation to purchase, the
RCB Twin Peaks Equity Interest; and
WHEREAS, RCB owns certain Other Assets (as defined herein); and
WHEREAS, RCB has entered with Option Holder into an Amended and
Restated Asset Purchase Agreement, dated as of April 10, 1996 and as amended and
restated as of May 31, 1996 (as amended, the "Asset Purchase Agreement"),
pursuant to which Option Holder is purchasing on the date hereof certain assets
and rights of RCB, as provided in the Asset Purchase Agreement; and
WHEREAS, on the date hereof (the "Asset Purchase Agreement Closing
Date") in connection with the closing of the Asset Purchase Agreement (the
"Asset Purchase Closing"), Sellers and Option Holder have entered into a Time
Brokerage Agreement
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relating to the Group I Stations but not including the New Mexico Stations (the
"Group I TBA") pursuant to which Option Holder will provide certain television
and radio programming to Sellers for the Group I Stations, all on the terms and
conditions contained in the Group I TBA; and
WHEREAS, RCB and Licensee desire to grant an option to the Option
Holder to acquire the License Assets (as defined in Section 1.1.A herein), and
Option Holder desires to acquire an option to acquire the License Assets, all on
the terms described herein; and
WHEREAS, with respect to each Station, on the Option Closing Date (as
defined in Section 2.2(b) herein) applicable to such Station, Sellers will
transfer and assign to Option Holder all of the License Assets with respect to
such Station;
WHEREAS, on the Asset Purchase Agreement Closing Date in connection
with the Asset Purchase Agreement Closing, Sellers and Option Holder are
entering into a Columbus Option Agreement (the "Columbus Option Agreement")
relating to Television Station WSYX(TV), Columbus, Ohio (the "Columbus Station")
pursuant to which Option Holder will acquire the option to acquire the License
Assets (as defined in the Columbus Option Agreement) and the Columbus Station
Assets (as defined in the Columbus Option Agreement); although certain of the
License Assets (as defined in the Columbus Option Agreement) and the Columbus
Station Assets are listed on the Schedules hereto, none of the assets relating
to the Columbus Station will be conveyed hereunder and no representations,
warranties, covenants or other agreements are made or shall be deemed to be made
hereunder with respect thereto.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows:
ARTICLE 1
---------
OPTION TO ACQUIRE LICENSE ASSETS
--------------------------------
1.1 Options. Upon and subject to the terms and conditions stated in
this Agreement, Sellers hereby as of the date hereof grant to Option Holder
separate options (i.e., one option per Station and one option for the RCB Twin
Peaks Equity Interest) to acquire concurrently in their entirety at one Closing
or separately at one or more Closings, all of Sellers' rights, title and
interest in, to and under the License Assets used or held by
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Sellers with respect to the Group I Stations, including (subject to RCB's right
to consummate the Twin Peaks Sale) the RCB Twin Peaks Equity Interest (the
"Group I Options" or the "Options").
1.1.A. Option to Acquire License Assets. Subject to the terms and
conditions stated in this Agreement, on the Option Closing Date applicable to
such Stations which are being acquired on such Option Closing Date, Sellers
shall convey, transfer, assign and deliver to Option Holder, and Option Holder
shall acquire from Sellers, all of Sellers' rights, title and interest in, to
and under all License Assets used or held for use by Sellers with respect to
such Stations, including the RCB Twin Peaks Equity Interest. As used in this
Agreement, "License Assets" used or held for use with respect to any Station
means all of Sellers' rights in, to and under the following, on the Option
Closing Date for such Station:
(a) FCC Authorizations. All FCC Authorizations issued to
Licensee with respect to the Station, including, without limitation, those shown
on Schedule 1.1.A(a) to this Agreement, and all applications therefor, together
with any renewals, extensions or modifications thereof and additions thereto.
(b) Tangible Personal Property. All equipment, vehicles,
furniture, transmitters, antennae, engineering equipment, office materials and
supplies, spare parts and other tangible personal property of every kind and
description owned as of the date of this Agreement by Sellers and used in
connection with the business and operations of the Station, including, without
limitation, those shown on Schedule 1.1.A(b) to this Agreement, and any
additions, improvements, replacements and alterations thereto made between the
date of this Agreement and the Option Closing Date for the Station, but
excluding all such property which is consumed, retired or disposed of by Sellers
in the ordinary course of their business between the date of this Agreement and
the Option Closing Date for the Station or as otherwise permitted by this
Agreement.
(c) Real Property. (i) All real property owned by Sellers
listed on Schedule 1.1.A(c) relating to the Station (the "Real Property"), (ii)
all buildings, structures, towers, improvements, transmitting towers and other
fixtures thereon (the "Real Property Improvements"), owned by Seller and used in
the business and operations of the Station; (iii) all other leaseholds and other
interests in real property held by Sellers relating to the Station (the
"Leasehold Interests") listed and so designated on Schedule 1.1.A(c); and (iv)
real property, and all buildings, structures and improvements thereon and
leasehold
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interests that are acquired by Sellers between the date hereof and the Option
Closing Date for the Station.
(d) Other Contracts. All contracts relating to any Station,
other than the Group I TBA, to which either Seller is a party (in addition to
and not included in those set forth in Sections 1.1.A(b) and 1.1.A(c) hereof)
and the Consent Contracts, as defined in, and contemplated under, Section 1.3(c)
of the Asset Purchase Agreement (collectively, "Other Contracts"), including all
agreements, equipment leases and other leases listed on Schedules 1.1.A(d) and
3.11 (as may be entered into, amended, renewed or extended pursuant to Section
5.1) to this Agreement, together with all such contracts that will have been
entered into in the ordinary course of business of the Station between the date
of this Agreement and the Option Closing Date for the Station and all other such
Contracts that will have been entered into between the date of this Agreement
and the Option Closing Date for the Station the making of which by Sellers is
permitted by this Agreement, to the extent existing as of the Option Closing
Date for the Station. As used in this Agreement, "Contract" means, with respect
to any Station, any agreement, lease, arrangement, commitment or understanding,
written or oral, expressed or implied, to which the Station or Sellers with
respect to the Station are a party or are bound.
(e) Trademarks, Etc. All trademarks, service marks, patents,
trade names, jingles, slogans and logotypes owned and used by Sellers in
connection with the business and operations of the Station as of the date
hereof, including, without limitation, Sellers' rights to use the call letters
of the Station and any related names and phrases and those shown on Schedule
1.1.A(e) to this Agreement and those acquired between the date hereof and the
Option Closing Date for the Station.
(f) FCC Records. All FCC logs and other records that relate
to the operations of the Station.
(g) Files and Records. All files and other records of
Sellers relating solely to the business and operations of the Station other than
account books of original entry and other than such files and records that are
maintained at the corporate offices of Sellers or RCB's general partner for tax
accounting purposes.
(h) RCB Twin Peaks Equity Interests. With respect to the New
Mexico Stations, all of the RCB Twin Peaks Equity Interests.
<PAGE>
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(i) Goodwill. All of Sellers' goodwill in and going concern
value associated with the Stations.
(j) Other Assets. All other assets of Sellers relating to
the business and operations of the Station not expressly excluded in Section 1.2
hereof.
1.2 Excluded Assets. There shall be excluded from the License Assets
relating to any Station and retained by Sellers, to the extent in existence on
the Option Closing Date for such Station, the following assets (the "Excluded
Assets"):
(a) Cash. All cash, cash equivalents and cash items of any
kind whatsoever, certificates of deposit, money market instruments, bank
balances and rights in and to bank accounts, Treasury bills and marketable
securities and other securities of either Seller.
(b) Personal Property Disposed Of. All tangible personal
property disposed of or consumed in the ordinary course of the business of any
Station between the date of this Agreement and the Closing relating to such
Station.
(c) Insurance, Bonds, Etc. All contracts of insurance and
all insurance plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto.
(d) Claims. Any and all claims of Sellers with respect to
transactions occurring prior to the occurrence of the last Option Closing Date
hereunder, including, without limitation, rights and interests of Sellers in and
to any claims for tax refunds (including, but not limited to, federal, state or
local franchise, income or other taxes) and all causes of action and claims of
Sellers under contracts and with respect to other transactions with respect to
events occurring prior to such last Option Closing Date and all claims for other
refunds of monies paid to any governmental agency and all claims for copyright
royalties for broadcast prior to the Option Closing Date.
(e) Pension Assets, Etc. Except as otherwise provided under
Section 10.1, pension, profit sharing, retirement, bonus, stock purchase,
savings plans and trusts, 401(k) plans, health insurance plans (including any
insurance contracts or policies related thereto), and the assets thereof and any
rights thereto, and all other plans, agreements or understandings to provide
employee benefits of any kind for employees of Sellers.
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(f) Certain Contracts. The agreements listed on Schedule
1.2(f) hereof (the "Excluded Contracts").
(g) Certain Books and Records. Sellers' partnership records
and other books and records that pertain to internal partnership matters of
Sellers and Sellers' account books of original entry with respect to any
Station, and all books, records, accounts, checks, payment records, tax records
(including payroll, unemployment, real estate and other tax records) and other
similar books, records and information of Sellers relating to Sellers' operation
of the business of each Station prior to the Closing relating to such Station,
with the proviso that Option Holder shall be allowed to maintain copies of all
such records relating to the Stations or the License Assets and/or upon a
written request for same shall be allowed further access to all excluded records
to the extent retained by Sellers at all reasonable times during the term of
this Agreement for a period of the (3) years after the Option Closing Date
relating thereto.
(h) Certain Prepaid Expenses. The prepaid expenses of
Sellers with respect to items that are not subject to adjustment under Section
2.5.
(i) Interests in Certain Subsidiaries. All of Sellers'
interests in the subsidiaries described in Schedule 1.2(i).
(j) River City Name. All rights to and goodwill in the name
"River City Broadcasting" and any logo, variation or derivation thereof.
1.3 Liabilities. (a) Liens. For each Station, the License Assets used
or held for use by Sellers with respect to such Station shall be sold and
conveyed to Option Holder, as of the Option Closing Date for such Station, free
and clear of all liens, security interests and encumbrances except (i) all
matters of record including, without limitation, those matters disclosed on
Schedule 1.3 hereto as "continuing" and, including, without limitation, the
rights of lessors with respect to any leasehold interests in real property or
operating leases for personal property; (ii)(1) liens or encumbrances on the
Real Property, Real Property Improvements, Leasehold Interests currently of
record; and (2) other liens or encumbrances on the Real Property, Real Property
Improvements and Leasehold Interests included in the License Assets that with
respect to (ii)(2) hereof do not materially affect the value or the current or
continued use and enjoyment (to the extent such continued use and enjoyment
conforms with current use and enjoyment) thereof in the operation of the
Stations; (iii) liens for taxes not yet due and payable;
<PAGE>
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and (iv) the Assumed Liabilities (as hereinafter defined) and "Assumed
Liabilities" as defined in the Asset Purchase Agreement (all of the foregoing in
clauses (i) through (iv) are sometimes collectively referred to herein
collectively as "Permitted Encumbrances" but shall be deemed to exclude any
judgment liens, mortgages, capital leases or security interests or trust
arrangements providing for similar effect (including, without limitation,
purchase money mortgages and purchase money security interests granted by
Sellers in favor of any third party securing obligations for borrowed money)).
(b) Assumption of Liabilities. (i) Option Holder agrees that, on the
Option Closing Date relating to any Station, Option Holder shall assume,
undertake and agree to pay, satisfy, perform, discharge and be liable for, with
respect to such Station, and Sellers shall not thereafter be liable for (1) any
liabilities and obligations of Sellers that Option Holder has not previously
assumed and as the same shall exist on the Option Closing Date that arise on or
after the Option Closing Date, including all such liabilities and obligations
arising out of and related to the ownership and operation of such Station that
Option Holder has not previously assumed, including the License Assets
(including under the contracts assigned pursuant to Sections 1.1.A(c) and
1.1.A(d) with respect to such Station and any contracts that are entered into
after the date hereof with respect to such Station and those liabilities and
obligations referred to in Section 10.1 hereof); (2) any liability or obligation
arising out of the business or operations of any Station or any of the License
Assets, arising on or after the Option Closing Date for such Station; (3) any
Assumed Liabilities, including under any contracts assumed by Option Holder
hereunder, with respect to such Group I Station; (4) any other liabilities or
obligations incurred or assumed by Option Holder with respect to any of the
License Assets with respect to such Station; (5) any liability or obligation to
any Station Employee for such Station; and (6) any duty, obligation or liability
relating to any pension, 401(k) or other similar plan, agreement or arrangement
provided by Option Holder to any Station Employee for such Station.
To the extent, if any, any Seller makes a payment to Option Holder as a
result of any adjustment pursuant to Section 2.5 hereof, Option Holder shall
then assume and be obligated to pay such obligations and liabilities for which
such adjustment was made pursuant to Section 2.5.
(c) Consents to Contracts. Option Holder agrees that on the
Option Closing Date for such Station, Option Holder will assume the contracts
included in the License Assets relating to
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such Group I Station (together with any Consent Contracts, as defined in and
pursuant to Section 1.3 of the Asset Purchase Agreement), regardless of whether
consent has been obtained in connection therewith. The liabilities and
obligations in connection with all such contracts shall also constitute "Assumed
Liabilities" for purposes of this Agreement.
1.4 Option Exercise. In order to exercise an Option, Option Holder must
deliver to Sellers written notice (an "Exercise Notice") of Option Holder's
intention to so exercise such Option and designating whether all or any one of
the Group I Options is being exercised (and designating which Stations are to be
acquired thereunder). The date upon which any Exercise Notice is given with
respect to an Option shall be referred to as the "Exercise Date" for such
Option. Option Holder may withdraw any Exercise Notice at any time prior to the
related Option Closing Date by written notice to that effect to Sellers. Upon
withdrawal of any Exercise Notice, Option Holder shall reimburse Sellers for all
reasonable out-of-pocket expenses, including, without limitation, reasonable
attorneys' fees, incurred by Sellers in connection with its compliance with
Section 5.8(a) and Section 5.8(b) with respect to such Exercise Notice. Nothing
contained in this Section 1.4 is intended to prohibit the Option Holder from
subsequently exercising an Option during the Exercise Period defined in Section
1.5 hereof after any such withdrawal nor shall any withdrawal of any Exercise
Notice extend the terms of the Option or affect the payments referred to in
Section 1.5 below. The Group I Options may be exercised concurrently in one step
or separately in two or more steps with respect to the Group I Stations.
1.5 Terms of Option. Option Holder shall have the right to exercise the
Group I Options from the date hereof to and including April 10, 2006 (the
"Exercise Period"). Upon the failure of Option Holder to deliver the Exercise
Notice for any unexercised Group I Option during the Exercise Period as provided
herein, such Group I Option shall expire. Notwithstanding anything to the
contrary herein, the Closing on an Option may take place after the expiration of
the Exercise Period so long as Option Holder has (i) delivered the Exercise
Notice for such Option to Sellers in accordance with Section 1.4 prior to the
expiration of the then current Exercise Period, but in no event shall the final
Closing of any Group I Option take place later than April 10, 2008.
<PAGE>
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ARTICLE 2
---------
PAYMENTS AND CLOSING
--------------------
2.1 Grant Price and Option Closing Price.
2.1.A Payment for Option Grant. In consideration of Sellers' grant
of the Options, Option Holder shall pay to Sellers Two Hundred Thirty-Two
Thousand Dollars ($232,000) (the "Group I Option Grant Price" or the "Option
Grant Price"), which shall be allocated among the Stations in accordance with
Schedule 2.1.A. The Group I Option Grant Price shall be allocated between the
Sellers as determined by Seller and paid by Option Holder to Sellers by wire
transfer of immediately available funds to such bank account(s) as Sellers may
designate on or prior to the Option Grant Date.
2.1.B Payment Upon Option Closing and Option Extension Fees.
(a) In consideration of Sellers' performance of this Agreement
and the transfer, assignment and delivery of the License Assets of the Group I
Stations, Option Holder will pay to Sellers (as set forth in the next sentence)
with respect to each Group I Station the amount allocable to such Group I
Station in accordance with Schedule 2.1.B(a) (collectively, the "Group I Option
Closing Price" or the "Option Closing Price") on or before the Columbus Option
Payment Date (which term when used herein shall have the meaning assigned to
such term in the Columbus Option Agreement). If on the date of payment of a
Group I Option Closing Price, there is an outstanding balance due from Sellers
under that certain Credit Agreement dated as of May 31, 1996 by and among the
Sellers, The Chase Manhattan Bank, N.A., as agent and other lenders thereunder
(as the same may be amended, modified or supplemented and including any
successor credit agreement or similar document evidencing any refinancing or
refunding of obligations under such Credit Agreement, collectively, the "RCB
Credit Agreement") (such outstanding balance, the "Unpaid Amount"), Option
Holder shall pay for the benefit of Sellers, directly to the lenders under the
Credit Agreement (the "Lenders"), an amount equal to the lesser of (i) the
Unpaid Amount, and (ii) an amount equal to the product of (A) the excess of one
(1) over the Highest Capital Tax Rate (as defined herein), and (B) the Group I
Option Closing Price. The "Highest Capital Tax Rate" means the greater of (a)
the combined marginal federal, state, and local income tax rate applicable to
the capital gains of an individual residing in New York City as of the end of
the fiscal year in which Closing of the Group I Option occurs, or (b) the
combined marginal federal, state, and
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local income tax rate applicable to the capital gains of a corporation located
in New York City as of the end of the fiscal year in which Closing of the Group
I Option occurs. At least three (3) business days prior to payment hereunder
Option Holder shall give Sellers notice of the date on which Option Holder is
making a payment, and at least one (1) business day prior to the payment of the
Group I Option Closing Price, Sellers will provide to Option Holder a
certificate setting forth whether there is any Unpaid Amount, and, if so,
Sellers' calculation of the amount of the Group I Option Closing Price (which
shall be made in good faith and shall be conclusive absent manifest error) that
should be paid to Lender in connection therewith. Any portion of the Group I
Option Closing Price not paid directly to the Lender shall be paid directly to
Sellers.
Option Holder shall pay (or be deemed to have paid) the Group I Option
Closing Price as follows:
(i) With respect to a Group I Option the Closing of
which occurs prior to the Columbus Option Payment Date (as defined in the
Columbus Option Agreement), Option Holder shall pay the Option Closing Price for
such Group I Option at any time on or prior to the Columbus Option Payment Date;
and
(ii) With respect to a Group I Option the Closing of
which does not occur on or prior to the Columbus Option Payment Date:
(A) if such Columbus Option Payment Date is
the date of the Closing of the Columbus Option, Option Holder shall pay the
Option Closing Price for such Group I Option on the Columbus Option Payment
Date;
(B) if such Columbus Option Payment Date is
the date described in Section 2.1.B(a)(ii) of the Columbus Option Agreement,
Option Holder shall be deemed to have paid the Option Closing Price for such
Group I Option on such Columbus Option Payment Date; and
(C) if such Columbus Option Payment Date is
the date described in Section 2.1.B(a)(iii) of the Columbus Option Agreement,
Option Holder shall be deemed to have paid the Option Closing Price for such
Group I Option on such Columbus Option Payment Date.
As used herein, at any time the "Group I Unpaid Options" shall mean:
(i) any Group I Option the Closing of which has occurred and with respect to
which Option Holder has not yet paid
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in full the Option Closing Price relating thereto, and (ii) any Group I Option
the Closing of which has not occurred.
(b) Until the Columbus Option Payment Date, Option Holder shall be
required to pay to Sellers, on December 31, 1996, and on each March 31, June 30,
September 30 and December 31 thereafter and on the Columbus Option Payment Date,
an extension fee with respect to each Group I Unpaid Option (each, an "Option
Extension Fee" and collectively, the "Option Extension Fees"). The Option
Extension Fees shall accrue on each Group I Unpaid Option on the basis of a
365-day year based on the actual number of days elapsed in the period during
which the Option Extension Fees accrue. The Option Extension Fees shall be paid
as follows:
(i) on December 31, 1996 (or the Columbus Option Payment
Date, if earlier), Option Holder shall pay to Sellers an Option Extension Fee
with respect to each Group I Unpaid Option in an amount equal to (A) the product
of (Y) eight percent (8%) and (Z) the amount of the Option Closing Price
attributable to such Unpaid Option minus, in the case of a Group I Unpaid Option
that has been assigned pursuant to Section 11.4 hereof, the Option Assignment
Price for such Group I Unpaid Option, multiplied by (B) a fraction, the
numerator of which is the number of days elapsed from the Option Grant Date to
December 31, 1996 (or the Columbus Option Payment Date, if earlier) and the
denominator of which is 365;
(ii) thereafter, on each March 31, June 30, September 30 and
December 31, and on the Columbus Option Payment Date, Option Holder shall pay to
Sellers an Option Extension Fee calculated as follows:
(A) with respect to each Group I Unpaid
Option, for the period beginning on January 1, 1997 and ending on the first
anniversary of the Option Grant Date, an amount equal to (A) the product of (Y)
eight percent (8%) and (Z) the amount of the Option Closing Price attributable
to such Group I Unpaid Option minus, in the case of a Group I Unpaid Option that
has been assigned pursuant to Section 11.4 hereof, the Option Assignment Price
for such Group I Unpaid Option, multiplied by (B) a fraction, the numerator of
which is equal to the number of days elapsed since the due date of the previous
payment of an Option Extension Fee and the denominator of which is 365;
(B) with respect to each Group I Unpaid
Option, for the period beginning on the first day after the first anniversary of
the Option Grant Date and ending on the second anniversary of the Option Grant
Date, an amount equal to (A) the product of (Y) fifteen percent (15%) and (Z)
the amount of the
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Option Closing Price attributable to such Group I Unpaid Option minus, in the
case of a Group I Unpaid Option that has been assigned pursuant to Section 11.4
hereof, the Option Assignment Price for such Group I Unpaid Option, multiplied
by (B) a fraction, the numerator of which is equal to the number of days elapsed
since the later of (I) the due date of the previous payment of an Option
Extension Fee and (II) the first anniversary of the Option Grant Date, and the
denominator of which is 365; and
(C) with respect to each Group I Unpaid
Option, for the period beginning on the first day after the second anniversary
of the Option Grant Date and ending on the Columbus Option Payment Date, an
amount equal to (A) the product of (Y) twenty-five percent (25%) and (Z) the
amount of the Option Closing Price attributable to such Group I Unpaid Option
minus, in the case of a Group I Unpaid Option that has been assigned pursuant to
Section 11.4 hereof, the Option Assignment Price for such Group I Unpaid Option,
multiplied by (B) a fraction, the numerator of which is equal to the number of
days elapsed since the later of (I) the due date of the previous payment of an
Option Extension Fee and (II) the second anniversary of the Option Grant Date,
and the denominator of which is 365.
(c) The Option Holder shall assume the Assumed Liabilities and other
obligations and liabilities to be assumed by Option Holder hereunder with
respect to a Group I Station on the Option Closing Date for such Station.
(d) Notwithstanding any other provision contained herein, except and
subject to Section 11.1.B, (i) the Group I Options shall expire on April 10,
2006 and (ii) notwithstanding the expiration or termination of a Group I Option,
such terminated Group I Option shall continue to be a Group I Unpaid Option, and
Option Holder shall continue to be liable for the payment of the Option Closing
Price and Extension Fees attributable to such terminated Option pursuant to this
Section 2.1.B until the Columbus Option Payment Date (iii) it is understood and
agreed by Option Holder that in no event shall any Option Extension Fee be
refundable to Option Holder hereunder; and (iv) if the Columbus Option is
terminated, Option Holder shall continue to pay the Option Extension Fees
required by Section 2.1.B until Option Holder pays, or is deemed to have paid,
the Group I Option Closing Price on the Columbus Option Payment Date.
(e) The Option Closing Price payable for each Station and Extension
Fees attributable to such Station shall be allocated between the Sellers in such
manner as determined by the
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Sellers and shall be paid by Option Holder to Sellers by wire transfer of
immediately available federal funds in United States dollars to such bank
account(s) as Sellers may designate; provided, however, that payments of One
Hundred Dollars ($100.00) or less may be made by check.
2.2 Option Grant and Closing.
(a) Option Grant. The grant of the Group I Options (the "Option
Grant") shall become effective on the Option Grant Date upon the execution of
this Agreement by all parties and the receipt of the Option Grant Price referred
to in Section 2.1(a)(i).
(b) Closing. The closing of the purchase and sale with respect to
a Group I Station upon the exercise of the Group I Option relating to such
Station (a "Closing") shall be held in the offices of Dow, Lohnes & Albertson,
1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036, at 10:00
a.m., local time, on a regular business day specified by Option Holder by
written notice to Sellers not less than twenty (20) business days in advance of
such specified business day, or at such other place and/or such other day as
Sellers and Option Holder may agree in writing, provided that, in no event shall
any Closing take place after April 10, 2008 (hereinafter referred to with
respect to such Option as a "Group I Option Closing Date" or an "Option Closing
Date").
2.3 Deliveries at Option Grant.
(a) Deliveries by Sellers. On the Option Grant Date, Sellers have
delivered to Option Holder such customary documentation reasonably satisfactory
to Option Holder and its counsel in order to effect the transaction contemplated
by this Agreement, including, without limitation, the following:
(i) a certified copy of the resolutions or proceedings of
Sellers authorizing Sellers' consummation of the transactions contemplated by
this Agreement;
(ii) a certificate as to the existence and good standing of
RCB issued by the Secretary of State of Delaware not more than ten (10) days
before this Option Grant Date, certifying as to the incorporation and/or
organization of RCB in Delaware and, certificates issued by an appropriate
governmental authority of RCB to do business in the jurisdictions listed in
Schedule 3.1, to the extent such certificates are available, dated not more than
ten (10) days before the Option Grant Date;
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(iii) a receipt for the Option Grant Price;
(iv) the opinion of Sellers' counsel in the form attached as
Exhibit 8.3 to the Asset Purchase Agreement, dated as of this Option Grant Date;
(v) certificates of insurance showing Option Holder named as
additional insured as contemplated in Section 5.1; and
(vi) such other documents as Option Holder may reasonably
request.
(b) Deliveries by Option Holder. On the Option Grant Date, Option
Holder have delivered to Sellers the Option Grant Price and such instruments and
other customary documentation reasonably satisfactory to Sellers and their
counsel in order to effect the transactions contemplated by this Agreement,
including, without limitation, the following:
(i) a certified copy of resolutions or proceedings of Option
Holder authorizing the consummation of the transactions contemplated by this
Agreement;
(ii) a certificate issued by the Maryland Department of
Assessments and Taxation dated not more than ten (10) days before this Option
Grant Date certifying as to the incorporation and good standing and/or
qualification of Option Holder in Maryland and, to the extent available, a
certificate of the appropriate governmental authorities as to the qualification
of Option Holder, or an appropriate wholly-owned operating subsidiary of Option
Holder, to transact business in each jurisdiction in which the Stations
presently transact business from the Secretary of State or analogous entity of
each such jurisdiction, dated not more than ten (10) days before the Option
Grant Date;
(iii) opinions of Option Holder's counsel and special
counsel in the forms attached as Exhibits 7.3(a) and 7.3(b), respectively, to
the Asset Purchase Agreement, each dated as of this Option Grant Date;
(iv) certificates of insurance contemplated in Section 6.5;
and
(v) such further documents as Sellers may reasonably
request.
<PAGE>
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2.4 Deliveries at Closing. All actions at each Closing shall be deemed
to occur simultaneously, and no document or payment shall be deemed to be
delivered or made until all documents and payments are delivered or made to the
reasonable satisfaction of Option Holder, Sellers and their respective counsel.
(a) Deliveries by Sellers.
(i) At each Closing, Sellers shall deliver to Option Holder
such instruments of conveyance and other customary documentation as shall in
form and substance be reasonably satisfactory to Option Holder and its counsel,
including, without limitation, the following:
(a) one or more bills of sale conveying the personal
property and all leases, contracts, and other intangible assets included in the
License Assets for the Station that is the subject of such Closing;
(b) one or more assignments conveying the FCC
Authorizations included in the License Assets for the Station that is the
subject of such Closing;
(c) any mortgage discharges or releases of liens that
are necessary in order to transfer (i) the License Assets for the Station that
is the subject of such Closing as contemplated by Section 1.3;
(d) a receipt for the Option Closing Price for the
Station that is the subject of such Closing and for the Extension Fee applicable
to such Group I Option that has accrued since the due date of the previous
payment of Option Extension Fees for such Option (unless, with respect to the
Closing of a Group I Option prior to the Columbus Option Closing Date, Option
Holder defers the payment of such Option Closing Price until the Columbus Option
Closing Date);
(e) all consents received by Sellers through the
Option Closing Date to the assignment to or assumption by Option Holder of
licenses, contracts and leases included in the License Assets for the Station
that is the subject of such Closing;
(f) the Terminations as required by Section 8.6
hereof;
(g) documents of conveyance evidencing transfer of
the Real Property included in the License Assets for the Station that is the
subject of such Closing;
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(h) in the case of the Closing of the Twin Peaks
Equity Interests, a stock certificate of Sandia representing the Sandia Stock
(together with a blank stock power for the Sandia Stock);
(i) to the extent (1) such assets were not conveyed
under the Asset Purchase Agreement, (2) made available by NewVenco, Inc. and
Television Alliance Group, Inc. and (3) consent is obtained to the transfer
thereof, (a) all stock certificates of NewVenco, Inc. and Television Alliance
Group, Inc. representing all of RCB's interest in the Other Assets (as such term
is defined in the Asset Purchase Agreement) (together with stock powers endorsed
in blank for such stock certificates of NewVenco, Inc. and Television Alliance
Group, Inc., respectively) or (b) a stock certificate of NewVenco, Inc. and
Television Alliance Group, Inc. representing Buyer's interest in the Other
Assets;
(j) to the extent (1) such assets were not conveyed
under the Asset Purchase Agreement and (2) consent is obtained to the transfer
thereof, a stock certificate of Transtower, Inc. representing all of Seller's
interest in Transtower, Inc. (together with a stock power endorsed in blank for
such stock of Transtower, Inc.); and
(k) the list of Qualified Beneficiaries entitled to
Continuation Coverage as of such Closing Date, as contemplated under Section
10.1(b).
(ii) At each Closing, and upon the written request of Option
Holder at least ten (10) business days prior to such Closing, Sellers shall
deliver to Option Holder, to the extent requested by Option Holder, the
following:
(a) a certified copy of the resolutions or
proceedings of each Seller authorizing the transactions contemplated at such
Closing by this Agreement;
(b) a certificate of Sellers as required by Section
8.1(c) hereof;
(c) the opinion of counsel required by Section 8.3
hereof;
(d) a certificate as to the existence and good
standing of RCB issued by the Secretary of State of the State of Delaware dated
not more than ten (10) days before the Option Closing Date and a certificate of
the appropriate governmental authorities as to RCB's qualification to transact
business in
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Delaware and, certificates issued by the appropriate governmental authority of
the jurisdiction in which the Station that is the subject of such Closing to the
extent RCB then transacts business in such jurisdiction and to the extent such
certificates are available, dated not more than ten (10) days before the Option
Closing Date;
(e) such other documents as Option Holder shall
reasonably request.
(b) Deliveries by Option Holder.
(i) At each Closing, Option Holder shall deliver to Sellers
and to Lender to the extent set forth in Section 2.1.B(a) above, the Group I
Option Closing Price applicable to such Closing and to Sellers such instruments
of assumption and other customary documentation as shall in form and substance
be reasonably satisfactory to Sellers and their counsel, including, without
limitation, the following:
(a) the Group I Option Closing Price for the Station
that is the subject of such Closing and the Extension Fee applicable to such
Group I Option that has accrued since the due date of the previous payment of
Option Extension Fees for such Option (unless, with respect to the Closing of a
Group I Option prior to the Columbus Option Payment Date, Option Holder defers
the payment of such Option Closing Price until the Columbus Option Payment
Date); provided that such amounts shall be delivered in the manner set forth in
Section 2.1.B hereof;
(b) an assumption of liabilities pursuant to which
Option Holder will assume the Assumed Liabilities relating to the Station that
is the subject of such Closing;
(c) the Terminations as required by Section 7.6; and
(d) in the case of the Closing of the RCB Twin Peaks
Equity Interests, a receipt for the stock certificate issued to Option Holder
representing the Sandia Stock;
(ii) At each Closing, and upon the written request of Sellers
at least ten (10) business days prior to such Closing, Option Holder shall
deliver to Sellers, to the extent requested by Sellers, the following:
(a) a certified copy of the resolutions or
proceedings of Option Holder authorizing the transactions contemplated by this
Agreement;
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(b) a certificate of Option Holder as required by
Section 7.1(c) hereof;
(c) a certificate as to the existence and good
standing of Option Holder issued by the Maryland Department of Assessments and
Taxation dated not more than ten (10) days before the Option Closing Date and a
certificate of the appropriate governmental authorities as to the qualification
of Option Holder or an appropriate wholly-owned operating subsidiary of Option
Holder to transact business in each jurisdiction in which the Station that is
the subject of such Closing to the extent RCB then transacts business in such
jurisdiction and to the extent such certificates are available from the
Secretary of State or analogous entity of such jurisdiction dated not more than
10 days before the Option Closing Date;
(d) the opinion of counsel required by Section 7.3
hereof;
(e) such other documents as Sellers shall reasonably
request.
2.5 Adjustments.
(a) Group I TBA. The parties agree to finalize any payments
due under the Group I TBA relating to the Station through 11:59 p.m. on the day
preceding the Option Closing Date for such Station (the "Adjustment Date").
(b) (i) Pre-Closing Certificate. For the purpose of finalizing
the amounts required pursuant to Section 2.5(a)(i), Sellers shall deliver to
Option Holder, and Option Holder shall deliver to Sellers, not less than five
(5) days prior to the applicable Option Closing Date, a certificate (the
"Pre-Closing Certificate"), to be signed at such Closing by an appropriate
official of such parties after due inquiry by such official, but without any
personal liability to any such official, each of which shall specify Sellers'
and Option Holder's good faith determinations of the dollar amount under Section
2.5(a)(i), including, without limitation, appropriate documentation supporting
determinations and calculations under Section 2.5(a).
(ii) Pre-Closing Dispute; Escrow. If Sellers or
Option Holder, acting in good faith, do not agree with any amount set forth in
the other parties' Pre-Closing Certificate, then on or prior to the second
business day prior to such Option Closing Date, such party (the "Disputing
Party") may deliver to the other a written report (the "Estimate Report")
setting forth in reasonable detail the Disputing Party's good faith reasonable
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estimate(s) of the amount(s) with which the Disputing Party disagrees. Any
estimated amount which is set forth in the Pre- Closing Certificate and as to
which the Disputing Party does not deliver its own estimate on or prior to such
second business day will be the "estimated amount" of the adjustments under
Section 2.5(a)(i) (the "Adjustment Amount"), on the applicable Option Closing
Date. In the case of any such estimated amount as to which the Disputing Party
delivers its own estimate, the parties will endeavor in good faith to agree
prior to the Closing on the appropriate amount of such estimate, and any amount
so agreed upon by them in writing prior to the Closing will be the "estimated
amount" of the Adjustment Amount on the applicable Option Closing Date. In the
case of any such estimated amount as to which the Disputing Party delivers its
own estimate and Sellers and Option Holder do not so agree, the estimate set
forth in the Sellers' Pre-Closing Certificate will be the "estimated amount" of
the Adjustment Amount, on the Option Closing Date, and at the Closing the
difference (if any) between the amount of the Option Closing Price that would be
determined using the amount set forth in the Sellers' Pre-Closing Certificate
(as adjusted in accordance with Section 2.5(a)(ii)) and the amount of the Option
Closing Price determined using the estimated Adjustment Amount set forth in the
Estimate Report (such amount, the "Post-Closing Estimate Fund Deposit") will be
transferred by Option Holder to Magna Trust Company, St. Louis, Missouri or such
other bank as mutually agreed to by the parties (the "Escrow Agent"), to be held
by the Escrow Agent pursuant to the Post-Closing Escrow Agreement substantially
in the form of Exhibit 2.5(b) (with such changes as the Escrow Agent may
request), and pending final determination of the disputed amount(s) in question
pursuant to this Section 2.5(b) as set forth below, as a fund in escrow (the
"Post-Closing Estimate Fund") to provide security for the payment of any
additional amount which may be payable by Option Holder or pursuant to Section
2.1.
(iii) Adjustment at Closing. At such Closing, the
Option Closing Price shall be decreased to the extent Sellers owe Option Holder
funds or increased to the extent Option Holder owes Sellers funds, based upon
the amount set forth, in the Sellers' Pre-Closing Certificate (as adjusted in
accordance with Section 2.5(a)(ii)).
(iv) Post-Closing Dispute. If any such dispute cannot
be resolved by Option Holder and Sellers or their respective independent public
accountants within one hundred and eighty (180) days after the Option Closing
Date, the disputed matters shall be referred to a mutually satisfactory
independent public accounting firm of national stature which has not been
employed by any party hereto for the two (2) years preceding the
<PAGE>
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date of such referral; such firm to be selected by the independent public
accountants of Sellers and Option Holder. The determination of such firm shall
be conclusive and binding on each party and not subject to dispute or review.
One-half of the fees of such firm shall be paid by Sellers, and one-half shall
be paid by Option Holder.
(v) Disbursement of Post-Closing Estimate Fund. If
any funds are transferred to the Escrow Agent to be held in the Post-Closing
Estimate Fund, then any amount which becomes payable to Option Holder or Sellers
pursuant to Section 2.5(b), together with interest accrued on such amount, will
be paid to Option Holder or Sellers from the Post-Closing Estimate Fund, to the
extent of the funds therein. If no funds are transferred to the Escrow Agent to
be held in the Post-Closing Estimate Fund or the entire amount so transferred
has theretofore been paid pursuant to this paragraph of Section 2.5(b), then any
remaining amount payable to Sellers pursuant to Section 2.5(b) will be paid by
Option Holder and any remaining amount payable to Option Holder pursuant to
Section 2.5(b) will be paid by Sellers. Any amount payable by Sellers or Option
Holder pursuant to Section 2.5(b) (other than to the extent that funds are
available from the Post-Closing Estimate Escrow to pay such amount) will bear
interest at the prime or reference rate of interest announced by Chemical Bank
as in effect from time to time, from the third business day after the adjusted
Option Closing Price is determined in accordance with Section 2.5(b) through and
including the date upon which such amount and all such interest are paid in
full.
2.6 Effect of Certain Laws or Proceedings. The parties hereto
acknowledge and agree that notwithstanding anything in this Agreement or any
other documents related hereto to the contrary (including, without limitation,
any representations or warranties made by Sellers, covenants of the Sellers made
herein, any condition precedent to the obligations of Option Holder set forth in
this Agreement, or any provisions relating to indemnification to be made by
Sellers hereunder), matters relating to, in connection with or resulting or
arising from: (a) the effect, for purposes of any laws, statutes, ordinances,
rules, regulations, orders or other actions whenever promulgated or enacted,
including communications or communications-related laws, statutes, ordinances,
rules, regulations, orders or other actions, whenever promulgated or enacted,
and any licenses, permits or authorizations issued by any governmental authority
(including, without limitation, the FCC) (collectively, "Laws") or any contract
or agreement to be conveyed to or assumed, directly or indirectly, by Option
Holder pursuant hereto or under the Asset Purchase Agreement (collectively, the
"Conveyed
<PAGE>
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Contracts"), of (1) the transfer of the Station Assets, as defined in and
pursuant to the terms of the Asset Purchase Agreement, to Option Holder and the
transfer by Sellers of the License Assets hereunder and the Columbus Station
Assets and the License Assets (as such terms are defined in the Columbus Option
Agreement); (2) the grant by Sellers of the Options and the Columbus Option (as
defined in the Columbus Option Agreement); (3) the execution, delivery and
performance of any of the Transaction Documents; or (4) the consummation of the
other transactions contemplated hereby, by the Columbus Option Agreement or by
the Asset Purchase Agreement; (b) any conflict with, violation of, termination
of or breach or default under any Laws or Conveyed Contracts as a result of the
consummation of any of the transactions contemplated hereby, by the Columbus
Option Agreement or by the Asset Purchase Agreement (including, without
limitation, the Transaction Documents); or (c) any claims, actions, suits or
other proceedings of any nature whatsoever ("Proceedings"), by any person or
entity (including, without limitation, any governmental entity) by or before any
court, administrative agency or otherwise, alleging a conflict, violation of,
breach or default under, termination of or other inconsistency with Laws or
Conveyed Contracts as a result of the consummation of any of the transactions
contemplated hereby, by the Columbus Option Agreement or by the Asset Purchase
Agreement (including, without limitation, the Transaction Documents), shall not:
(i) cause or constitute, directly or indirectly, a breach by
either Seller of any of its representations, warranties, covenants or
agreements set forth in this Agreement or any other document related
hereto (and such representations, warranties, covenants and agreements
shall hereby be deemed to be modified appropriately to reflect and
permit the impact and existence of such Laws, Conveyed Contracts and
Proceedings and to permit any action by Seller to comply with or
attempt in good faith to comply with such Laws, Conveyed Contracts and
Proceedings);
(ii) otherwise cause or constitute, directly or indirectly, a
default or breach by Sellers under this Agreement or any other
documents related hereto;
(iii) result in the failure of any condition precedent to the
obligations of Option Holder under this Agreement or any other
document related hereto to be satisfied;
(iv) otherwise excuse Option Holder's performance of its
obligations under this Agreement or any other document related hereto;
or
<PAGE>
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(v) give rise to any claim for indemnification or other
compensation by Option Holder or any adjustment of the Option Closing
Price;
provided that the foregoing clauses (i) through (v) shall not apply to (1) any
claim brought by a partner of Sellers alleging a violation of any Seller's
partnership agreement or any claim brought by any partner, officer, director,
agent or Affiliate of Sellers; (2) any breach by Sellers of their covenants set
forth in this Agreement; or (3) any action instituted by the Federal Trade
Commission or the Department of Justice relating to the HSR Act, in each case
which shall be governed by other applicable provisions of this Agreement.
2.7 Representations and Warranties of Sellers. The parties hereto
acknowledge and agree that notwithstanding anything in this Agreement or any
other documents related hereto to the contrary, and without expanding any
obligations of Sellers hereunder, Sellers shall have no liability hereunder (for
indemnification or otherwise) for the breach of any representation or warranty
hereunder relating to events occurring after the date hereof unless such breach
was caused by a negligent, grossly negligent or intentional wrongful action
taken by Sellers.
2.8. Effect of RCB Credit Agreement. Notwithstanding anything to the
contrary in this Agreement, including, without limitation, Article 5 hereof, to
the extent that (i) Sellers take any action that Sellers are required to take or
that Sellers deem necessary to take, or fail to take any action that Sellers are
prohibited from taking, under the terms of the RCB Credit Agreement or any
document related thereto (including the security documents related thereto) but
which in any event would cause Sellers to be in breach of, or in default under,
this Agreement or (ii) Lender takes any action under that RCB Credit Agreement
or any document related thereto (including the security documents related
thereto), the result of which would cause Sellers to be in breach of, or in
default under, this Agreement, such action or inaction shall be deemed to be
permitted hereunder; Sellers and Lender shall be permitted to take such action
or Sellers shall be permitted to not take such action, and Sellers shall have no
liability whatsoever to Option Holder in connection therewith. Option Holder and
RCB agree that notwithstanding anything to the contrary in the Cure Rights
Agreement dated as of May 31, 1996 by and among Option Holder, certain
subsidiaries of Option Holder, The Chase Manhattan Bank, N.A. and Sellers or in
the RCB Credit Agreement (and documents related thereto), none of the rights and
obligations of Option Holder hereunder shall be affected thereby.
<PAGE>
- 24 -
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Subject to the exceptions set forth in Section 8.1(a) hereof, Sellers
represent and warrant to Option Holder as follows:
3.1 Organization. RCB is a limited partnership duly formed, validly
existing and in good standing under the law of the State of Delaware. Licensee
is a general partnership duly formed and validly existing under the laws of the
State of Missouri. Each Seller has the requisite partnership power and authority
to carry on the business of the Stations now being conducted by it, to own and
operate the License Assets owned and operated by it, and to enter into and
consummate the transactions contemplated by this Agreement. RCB is qualified to
conduct the business of the Stations now being conducted by it in each
jurisdiction listed on Schedule 3.1.
3.2 Approval/Authority. All requisite partnership actions and
proceedings necessary to be taken by or on the part of each Seller in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and necessary to make the same effective have
been, or with respect to each Closing will be, duly and validly taken. This
Agreement has been duly and validly authorized, executed and delivered by each
Seller and constitutes its valid and binding agreement, enforceable in
accordance with and subject to its terms, except as enforceability may be
limited by laws affecting the enforcement of creditors' rights or contractual
obligations generally and by the application of general principles of equity.
3.3 No Conflicts. Except as set forth on Schedule 3.3, on this Option
Grant Date (after giving effect to all approvals and consents which have been
obtained), neither the execution and delivery by Sellers of this Agreement, nor
the consummation by either Seller of the transactions contemplated hereby would
constitute, a material violation of or would conflict in any material respect
with or result in any material breach of or any material default under, any of
the terms, conditions or provisions of any law or regulation to which either
Seller is subject, or of RCB's agreement of limited partnership or Licensee's
agreement of general partnership, as the case may be, or any contract, agreement
or instrument that is required by the terms hereof to be listed on the Schedules
hereto to which either Seller is a party or by which either Seller is bound.
<PAGE>
- 25 -
3.4 Brokers. Except for the fees payable to Communications Equity
Associates referenced in Section 3.14 of the Asset Purchase Agreement, there is
no broker or finder or other person or entity who would have any valid claim
against Sellers for a commission or broker's fee in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by any Seller or any Affiliate of Seller.
3.5 FCC Authorizations. Licensee is the holder of the FCC
Authorizations relating to the Group I Stations listed in Schedule 1.1.A(a) to
this Agreement. Such FCC Authorizations constitute all of the licenses and
authorizations required under the Communications Act of 1934, as amended (the
"Communications Act") or the current rules and regulations and published
policies of the FCC for and/or used in the operation of the Stations as now
operated by Sellers. The material FCC Authorizations are in full force and
effect and will not be subject to or scheduled for renewal until the dates set
forth in Schedule 1.1.A(a). Except as set forth on Schedule 3.5, there is not
pending, or to the actual knowledge of Sellers, threatened, any action by or
before the FCC to revoke, cancel, rescind, modify or refuse to renew in the
ordinary course any of the FCC Authorizations, and except as set forth on
Schedule 3.5, there is not now pending, or to the actual knowledge of Sellers,
threatened, issued or outstanding by or before the FCC, any investigation, order
to show cause, notice of violation, notice of apparent liability or notice of
forfeiture or complaint against Sellers with respect to any of the Stations,
except to the extent that the result of such action, investigation, order,
notice or complaint would not be attributable to (i) factors affecting the
television or radio industries generally, (ii) general national, regional or
local economic or financial conditions, (iii) governmental or legislative laws,
rules or regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Option Holder thereof or (v) actions taken by Option Holder or
any Affiliate of Option Holder). To Sellers' actual knowledge, each Station is
operating in compliance in all material respects with the FCC Authorizations,
the Communications Act and the current rules and regulations of the FCC. For
purposes of this Agreement, "Affiliate" means with respect to a party, any
Person, directly or indirectly, controlling or controlled by such party, or any
Person under direct or indirect common control with such party (as such terms
are interpreted from time to time pursuant to the Securities Act of 1933, as
amended); "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not
<PAGE>
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legal entities, and governments and agencies and political subdivisions thereof;
and "actual knowledge" with respect to Sellers means the conscious awareness of
facts of Sellers' Station general managers and the officers of the general
partner of Sellers after reasonable inquiry by such Station general managers and
such officers with respect to the matters related to herein as to which the
Sellers are stating their knowledge.
3.6 Condition of Assets. The material tangible assets included in
the License Assets are, in all material respects, in good and technically sound
operating condition to permit the owner thereof to operate the Stations (in the
manner in which the Stations are operated by the Sellers) in compliance with the
terms of the FCC Authorizations, the Communications Act and current FCC rules
and regulations.
3.7 Title.
(a) Schedule 1.1.A(c) contains a description of the material
real property leases (the "Leases") to which either Seller is a party as a
tenant (or subtenant) or landlord with respect to the License Assets as of the
date of this Agreement to be used under the Group I TBA. To the actual knowledge
of Sellers, Sellers or either of them, as the case may be, are not in material
default under any of the Leases.
(b) Except for this Option, the Permitted Encumbrances, as
set forth on Schedule 1.3 and as otherwise provided herein, Sellers have on this
Option Grant Date good, insurable and marketable (only, with respect to
insurability and marketability, as to tangible property constituting Real
Property) and indefeasible title to the tangible assets included in the License
Assets owned by them and good and marketable title to the Real Property, and all
such assets and Real Property are free and clear of all liens and encumbrances
except for Permitted Encumbrances.
(c) On the Option Grant Date, except for Permitted
Encumbrances, Sellers shall cause the FCC Authorizations to be free and clear of
all liens, security interests and encumbrances of any kind whatsoever and shall
cause the FCC Authorizations to remain free and clear of all such liens,
security interests and encumbrances from the Option Grant Date through the
Option Closing Date.
3.8 Call Letters, Trademarks, Etc. Except as set forth on Schedule
1.1.A(e), Sellers possess, and on the Option Closing Date shall possess,
adequate rights, licenses or other authority to use all call letters, trademarks
and trade names necessary to
<PAGE>
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conduct the business of the Stations as presently conducted by Sellers except
where the failure to so possess would not cause a material adverse change in
financial condition or business of any TV Station, individually, or the Radio
Stations, taken as a whole (provided that the foregoing shall not include any
material adverse change attributable to (i) factors affecting the television or
radio industries generally, (ii) general national, regional or local economic or
financial conditions, (iii) governmental or legislative laws, rules or
regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Option Holder thereof or (v) actions taken by Option Holder or
any Affiliate of Option Holder) (a "Station Material Adverse Change"). Except as
set forth on Schedule 1.1.A(e), Sellers have not received any notice with
respect to any alleged infringement or unlawful or improper use of any
copyright, trademark, trade name or other intangible property right owned or
alleged to be owned by others and used in connection with the Stations. Sellers
represent and warrant that, except as set forth on Schedule 1.1.A(e) hereto,
none of the trademarks listed thereon have been registered.
3.9 Insurance. The Stations and the License Assets are, as of the
Option Grant Date, insured by Sellers against loss or damage by fire and other
hazards and risks of the character usually insured against by persons operating
similar properties and business under policies issued by insurers of recognized
responsibility.
3.10 Contracts. Schedules 1.1.A(c), 1.1.A(d) and 3.11 to this Agreement
contain a list of the following contracts as to which any Station or either
Seller with respect to any Station is a party, and which have been excluded from
transfer under the Asset Purchase Agreement, as of the Option Grant Date, other
than the Excluded Contracts:
(a) contracts evidencing time sales to advertisers or advertising
agencies that are "trade" or "barter" transactions that require the furnishing
of advertising time on a Station at any time after the Option Grant Date and
that individually involve annual payments of more than $250,000;
(b) sales agency or advertising representation contracts ending
more than one year after the date of this Agreement;
(c) employment contracts that individually involve annual base
salaries of more than $100,000;
<PAGE>
- 28 -
(d) material licenses or agreements under which either Seller is
authorized to broadcast on any Station filmed or taped programming supplied by
others;
(e)leases of personal property which have a term, including
renewal options exercisable by any other party thereto, ending more than one
year after the date of this Agreement and which involve annual payments of more
than $50,000 or $250,000 in the aggregate;
(f) material contracts not made in the ordinary and usual course
of business; and
(g) any other contracts which are material to the business and
operation of any Station and involve annual payments of more than $100,000
individually.
Notwithstanding anything to the contrary in the foregoing, it is
understood and agreed that Sellers are not required to list contracts entered
into in the ordinary course of business for the sale or sponsorship of
advertising time on any Station for cash at such Station's prevailing rate with
not more than one year remaining in any of their terms.
3.11 Employees. Sellers have heretofore delivered to Option Holder a
list of all employees of the Sellers as of the Option Grant Date and their
respective salaries and dates of hire. Except as described on such list or on
Schedule 3.11, after giving effect to the consummation of the Asset Purchase
Agreement Closing Sellers have no written contracts of employment with any
employee. Except as described on Schedule 3.11 after giving effect to the
consummation of the Asset Purchase Agreement Closing, neither Seller is a party
to or subject to any collective bargaining agreements with respect to any
Station nor, except as described in Schedule 3.11 after giving effect to the
consummation of the Asset Purchase Agreement Closing, does either Seller have
any other contracts with any labor union or other labor organization with
respect to any Station. Except as described on Schedule 3.11 after giving effect
to the consummation of the Asset Purchase Agreement Closing, Sellers are not a
party to any pending or, to their actual knowledge, threatened labor dispute
affecting any Station that would cause a Station Material Adverse Change.
3.12 Litigation. Except as set forth on Schedule 3.12 hereto: (i)
Sellers, with respect to the Stations, have not been operating under or subject
to or in default with respect to any order, writ, injunction or decree of any
court or federal, state, municipal or other governmental department, commission,
board,
<PAGE>
- 29 -
agency or instrumentality which has caused or could reasonably be expected to
cause a Station Material Adverse Change; (ii) neither Seller is a party to any
pending or, to Sellers' actual knowledge, threatened litigation affecting any of
the License Assets that would cause a Station Material Adverse Change. There are
no attachments, executions or assignments for the benefit of creditors or
voluntary or involuntary proceedings in bankruptcy pending against or
contemplated by Sellers, and to Sellers' actual knowledge, no such actions have
been threatened against Sellers or any Station or any subsidiary of Seller. On
the date hereof, except for ongoing or planned FCC rulemakings affecting the
television or radio industry generally, there is no litigation or proceeding
pending or, to Sellers' actual knowledge, threatened against or affecting
Sellers that would affect Sellers' ability to carry out the transactions
contemplated by this Agreement or restrain, enjoin, prohibit or render illegal
the consummation of the transactions contemplated by this Agreement.
3.13 Compliance with Laws. Except as set forth on Schedule 3.5,
Sellers, with respect to the Stations, are to their actual knowledge, in
compliance, except where the failure to so comply would not cause a Station
Material Adverse Change, with all applicable laws, regulations and orders, and
the present uses by Sellers of the License Assets do not, to Sellers' actual
knowledge, violate any such laws, regulations or orders, except to the extent
that any such violation would not result in a Station Material Adverse Change.
3.14 Complete Disclosure. The representations and warranties in this
Article 3 do not include any untrue statements of material fact or omit to state
a material fact required to be stated therein necessary to make the statements
not misleading in light of the circumstances under which they were made.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
-----------------------------------------------
Option Holder represents and warrants to Sellers as follows:
4.1 Incorporation. Option Holder is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
and Option Holder or an appropriate wholly-owned subsidiary of Option Holder
shall be qualified to transact business in the States of California, Illinois,
Indiana, Iowa, Louisiana, Missouri, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas and any other
<PAGE>
- 30 -
state in which a Station is doing business as of the respective Option Closing
Date of the acquisition of License Assets in such jurisdiction, and each of
Option Holder has the corporate power and authority to enter into and consummate
the transactions contemplated by this Agreement.
4.2 Corporate Action. All corporate actions and proceedings necessary
to be taken by or on the part of Option Holder in connection with the execution
and delivery of this Agreement and the respective consummation of the
transactions contemplated hereby and necessary to make the same effective have
been duly and validly taken. This Agreement has been duly and validly
authorized, executed and delivered by Option Holder, and constitutes its valid
and binding agreement, enforceable in accordance with and subject to its terms
except as enforceability may be limited by laws affecting the enforcement of
creditors' rights or contractual obligations generally and by the application of
general principles of equity.
4.3 No Conflicts. Neither the execution and delivery by Option Holder
of this Agreement, nor the consummation by Option Holder of the transactions
contemplated hereby, would constitute or, with the giving of notice or the
passage of time or both, would constitute a material violation of or would
conflict with or result in any material breach of or any material default under
any of the terms, conditions or provisions of any law or regulation to which
Option Holder is subject, or the articles of incorporation or bylaws of Option
Holder, or any contract, agreement or instrument to which Option Holder is a
party or by which it is or will be bound.
4.4 Brokers. Except for the fees payable to Smith Barney Inc. as
referenced in Section 4.4 of the Asset Purchase Agreement, there is no broker or
finder or other person who would have any valid claim against any of the parties
to this Agreement for a commission or brokerage in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by Option Holder.
4.5 Litigation. There is no litigation, proceeding or investigation of
any nature pending or, to the best of Option Holder's actual knowledge,
threatened against or affecting Option Holder that would affect Option Holder's
ability fully to carry out the transactions contemplated by this Agreement or
which has or could reasonably expected to restrain, enjoin, prohibit or render
illegal the consummation of the transactions contemplated by this Agreement.
There are no attachments, executions or assignments for the benefit of creditors
or voluntary or involuntary proceedings in bankruptcy pending against or
<PAGE>
- 31 -
contemplated by Option Holder, and no such actions have been threatened against
Option Holder. For purposes of this Agreement "actual knowledge" with respect to
Option Holder means the conscious awareness of facts of the officers of Option
Holder after reasonable inquiry by such officers with respect to the matters
referred to herein as to which Option Holder is stating its knowledge.
ARTICLE 5
---------
COVENANTS OF SELLERS PENDING THE CLOSING
----------------------------------------
Sellers covenant and agree, from the date hereof to and including the
Option Closing Date for a Station and thereafter where so indicated (but not
after the final Option Closing Date hereunder or the earlier termination of the
Options hereunder), that they will act as follows with respect to such Station:
5.1 Maintenance of Business until Closing. Until the Option Closing
Date applicable to a particular Station, each Seller shall, with respect to the
License Assets relating to such Station, continue to conduct its business and
operations and keep its books of account, records and files in a manner
consistent with the Group I TBA. Until the Option Closing Date applicable with
respect to the particular Station, subject to the provisions of the Group I TBA,
Sellers shall operate the Stations in all material respects in accordance with
the terms of the FCC Authorizations and in compliance in all material respects
with all applicable laws and FCC rules, regulations and published policies.
Sellers will promptly execute and file any necessary applications for the
renewal of the FCC Authorizations.
Sellers will maintain in full force and effect through the Option
Closing Date for each Station property damage, liability and other insurance
with respect to the License Assets used or held for use by Sellers with respect
to such Station consistent with Sellers' present practices as set forth in
Section 3.9, and between the Option Grant Date and the Option Closing Date with
respect to a Station, Option Holder shall be named as an additional insured as
its interests may appear on the insurance policies carried by Sellers with
respect to the License Assets in connection with such Station thereunder.
Except as consistent with the Group I TBA, nothing contained in this
Agreement shall give Option Holder any right to control the programming,
operations or any other matter relating to any Station prior to the Option
Closing Date for such Station, and Sellers shall have complete control of the
programming,
<PAGE>
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operations and all other matters relating to each Station up to the Option
Closing Date for such Station.
Prior to the Option Closing Date for a Station, except as set forth on
Schedule 5.1 or as otherwise may be consistent with the Group I TBA and the
third from the last paragraph of this Section 5.1, Sellers will not, without the
prior written consent of Option Holder (to the extent the following restrictions
are permitted by the FCC and all applicable law):
(a) enter into (i) any written contract of employment or any
collective bargaining agreement that will be binding on Option Holder or (ii)
permit any increases in the compensation of any of the Station's employees,
except in the case of (i) and (ii), to the extent consistent with the Group I
TBA or past practices or as required by law or existing contract, in which case
such contracts and agreements shall be assumed by Option Holder and treated as
Assumed Liabilities hereunder; provided, however, that Sellers may pay bonuses
to any of their employees so long as such bonuses do not create a binding
obligation upon Option Holder after the applicable Option Closing Date;
(b) apply to the FCC for any construction permit that would
materially restrict the Station's present operations or make any material change
in the Station's buildings or leasehold improvements;
(c) (i) create or permit any lien or encumbrance, other than
the Permitted Encumbrances, on the License Assets; or (ii) make capital
expenditures or commitments for additions to property, plant or equipment
constituting capital assets on behalf of any Station outside the ordinary course
of business or consistent with the Group I TBA; provided, however, that Seller
shall consult with Option Holder to the extent Seller seeks to make significant
capital expenditures prior to making such capital expenditures;
(d) violate, breach or default under, in any material respect,
or take or fail to take any action that (with or without notice or lapse of time
or both) would constitute a material violation or breach of, or default under,
any term or provision of any material contract or license of any Station, other
than as a result of this Agreement, the Option Agreement, the Group I TBA and
the transactions contemplated hereby and thereby;
(e) incur, purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date with
respect to, or waive any right of Sellers under, any liability of or owing to
Sellers in connection
<PAGE>
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with any Station, other than (i) in the ordinary course of business consistent
with past practice, (ii) as contemplated pursuant to this Agreement or the Group
I TBA, (iii) the pay-off of any debt of Seller on or prior to the Closing or
(iv) in an aggregate amount (when combined with amounts under Section 5.1(e)(iv)
of the Columbus Option Agreement) not to exceed $1,000,000; provided, however,
that notwithstanding the foregoing, except as otherwise contemplated under the
third from the last paragraph of this Section 5.1, Sellers will not incur or
suffer to exist any additional indebtedness (whether in connection with any
Station or otherwise, but excluding trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary course
of business so long as such trade accounts payable are payable within 90 days of
the date the respective goods are delivered or the respective services are
rendered).
(f) engage with any Person in any business combination, except
as otherwise contemplated hereunder;
(g) engage in any transaction with respect to any Station with
any officer, director, or Affiliate of Sellers (or any Affiliate thereof),
either outside the ordinary course of business consistent with past practice or
other than on an arm's- length basis;
(h) enter into any contract, agreement or commitment to do or
engage in any of the foregoing;
(i) except as otherwise expressly provided for herein, sell,
lease, transfer or agree to sell, lease or transfer any Option or any License
Assets; or
(j) enter into and record any easements or restrictive
covenants that would materially adversely affect the value or the current or
continued use and enjoyment (to the extent such continued use and enjoyment
conforms with current use and enjoyment) of the property to which they relate
without the consent of Option Holder, which consent will not be unreasonably
withheld;
Notwithstanding anything in this Agreement to the contrary, Sellers
shall be entitled to (i) renew or extend the term of any contract listed on
Schedules 1.1.A(c), 1.1.A(d), 1.1.A(i)(1) or 3.11 which, by its terms, expires
or will expire prior to April 10, 2006 and, in connection therewith, agree not
to increase the amounts payable thereunder during any such renewal term except
in accordance with the applicable Station's usual practices or the Group I TBA
relating to the Station and (ii) take any action
<PAGE>
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specified in subsections (c), (d), (e), (f), (h) and (i) and enter into a local
management agreement in connection with the Twin Peaks Sale at the time of entry
into any agreement of sale for the New Mexico Stations or the RCB Twin Peaks
Equity Interest.
Notwithstanding anything in this Agreement to the contrary, if Option
Holder, including any assignee under the Group I TBA, has defaulted or breached
in any material respect its economic obligations or liabilities hereunder or
under the Group I TBA, prior to a sale by Sellers of the Group I Station
relating thereto as set forth below, Sellers shall give Option Holder and Option
Holder's lenders ("Option Holder's Lenders") under its then existing senior
credit facility (the name and notice information regarding which Option Holder
shall provide to Sellers) notice of the breach by Sellers, and Option Holder
shall be given fifteen (15) days from the date of receipt of such notice to cure
such breach and Option Holder's Lenders shall be given ninety (90) days from the
date of receipt of such notice to cure such breach. During such cure period,
Sellers shall be permitted to borrow an aggregate amount, which when combined
with amounts borrowed under the last paragraph of Section 5.1 of the Columbus
Option Agreement, does not exceed Three Million Dollars ($3,000,000) the
proceeds of which shall be used to continue to operate such Stations. After the
applicable cure periods with respect to such breach relating to a Group I
Station have expired without such breach having been cured within such periods,
Sellers shall, without being in violation of any of the covenants set forth
herein, and without being subject to the restrictions set forth in such
covenants, take such actions as Sellers in good faith deem necessary or
desirable in connection with the operations of such Group I Stations, including
without limitation, that Sellers may terminate the Group I TBA with respect to
such Group I Station and/or may sell the Group I Station with respect to which
Option Holder or any permitted assignee under the Group I TBA, is in breach, and
upon the sale of such Group I Station, Sellers shall, upon receipt thereof, pay
to Option Holder any amount received as payment for such Group I Station minus
(1) any non-recurring reasonable out-of-pocket costs incurred by Sellers in
connection with such sale, other than any sales commission paid by Sellers in
connection therewith, (2) any amounts owed by Option Holder to Sellers,
including, without limitation, in connection with any economic breach by Option
Holder hereunder or by Option Holder, or any permitted assignee under the Group
I TBA, and all Option Extension Fees that are due but have not yet been paid
through the date of the closing of such sale, (3) the total amount of all
federal, state and local taxes incurred by Sellers in connection with such sale
and (4) a commission based on the total amount
<PAGE>
- 35 -
paid for such Group I Station (such total amount, the "Sale Price") using the
Standard Formula. For purposes of this Agreement, "Standard Formula" means (a)
five percent (5%) on the first one million dollars ($1,000,000.00) of the Sale
Price; (b) four percent (4%) on the next one million dollars ($1,000,000.00) of
the Sale Price; (c) three percent (3%) on the next one million dollars
($1,000,000.00) of the Sale Price; (d) two percent (2%) on the next one million
dollars ($1,000,000.00) of the Sale Price; and (e) one percent (1%) on any
excess over four million dollars ($4,000,000.00) of the Sale Price. Option
Holder's Group I Option with respect thereto shall terminate upon such sale.
Option Holder hereby appoints each Seller as its attorney-in-fact for
Option Holder with full authority in the place and stead of Option Holder and in
the name of Option Holder, in Sellers' discretion to take any action to execute
any instrument Sellers may deem necessary and advisable to accomplish such sale.
Sellers agree to act in a commercially reasonable manner in connection with the
sale of such Group I Station, and Option Holder shall cooperate with Sellers in
connection therewith. Option Holder's rights hereunder shall be subject to any
such actions as may be taken by Sellers pursuant hereto.
TO THE EXTENT SELLERS HAVE ACTED IN A COMMERCIALLY REASONABLE MANNER IN
CONNECTION WITH THE SALE OF A GROUP I STATION, NO CLAIM MAY BE MADE BY OPTION
HOLDER AGAINST SELLERS OR ITS PARTNERS, AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR
IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING
OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP
ESTABLISHED BY THE FOREGOING PARAGRAPH, OR ANY ACT, OMISSION OR EVENT OCCURRING
IN CONNECTION THEREWITH; AND OPTION HOLDER HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
5.2 Goodwill/Compliance with Agreements. Sellers shall diligently make
all commercially reasonable efforts to preserve the License Assets and the
business organization of the Stations and preserve the goodwill of the Stations'
suppliers, customers and others having business relations with the Stations in a
manner consistent with the Group I TBA.
5.3 Reports; Access to Facilities, Files and Records. From time to time
during the Exercise Period at the request of Option Holder, Sellers shall give
or cause to be given to the officers,
<PAGE>
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employees, agents and representatives of Option Holder (a) access (in the
presence of any representative designated by Sellers), upon reasonable prior
notice, during normal business hours, to the License Assets and to all books and
records relating thereto, and (b) all such other information in Sellers'
possession concerning the affairs of the Stations as Option Holder may
reasonably request, provided that the foregoing does not unreasonably disrupt or
interfere with the business and operations of Sellers or the Stations.
5.4 Notice of Proceedings. Sellers will promptly notify Option Holder
in writing upon becoming aware of 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 department, court, agency or commission of its
intention to institute an investigation into or to 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.
5.5 Confidential Information. Sellers shall not use or disclose to any
third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Option
Holder, including delivery of a copy of the subpoena or request, if applicable)
this Agreement or any information received from Option Holder or its agents in
the course of investigating, negotiating and performing the transactions
contemplated by this Agreement; provided, however, that Sellers may disclose
such information to Sellers' respective officers, partners, employees, lenders,
advisors, attorneys and accountants who need to know such information in
connection with the consummation of the transactions contemplated by the
Agreement and who are informed by Sellers of the confidential nature of such
information. Nothing shall be deemed confidential information that: (a) is known
to either Seller at the time of the disclosure of such information to such
Seller; (b) becomes publicly known or available other than as a result of
disclosure by or through either Seller; (c) is rightfully received by Sellers
from a third party; or (d) is independently developed by either Seller. In the
event this Agreement is terminated and the transactions contemplated hereby
abandoned, Sellers will return to the Option Holder all copies of documents,
work papers and
<PAGE>
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other written confidential material obtained by Sellers in connection with the
transactions contemplated hereby.
5.6 Consummation of Option Closing. Subject to the express terms and
conditions of this Agreement, and without expanding such terms and conditions,
Sellers shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts in connection with any steps to be taken as part
of its respective obligations under this Agreement, and each of Sellers shall
diligently make and cooperate with Option Holder in making all commercially
reasonable efforts to fulfill and perform all conditions and obligations on
their part to be fulfilled and performed under this Agreement and to cause all
terms and conditions set forth herein to be fulfilled and to cause the
transactions contemplated by this Agreement in connection with the Option
Exercise and Closing to be fully carried out.
5.7 Notice of Certain Developments. Sellers shall give prompt written
notice to Option Holder if prior to the Option Closing Date: (a) License Assets
shall have suffered damage on account of fire, explosion or other cause of any
nature that is sufficient to prevent operation of any Station in any material
respect for more than twenty-four (24) consecutive hours, or (b) the regular
broadcast transmission of any Station in the normal and usual manner in which it
heretofore has been operating is interrupted in any material manner for a period
of more than twenty-four (24) consecutive hours.
5.8 Covenants of Sellers After Option Exercise. Sellers covenant and
agree that, after their receipt of any Exercise Notice for the exercise of an
Option relating to a particular Station, until either the Closing for such
exercised Option occurs or such Exercise Notice is withdrawn pursuant to Section
1.4:
(a) Application for Commission Consent and Defense of Claims.
Within ten (10) days after receipt by Sellers of such Exercise Notice with
respect to a Station, Sellers will complete Sellers' portion of applications to
the FCC requesting its written consent to the assignment of the FCC
Authorizations for such Station (and any extension or renewals thereof and any
necessary waiver required under the terms of 47 C.F.R. ss. 73.3555(b) with
respect thereto) to Option Holder, and upon receipt of Option Holder's portions
of such applications, will promptly file such applications with the FCC jointly
with Option Holder. Sellers will diligently take and cooperate in the taking of
all commercially reasonable steps that are necessary, proper or desirable to
expedite the preparation of such applications and
<PAGE>
- 38 -
their prosecution to a grant. Sellers will promptly provide Option Holder with a
copy of any pleading, order or other document served on them relating to such
applications. Sellers shall take, and cooperate with Option Holder in taking,
all commercially reasonable steps to oppose any petition for reconsideration,
application for review, or request for judicial review of, or any other protest
filed with respect to, the issuance of the FCC consents contemplated by this
Section 5.8(a).
(b) Consents. Sellers will diligently make and cooperate with
Option Holder in making all commercially reasonable efforts (without being
required to make any payment) to obtain or cause to be obtained prior to the
Option Closing Date consents to the assignment to or assumption by Option Holder
of all material licenses, leases and other contracts included in the License
Assets used or held for use by Sellers with respect to such Station that require
the consent of any third party by reason of the transactions provided for in
this Agreement.
(c) Consummation of Agreement. Subject to the terms and conditions
of this Agreement, and without expanding such terms and conditions, Sellers
shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts to fulfill and perform all conditions and
obligations on their part to be fulfilled and performed under this Agreement and
to cause the transactions contemplated by this Agreement to be fully carried
out.
5.9 Hart-Scott-Rodino. To the extent required by law, Sellers, as
promptly as practicable, shall prepare and jointly file with Option Holder all
documents with the Federal Trade Commission and the United States Department of
Justice, as are required to comply with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), and shall promptly furnish all
materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any filing fees (including by Sellers and Option Holder with
respect to the transaction) under the HSR Act shall be borne one-half (1/2) by
Sellers and one-half (1/2) by Option Holder.
5.10 Compliance with Group I TBA. For so long as the Group I TBA is in
effect with respect to a Station, Sellers shall comply in all material respects
with all terms, provisions, covenants and agreements to be complied with by
Sellers under the Group I TBA with respect to such Station.
<PAGE>
- 39 -
5.11 New Mexico Stations. To the extent RCB sells the New Mexico
Stations or the RCB Twin Peaks Equity Interest after the Option Grant Date and
prior to the purchase by Option Holder of the RCB Twin Peaks Equity Interest
hereunder, RCB shall pay to Option Holder the amount paid to RCB in connection
therewith, minus (1) the non-recurring out-of-pocket costs incurred by RCB in
respect of consummation of such sale, (2) the total amount of all federal, state
and local taxes (other than income taxes) incurred in connection with such sale,
(3) the total amount of all federal, state and local income taxes incurred by
Sandia in connection with such sale, and (4) the Option Closing Price for the
RCB Twin Peaks Equity Interest. In connection with any such sale, RCB shall
provide a certificate to Option Holder as to the amount of the adjustment or the
amount to be paid by RCB hereunder together with appropriate documentation
supporting RCB's calculations.
ARTICLE 6
---------
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
----------------------------------------------
Option Holder covenants and agrees that from and after the date hereof
through and including the final Option Closing Date that it will act as follows
with respect to each Station:
6.1 Confidential Information. Option Holder shall not use or disclose
to third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Sellers,
including delivery of a copy of the subpoena or request, if applicable) this
Agreement or any information (including, without limitation, financial
information and information regarding program contracts and revenue) received
from Sellers or their agents in the course of investigating, negotiating and
performing the transactions contemplated by this Agreement; provided, however,
that the Option Holder may disclose such information to Option Holder's
officers, directors, employees, lenders, advisors, attorneys and accountants who
need to know such information in connection with the consummation of the
transactions contemplated by this Agreement and who are informed by Option
Holder of the confidential nature of such information. Nothing shall be deemed
to be confidential information that: (a) is known to Option Holder at the time
of its disclosure to it; (b) becomes publicly known or available
<PAGE>
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other than as a result of disclosure by or through Option Holder; (c) is
rightfully received by Option Holder from a third party; or (d) is independently
developed by Option Holder. In the event this Agreement is terminated and the
purchase and sale contemplated hereby abandoned, Option Holder will return to
the appropriate Seller all copies of documents, work papers and other written
confidential material obtained by Option Holder in connection with the
transactions contemplated hereby.
6.2 Consummation of Agreement. Subject to the provisions of Section
11.1 of this Agreement, and subject to the express terms and conditions of this
Agreement, and without expanding such terms and conditions, Option Holder shall
diligently make and cooperate with Sellers in making all commercially reasonable
efforts in connection with any steps to be taken as part of their obligations
under this Agreement, and Option Holder shall diligently make and cooperate with
Sellers in making all commercially reasonable efforts to fulfill and perform all
conditions and obligations on its part to be fulfilled and performed under this
Agreement and to cause the transactions contemplated by this Agreement to be
fully carried out. Option Holder agrees to diligently cooperate with Sellers in
connection with obtaining consents to the assignment to, or assumption by,
Option Holder of licenses, leases and other contracts included in the License
Assets, and to execute such assumption instruments as may be required in
connection with obtaining such consents on monetary terms no less favorable to
Option Holder than those Sellers under such licenses, leases and other contracts
on the date of such assumption.
6.3 Notice of Proceedings. Option Holder will promptly notify Sellers
in writing upon becoming aware of 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 department, court, agency or commission 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.
6.4 Covenants of Option Holder After Option Exercise. Option Holder
covenants and agrees that after Option Holder gives any Exercise Notice for the
exercise of an Option relating to a particular Station, and until either the
Closing occurs or such Exercise Notice is withdrawn or deemed to be withdrawn
pursuant to Section 1.4:
<PAGE>
- 41 -
(a) Application For Commission Consent. Within ten (10) days after
delivery to Sellers of such Exercise Notice with respect to a Station, Option
Holder will complete Option Holder's portion of applications to the FCC
requesting its written consent to the assignment of the FCC Authorizations for
such Station (and any extension or renewals thereof and any necessary waiver
required under the terms of 47 C.F.R. ss. 73.3555(b) with respect thereto) to
Option Holder, and upon receipt of Sellers' portion of such applications
pursuant to Section 5.8(a), hereof will promptly file such applications with the
FCC jointly with Sellers. Option Holder will diligently take and cooperate in
the taking of all commercially reasonable steps that are necessary, proper or
desirable to expedite the preparation of all such applications and their
prosecution to a grant. Option Holder will promptly provide Sellers with the
copy of any pleading, order or other documents served on Option Holder relating
to such applications. Option Holder shall take, and cooperate with Sellers in
taking, all commercially reasonable steps to oppose any petition for
reconsideration, application for review, or request for judicial review of, or
any other protest filed with respect to, the FCC consents contemplated by this
Section 6.4(a).
(b) Consents for Closing. Option Holder will diligently make and
cooperate in making all reasonable efforts jointly with Sellers to obtain or
cause to be obtained for the Closing prior to the Option Closing Date all
necessary consents relating to the License Assets used or held for use by
Sellers with respect to such Station and to execute such assumption instruments
as may be required in connection with obtaining such consents. Without
limitation of the foregoing, Option Holder covenants and agrees that it shall
provide on request, to any third party from whom such consent is sought, such
financial or other information as such third party may reasonably request in
order for such third party to grant such consent.
6.5 Insurance. On the Option Grant Date and at all times thereafter
until the Option Closing Date with respect to a Station, Option Holder shall
cause all parties currently named as "additional insured" on RCB's and
Licensee's policies (a list of which has been previously provided to Option
Holder) to be named as additional insured parties as their interests may appear,
under all insurance policies carried by Option Holder with respect to the
applicable Station.
6.6 Notice of Material Impact. Option Holder will promptly notify the
Sellers in writing of any significant developments that have, or could
reasonably be expected to have, a material adverse impact on the condition
(financial or otherwise) of the business or any material asset of Option Holder.
<PAGE>
- 42 -
6.7 Hart-Scott-Rodino. To the extent required by law, Option Holder, as
promptly as practicable, shall prepare and jointly file with Sellers all
documents with the Federal Trade Commission and the United States Department of
Justice as are required to comply with the HSR Act, and shall promptly furnish
all materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any related filing fees under the HSR Act shall be paid in
accordance with Section 5.9 hereof.
6.8 Compliance with Group I TBA. For so long as the Group I TBA is in
effect with respect to a Station, Option Holder shall comply in all material
respects with all terms, provisions, covenants and agreements to be complied
with by Option Holder under the Group I TBA with respect to such Station.
ARTICLE 7
---------
CONDITIONS TO THE OBLIGATIONS OF SELLERS
----------------------------------------
In the case of a closing of a Group I Option on the Columbus Option
Closing Date, all of the conditions set forth below (other than Sections 7.1(a)
and 7.1(c)) apply with respect to the Group I Stations that are the subject of
such Group I Option; and in the case of a closing of a Group I Option other than
on the Columbus Option Closing Date, all of the conditions set forth below
(other than Section 7.1) apply with respect to all of the Group I Stations that
are the subject of such Group I Option. The obligations of Sellers to consummate
the transactions contemplated by this Agreement with respect to a duly exercised
Option from this Option Grant Date to the Option Closing Date are, at their
option, subject to the fulfillment of the following conditions prior to or at
the applicable Option Closing Date:
7.1 Representations, Warranties, Covenants.
(a) The representations and warranties of Option Holder contained
in this Agreement shall have been true and accurate in all material respects as
of the date when made and shall be true and accurate in all material respects as
of the Option Closing Date except to the extent any such representation or
warranty is expressly stated only as of a specified earlier date or dates, in
which case such representation or warranty shall be true and accurate in all
material respects as of such earlier date or dates and except to the extent
changes are permitted or contemplated pursuant to this Agreement;
<PAGE>
- 43 -
(b) Option Holder shall have performed and complied in all material
respects with the covenants and agreements required by this Agreement and the
Group I TBA to be performed or complied with by them prior to or at the Option
Closing Date (including the delivery by Option Holder of the Option Closing
Price due with respect to the Option then being closed, the Option Closing Price
of all Unpaid Options to the extent payable hereunder, and the Extension Fees
applicable to such Option and such Unpaid Options that have accrued since the
due date of the previous payment of Option Extension Fees for such Options to
the extent payable hereunder); and
(c) If requested by Sellers in accordance with Section 2.4(b)(ii),
Option Holder shall have delivered to Sellers a certificate of an officer of
Option Holder dated as of the Option Closing Date certifying to the fulfillment
of the conditions set forth in Section 7.1.
7.2 Proceedings.
(a) As of the Option Closing Date, no action or proceeding shall
have been instituted and be pending before any court or governmental body to
materially restrain or prohibit, or to obtain material damages in respect of,
the consummation of this Agreement that may reasonably be expected to result in
a permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render ineffective
this Agreement or such transactions or for the recovery against Sellers of such
material damages; and as of the Option Closing Date, none of the parties to this
Agreement shall have received written notice (other than a letter of inquiry)
from any governmental body of its intention to institute any action or
proceeding to materially restrain or enjoin or nullify, or to obtain material
changes in respect of, this Agreement or the transactions contemplated hereby
that may reasonably be expected to result in a permanent injunction against such
consummation or, if the transactions contemplated hereby were consummated, an
order to nullify or render ineffective this Agreement or such transactions or
the recovery against Sellers of substantial damages; provided, however, that the
foregoing (a) and (b) shall not be deemed to fall within the provisions hereof,
qualify as a condition hereunder to the extent such action or proceeding is (1)
brought or caused to be brought by (i) any partner, officer, director, agent,
Affiliate or creditor of Sellers, or any other party claiming by, through or
against Sellers that is not related to Option Holder, (ii) any third party or
agent of such party to any Contract relating to any consent required to convey
any such Contract, or (iii) any party or agent of such party, who is currently a
party to such
<PAGE>
- 44 -
affiliation agreement with Sellers, or any Affiliate of Sellers or in any way
relating to any television or radio network affiliation agreement of any Seller,
any Affiliate of any Seller, Option Holder or any Affiliate of Option Holder; or
(2) a Proceeding referred to in Section 2.6 hereof.
7.3 Opinion of Counsel. If requested by Sellers in accordance with
Section 2.4(b)(ii), Sellers shall have received an opinion of Option Holder's
counsel dated as of the Option Closing Date in substantially the form attached
to this Agreement as Exhibit 7.3(i) and an opinion of Option Holder's special
communications counsel, dated as of the Option Closing Date in substantially the
form attached to this Agreement as Exhibit 7.3(ii).
7.4 FCC Authorization. As of the Option Closing Date, all FCC consents
and approvals contemplated by this Agreement with respect to the Station shall
have been granted.
7.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or be terminated and there shall not
be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
7.6 Termination of Certain Agreements. The Sellers shall have received
from Option Holder the termination of (i) the Leases and Subleases (as such
terms are defined in the Asset Purchase Agreement) entered into by Option Holder
and RCB with respect to the Station and (ii) the Group I TBA as it relates to
the Station (together, the "Terminations").
7.7 Group I TBA. Option Holder or any permitted assignee shall have
paid all outstanding amounts due and owing, and performed in all material
respects all covenants and agreements to be performed by it or any permitted
assignee under the Group I TBA, on or before the Option Closing Date, including,
without limitation, the amount due in respect of any breach of its, or any
permitted assignee's, economic obligations or liabilities under the Group I TBA.
ARTICLE 8
---------
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
----------------------------------------------
In the case of a closing of a Group I Option, all of the conditions set
forth below apply with respect to all of the Group
<PAGE>
- 45 -
I Stations for which such Group I Option was exercised. Subject to Section 2.6
hereof, the obligations of Option Holder to consummate the transactions
contemplated by this Agreement of a duly exercised Option are, at its option,
subject to the fulfillment of the following conditions prior to or at the
applicable Option Closing Date:
8.1 Representations, Warranties, and Covenants.
(a) The representations and warranties of Sellers contained in this
Agreement shall have been true and accurate as of the date when made and shall
be true and accurate as of the Option Closing Date, except to the extent (i) any
such representation or warranty is expressly stated only as of a specified
earlier date or dates, in which case such representation and warranty shall be
true and accurate as of such earlier date or dates except as set forth in (iii)
below of this Section 8.1(a); (ii) changes are permitted as contemplated
pursuant to this Agreement and the Group I TBA, (iii) the consequence of the
matter set forth in such representation and warranty having failed to be true
and accurate as of the date when made, on the Option Closing Date or on such
earlier specified date would not result in a material adverse change in the
financial condition or business of the Group I Stations and the Columbus Station
taken as a whole, or of the License Assets taken as a whole (provided that the
foregoing shall not include any material adverse change attributable to (v)
factors affecting the television or radio industries generally, (w) general
national, regional or local economic or financial conditions, (x) governmental
or legislative laws, rules or regulations, (y) any affiliation agreement or the
lack thereof or the non- transfer to Option Holder thereof, or (z) actions taken
by Option Holder or any Affiliate of Option Holder) (a "Material Adverse
Change").
(b) Each Seller shall have performed and complied in all respects
with covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at such Option Closing Date, including the
delivery to Option Holder of the instruments conveying the License Assets that
are the subject of such Closing to Option Holder except to the extent that the
consequence of the failure of Seller to have so performed or complied would not
result in a Material Adverse Change.
(c) If requested by Option Holder in accordance with Section
2.4(a)(ii), Sellers shall have delivered to Option Holder a certificate of an
officer of the general partner of RCB and of Licensee dated the Option Closing
Date certifying to the
<PAGE>
- 46 -
fulfillment of the conditions set forth in Sections 8.1(a) and 8.1(b).
8.2 Proceedings.
(a) As of the Option Closing Date, no action or proceeding shall
have been instituted and be pending before any court or governmental body to
materially restrain or prohibit, or to obtain material damages in respect of,
the consummation of this Agreement that may reasonably be expected to result in
a permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render ineffective
this Agreement or such transactions or for the recovery against Option Holder of
such material damages; and (b) as of the Option Closing Date, none of the
parties to this Agreement shall have received written notice (other than a
letter of inquiry) from any governmental body of its intention to institute any
action or proceeding to materially restrain or enjoin or nullify, or to obtain
material damages in respect of, this Agreement or the transactions contemplated
hereby that may reasonably be expected to result in a permanent injunction
against such consummation or, if the transactions contemplated hereby were
consummated, an order to nullify or render ineffective this Agreement or such
transactions or the recovery against Option Holder of substantial damages;
provided, however, that the foregoing (a) and (b) shall not be deemed to fall
within the provisions hereof or qualify as a condition hereunder to the extent
such action or proceeding is (1) brought or caused to be brought by (i) any
stockholder, bondholder, officer, director, agent, Affiliate or creditor of
Option Holder or any other party claiming by, through or against Option Holder
that is not related to Sellers, (ii) any third party or agent of such party to
any Contract relating to any consent required to convey any such Contract, or
(iii) any party or agent of such party, who is currently a party to any such
affiliation agreement with Option Holder or any Affiliate of Option Holder or in
any way relating to any television or radio network affiliation agreement of any
Seller, any Affiliate of any Seller, Option Holder or any Affiliate of Option
Holder; or (2) a Proceeding referred to in Section 2.6 hereof.
8.3 Opinion of Counsel. If requested by Option Holder, in accordance
with Section 2.4(a)(ii), Option Holder shall have received an opinion of
Seller's counsel dated as of the Option Closing Date in substantially the form
attached to this Agreement as Exhibit 8.3(i), and an opinion of Sellers' special
communications counsel dated as of the Option Closing Date in substantially the
form attached to this Agreement as Exhibit 8.3(ii).
<PAGE>
- 47 -
8.4 FCC Authorizations. As of the Option Closing Date, all FCC consents
and approvals as contemplated by this Agreement with respect to the Station
shall have been granted.
8.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or been terminated and there shall
not be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
8.6 Termination of Certain Agreements. The Option Holder shall have
received from RCB the Terminations.
8.7 Group I TBA. Seller shall have performed in all material respects
all economic covenants and agreements to be performed by it under the Group I
TBA, on or before the Option Closing Date.
ARTICLE 9
---------
INDEMNIFICATION
---------------
9.1 Survival. The representations and warranties of Sellers and Option
Holder contained in this Agreement (including the Schedules hereto) or in any
certificate delivered by it pursuant to Sections 2.4, 7.1 and 8.1 of this
Agreement and the covenants of Sellers and Option Holder under this Agreement to
be performed on or before an Option Closing Date (a) that relate to a Station
shall survive the Option Closing Date with respect to such Station until the
earlier of (i) a period of one (1) year after such Option Closing Date, (ii) the
final Option Closing Date or (iii) the Columbus Option Closing Date, and (b)
that do not relate to the Stations shall survive for one year from the Option
Grant Date. Option Holder's obligation to pay, perform or discharge the Assumed
Liabilities shall survive until such Assumed Liabilities have been paid,
performed or discharged in full. Sellers' obligations with respect to all
obligations and liabilities not assumed by Option Holder pursuant to this
Agreement shall survive until such obligations and liabilities have been paid,
performed or discharged in full. The covenants and agreements contained in this
Article 9 shall continue in full force and effect until fully discharged. Any
other covenants or agreements contained herein or made pursuant hereto which by
their terms are to be performed after the Option Closing Date shall survive
until fully performed and discharged in full, including without limitation all
obligations and liabilities with respect to the Assumed Liabilities and the
Retained Liabilities.
<PAGE>
- 48 -
9.2 Indemnification of Option Holder. Sellers agree that, after the
Closing, subject to the limitations in Section 9.4 below, they shall indemnify
and hold Option Holder and its officers, directors, employees, agents and
Affiliates harmless from and against any and all damages, claims, losses,
expenses, costs, obligations and liabilities, including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees and
expenses ("Loss and Expense") suffered (whether any such claim arises out of a
third party action or is made by Option Holder against Sellers) by Option Holder
resulting from (i) any material breach of a representation or warranty made by
Sellers pursuant to this Agreement; (ii) any material failure by Sellers to
perform or fulfill any of their covenants or agreements set forth in this
Agreement; (iii) any failure by Sellers to pay, perform or discharge any
liabilities or obligations not specifically assumed by Option Holder pursuant to
this Agreement; (iv) any litigation, proceeding or claim by any third party
arising from the business or operations of the License Assets by Sellers prior
to the Option Grant Date, except to the extent arising from obligations or
liabilities that have been disclosed to Option Holder in this Agreement or the
Asset Purchase Agreement or the Schedules hereto (other than those set forth on
Schedule 9.2 relating to the Stations) and except to the extent arising from
obligations or liabilities of or assumed by Option Holder pursuant to this
Agreement and from obligations or liabilities incurred by Option Holder pursuant
to the Group I TBA.
9.3 Indemnification of Sellers. Option Holder agrees that, after the
Closing, it shall indemnify and hold Sellers and their respective officers,
directors, partners, employees, agents and Affiliates harmless from and against
any and all Loss and Expense suffered (whether any such claim arises out of a
third party action or is made by any Seller against Option Holder) by any Seller
resulting from (i) any material breach of representation or warranty made by
Option Holder pursuant to this Agreement; (ii) any material failure by Option
Holder to perform or fulfill any of its covenants or agreements set forth in
this Agreement; (iii) any failure by Option Holder to pay, perform or discharge
any Assumed Liabilities or any other obligations or liabilities of or assumed by
Option Holder under this Agreement (including, without limitation, those set
forth in Section 10.1 hereof); or (iv) any litigation, proceeding or claim
arising from the business or operations of any of the Stations on or after the
Option Grant Date.
9.4 Limitation of Liability. (i) Notwithstanding any other provision of
this Agreement, after a Closing, neither Sellers nor Option Holder shall
indemnify or otherwise be liable to the
<PAGE>
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other, unless (a) the party seeking indemnification has complied with the terms
of, including the time limits set forth in, Section 9.6 and (b) the aggregate
amount of Option Holder's Loss and Expense hereunder when combined with any Loss
and Expense under the Columbus Option Agreement (in the case of Sellers'
indemnification of Option Holder) or Sellers' Loss and Expense hereunder when
combined with any Loss and Expense under the Columbus Option Agreement (in the
case of Option Holder's indemnification of Sellers) exceeds $500,000, in which
event the indemnified party shall be entitled to recover its aggregate Loss and
Expense inclusive of $500,000 threshold; provided that such limitation shall not
apply to any indemnification obligation of Option Holder pursuant to Section
9.3(ii), (iii) or (iv) hereunder or under the Columbus Option Agreement or
Sellers pursuant to Section 9.2(ii), (iii) or (iv) hereunder or under the
Columbus Option Agreement. Notwithstanding any provision contained herein, in no
event shall Sellers be liable for any amount, which, when combined with any
other amount for which Sellers previously have been liable under Section 9.2
hereof and any amount for which RCB is liable, or previously has been liable,
under Section 9.2 of the Asset Purchase Agreement and any amount for which
Sellers are liable, or previously have been liable, under Section 9.2 of the
Columbus Option Agreement, is in excess of $50,000,000.
(ii) Notwithstanding anything in this Agreement to the
contrary, it is understood and agreed that any amounts owed to Option Holder by
Sellers for such Loss and Expense as determined in accordance with this Article
9 hereof, Article 9 of the Columbus Option Agreement and Article 9 of the Asset
Purchase Agreement shall be made solely and exclusively in the form of a
deduction from the Columbus Option Closing Price (such term when used herein
shall have the meaning assigned to such term in the Columbus Option Agreement)
that has not yet been paid to Sellers under the Columbus Option Agreement and
that once the Columbus Option Closing Price has been paid in full or portion
thereof placed in the Indemnification Fund (as defined in the Columbus Option
Agreement) to Sellers or if the Columbus Option is terminated under the Columbus
Option Agreement, Option Holder shall have no further recourse against Sellers,
and no other payment by Sellers shall be required, hereunder, except for any
pending claims against the amount of the Option Closing Price placed in the
Indemnification Fund (as defined in the Columbus Option Agreement).
(iii) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither Sellers (except to the extent expressly
provided for in Section 9.4(ii)) nor any partner, director, officer, employee,
agent or Affiliate of any
<PAGE>
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Seller (including any shareholder, director, officer, employee, agent or
Affiliate of the general partners of any Seller) shall have any personal
liability to Option Holder as a result of the breach of any representation,
warranty, covenant or agreement of Sellers contained herein or otherwise and
shall have no personal obligation to indemnify Option Holder for any of Option
Holder's Losses or Expenses.
9.5 Bulk Sales Indemnity. Option Holder hereby waives compliance with
the provisions of any applicable bulk transfer laws. Subject to the limitations
set forth in Section 9.4 above, Sellers further agree to indemnify and hold
Option Holder harmless from and indemnify Option Holder against any and all Loss
and Expense relating to any claims made by creditors with respect to
non-compliance with any bulk transfer law, except to the extent that such claims
result from the Assumed Liabilities and other obligations or liabilities to be
paid or discharged by Option Holder as a result of this Agreement, the Columbus
Option Agreement and the Group I TBA and/or Option Holder's failure to pay the
same when due.
9.6 Notice of Claims. If either Option Holder, on the one hand, or
Sellers on the other hand, believes in good faith that it has suffered or
incurred any Loss and Expense, such Seller shall notify the Option Holder in
writing and, in any event, within one year from the Option Closing Date with
respect to the related Station, describing such Loss and Expense, the factual
basis for such claim, the amount thereof, estimated in good faith, and the
method of computation of such Loss and Expense, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss and Expense shall have occurred. If any action at law
or suit in equity is instituted by a third party with respect to which any of
the parties intends to claim any liability or expense as Loss and Expense under
this Article 9, such party shall within twenty (20) days after receiving written
notice thereof (or sooner to the extent the indemnifying party would not have
time to adequately take the actions contemplated under Section 9.7) notify the
indemnifying party of such action or suit.
9.7 Defense of Third Party Claims. The indemnifying party under this
Article 9 shall have the right to conduct and control through counsel of its own
choosing the defense of any third party claim, action or suit (and the
indemnified party shall cooperate fully with the indemnifying party), but the
indemnified party may, at its election, participate in the defense of any such
claim, action or suit at its sole cost and expense provided that, if the
indemnifying party shall fail to defend any such claim, action or suit, then the
indemnified party may defend
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through counsel of its own choosing such claim, action or suit, and (so long as
it gives the indemnifying party at least fifteen (15) days' notice of the terms
of the proposed settlement thereof and permits the indemnifying party to then
undertake the defense thereof) settle such claim, action or suit, and to recover
from the indemnifying party the amount of such settlement or of any judgment and
the costs and expenses of such defense. The indemnifying party shall not
compromise or settle any third party claim, action or suit without the prior
written consent of the indemnified party, which consent will not be unreasonably
withheld or delayed.
9.8 Indemnity as Sole Remedy. After the Option Closing Date,
indemnification pursuant to this Article 9 shall be the sole and exclusive
remedy of any party to this Agreement for any breach of a representation,
warranty or covenant made or obligation undertaken by any other party, or for
any Loss or Expense arising out of or relating to the items listed in Sections
9.2 and 9.3 or otherwise related to the transactions contemplated hereby, other
than in respect of the Asset Purchase Agreement (subject to Section 9.4), the
Columbus Option Agreement (subject to Section 9.4 thereof), the Registration
Rights Agreement, the Group I TBA, the Employment Agreement, the Consulting
Agreement, the Baker Stock Option Agreement, the Corporate Employee Stock Option
Agreement, the Station Employee Stock Option Agreement, the Amended Employee
Letter Agreement, the Voting Agreement, the ISO Amendment, the LTIP, the Amended
Charter or the Articles Supplementary (as such documents are described in the
Asset Purchase Agreement and, collectively, the "Transaction Documents"), which
shall be governed by their terms, whether such claim may be asserted as a breach
of contract, tort or otherwise.
9.9 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to Article 9 of this
Agreement, including the determination of the scope or applicability of this
agreement to arbitrate, shall be settled by final and binding arbitration in
accordance with the rules then in effect of the American Arbitration Association
("AAA"), as modified or supplemented under this Section, and subject to the
Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16. The decision of the arbitrators
shall be final and binding provided that, where a remedy for breach is
prescribed hereunder or limitations on remedies are prescribed, the arbitrators
shall be bound by such restrictions, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
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If any series of claims arising out of the same or related transactions
shall involve claims which are arbitrable under the preceding paragraph and
claims which are not, the arbitrable claims shall first be finally determined
before suit may be instituted upon the others and the parties will take such
action as may be necessary to toll any statutes of limitations, or defenses
based upon the passage of time, that are applicable to such non-arbitrable
claims during the period in which the arbitrable claims are being determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 9.9, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. The
arbitration panel shall consist of three arbitrators, appointed in accordance
with the procedures set forth in this paragraph. Within ten (10) business days
of delivery of the notice of commencement of arbitration referred to above,
Sellers, on the one hand, and Option Holder, on the other hand, shall each
appoint one arbitrator, and the two arbitrators so appointed shall within ten
(10) business days of their appointment mutually agree upon and appoint one
additional arbitrator (or, if such arbitrators cannot agree on an additional
arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules) provided, that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least 15 years as an attorney
specializing in either general commercial litigation or general corporate and
commercial matters and (iii) are experienced in matters involving the
broadcasting industry.
The arbitration hearing shall commence no later than thirty (30)
business days after the completion of the selection of the arbitrators.
Consistent with the intent of the parties hereto that the arbitration be
conducted as expeditiously as possible, the parties agree that (i) discovery
shall be limited to the production of such documents and the taking of such
depositions as the arbitrators determine are reasonably necessary to the
resolution of the controversy, claim or dispute and (ii) the arbitrators shall
limit the presentation of evidence by each side in such arbitration to not more
than ten (10) full days (or the equivalent thereof) or such shorter period as
the arbitrators shall determine to be necessary in order to resolve the
controversy, claim or dispute. The arbitrators shall be instructed to render a
decision within ten (10) business days of the close of the arbitration hearing.
If arbitration has not been completed within ninety (90) days of the
commencement of such arbitration, any party to the arbitration may initiate
litigation upon ten (10) days written notice to the other
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party(ies); provided, however, that if one party has requested the other to
participate in an arbitration and the other has failed to participate, the
requesting party may initiate litigation before the expiration of such
ninety-day period; and provided further, that if any party to the arbitration
fails to meet any of the time limits set forth in this Section 9.9 or set by the
arbitrators in the arbitration, any other party may provide ten (10) days
written notice of its intent to institute litigation with respect to the
controversy, claim or dispute without the need to continue or complete the
arbitration and without awaiting the expiration of such ninety-day period. The
parties hereto further agree that if any of the rules of the AAA are contrary to
or conflict with any of the time periods provided for hereunder, or with any
other aspect of the matters set forth in this Section 9.9, that such rules shall
be modified in all respects necessary to accord with the provisions of this
Section 9.9 (and the arbitrators shall be so instructed by the parties). The
arbitrators shall base their decision on the terms of this Agreement and
applicable law and judicial precedent which a United States District Court
sitting in the District of Maryland (Southern Division) would apply in the event
the dispute were litigated in such court, and shall render their decision in
writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrators shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Rockville, Maryland.
ARTICLE 10
----------
EMPLOYEE MATTERS
----------------
10.1 Employee Matters. The following provisions shall act exclusively
for the benefit of parties to this Agreement and not for the benefit of any
other person or entity:
(a) Effective as of each Option Closing Date, the Option Holder
shall offer employment to each employee of Sellers who is employed at any
Station immediately prior to the Option Closing Date with respect to such
Station (the "Station Employees") on terms and conditions which are
substantially similar in the aggregate to the terms and conditions of employment
of the Option Holder's employees as of the Option Closing Date, including the
provision of retirement and health care benefits, except as any employment
agreement between Option Holder and any Station Employee may otherwise require.
The Option Holder shall assume all contracts of employment of the
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Station Employees and notwithstanding anything in the foregoing to the contrary,
to the extent such employment contract or collective bargaining agreement
assumed hereunder provides for terms and conditions in addition to those
referenced in the preceding sentence, Option Holder shall assume the terms
thereof. Each Station Employee shall receive credit for past service with the
Sellers for all purposes under the Option Holder's benefit plans.
(b) Option Holder shall assume full responsibility and liability
for offering and providing "Continuation Coverage" to any "Qualified
Beneficiary" who is covered by a "Group Health Plan" sponsored or contributed to
by the Sellers or any entity required to be combined with the Sellers (within
the meaning of Sections 414(b), (c), (m) or (o) of the Code) and who has
experienced a "Qualifying Event" or is receiving "Continuation Coverage" arising
with respect to employment at any Station on or prior to the Option Closing Date
with respect to such Station. For purposes of this Section 10.1(b), a Qualified
Beneficiary will be deemed to experience a Qualifying Event or to be receiving
Continuation Coverage "arising with respect to employment" at a Station if such
Qualified Beneficiary is or was an employee of the Station or is or was the
spouse or other covered dependent of such employee. Schedule 10.1 identifies all
Qualified Beneficiaries entitled to Continuation Coverage under any Seller's
Group Health Plan on the date of this Agreement, and Sellers shall deliver at
each Option Closing Date a list of Qualified Beneficiaries entitled to
Continuation Coverage as of such date. "Continuation Coverage," "Qualified
Beneficiary," "Qualifying Event" and "Group Health Plan" all shall have the
meanings given such terms under Section 4980B of the Code and Section 601 et
seq. of ERISA.
(c) Option Holder shall offer health plan coverage to all Station
Employees under the terms and conditions generally applicable to the Option
Holder's employees as of the Option Closing Date. For purposes of providing such
coverage, the Option Holder shall waive all preexisting condition limitations
for all Station Employees covered by any Seller's group health plan as of the
Option Closing Date and shall provide such health care coverage effective as of
the Option Closing Date without the application of any eligibility period for
coverage. In addition, the Option Holder shall credit all employee payments
toward deductible and co-payment obligations limits under the Seller's health
care plans for the plan year which includes the Option Closing Date as if such
payments had been made for similar purposes under the Option Holder's health
care plans during the plan year which includes the Option Closing Date, with
respect to the Station Employees.
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(d) Option Holder shall grant Station Employees credit for and
shall assume and be responsible for any liabilities with respect to sick leave
and personal days accrued but unused by any Station Employees as of the Closing
Date, and, Option Holder shall grant Station Employees credit for and shall be
responsible for any liabilities with respect to any accrued but unused vacation
for such employees as of the Option Closing Date.
(e) Except as otherwise provided in Section 10.1(f), within a
reasonable period of time after each Option Closing Date, RCB shall transfer
from the River City Investment and Retirement Plan ("RCB's 401(k) Plan") to the
Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust ("Option
Holder's 401(k) Plan") an amount, in cash, equal to the aggregate account
balances held in the RCB's 401(k) Plan as of the date of transfer with respect
to all Station Employees. Prior to the date of such transfer, and as
preconditions thereto: (1) the Option Holder shall use commercially reasonable
efforts to deliver to Sellers a copy of the most recently issued Internal
Revenue Service ("IRS") determination letter (or other proof satisfactory to
counsel for the Sellers) that Option Holder's 401(k) Plan is qualified under the
Code, and (2) Sellers shall use commercially reasonable efforts to deliver to
the Option Holder a copy of the most recently issued IRS determination letter
(or other proof satisfactory to counsel for the Option Holder) that RCB's 401(k)
Plan is qualified under the Code. Sellers shall not take any action with respect
to RCB's 401(k) Plan to create a right on behalf of the Station Employees to
distribution of plan assets from RCB's 401(k) Plan prior to such transfer.
Subsequent to the transfer of assets to the Option Holder's 401(k) Plan, neither
the Sellers nor RCB's 401(k) Plan shall retain any liability with respect to
such Station Employees to provide them with benefits in accordance with the
terms of RCB's 401(k) Plan. On or prior to the Option Closing Date, Sellers
shall deliver to Option Holder a list of all Station Employees, indicating
thereon the total amount deferred in pre-tax dollars to RCB's 401(k) Plan by
each of the Station Employees under the terms of Section 402(g) of the Code with
respect to the plan year of RCB's 401(k) Plan in which Closing occurs. Sellers
and the Option Holder agree to cooperate with respect to any government filing,
including, but not limited to, the filing of IRS Forms 5310-A, if necessary, to
effect the transfer of assets contemplated by this Section 10.1.
(f) The Option Holder agrees, effective as of the later of final
Option Closing Date under this Option Agreement, the Columbus Option Closing
Date or the termination of the Columbus Option Agreement, to fully assume
sponsorship of RCB's 401(k) Plan including all obligations of the sponsor to
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contribute to and administer the plan. Sellers and the Option Holder agree to
perform all acts necessary or proper to consummate the assumption of RCB's
401(k) Plan, including but not limited to the making of all proper filings with
the IRS and the Department of Labor and the receipt of all necessary notices or
approvals from governmental agencies.
(g) The Option Holder agrees that the Sellers may inform its
employees that the Option Holder has agreed that the Station Employees will be
offered employment as provided in this Section 10.1; provided, however, that
Option Holder shall have the right to approve any written statement to be made
by Sellers in connection therewith.
ARTICLE 11
----------
TERMINATION/MISCELLANEOUS
-------------------------
11.1 Termination of Options.
11.1.A Group I Options. If not exercised on or prior to April 10, 2006,
in accordance with the terms and conditions specified herein, the applicable
unexercised Group I Option shall expire and terminate. Subject to Section
11.1.B, a Group I Option may be terminated by Sellers at any time on or after
April 10, 2008 if the Option Closing Date has not occurred on or prior to April
10, 2008.
11.1.B Notice and Cure. (a) Notwithstanding anything to the contrary in
the foregoing, to the extent that Option Holder has taken, or failed to take,
any of the actions otherwise contemplated under Section 11.1.A prior to a
termination under such provisions by Sellers, Sellers shall give Option Holder
and Option Holder's Lenders under its then existing senior credit facility (the
name and notice information regarding which Option Holder shall provide to
Sellers) notice thereof, Option Holder shall be given thirty (30) days from the
date of receipt of such notice to cure such action or inaction and the Option
Holder's Lenders shall be given ninety (90) days from the date of receipt of
such notice to cure such action or inaction. After the applicable cure period
with respect to such action or inaction has expired without such action or
inaction having been cured within such periods, Sellers shall have the right to
terminate hereunder.
(b) On the date of this Agreement, Sellers shall have received
from Option Holder, an irrevocable standby letter of credit issued by Option
Holder's Lenders for the account of Sellers in the amount of $1,550,000 which
shall have no
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conditions to drawing other than notice from Sellers that Option Holder or any
permitted assignee under the Group I TBA has defaulted in its obligations under
the Group I TBA relating to a Station, and Sellers shall have the right to draw
down all amounts set forth on Schedule 11.1.D for each Station for which the
Option Closing Date has not yet occurred, and following each draw down by
Sellers, Option Holder shall replenish such letter of credit such that at all
times such letter of credit shall be an amount equal to the aggregate of all
amounts set forth on Schedule 11.1.D for each Station with respect to which the
Option Closing Date has not yet occurred.
11.2 Effect of Termination and Other Limitations. (a) In the event of
termination, as provided in Section 11.1, the obligations of the parties hereto
in respect of the terminated Option shall terminate (but shall remain in effect
as applicable with respect to Options that were not terminated) without any
liability or obligation on the part of Sellers or Option Holder, except that (i)
the provisions of Sections 2.1.B, 3.4, 4.4, 5.5, 6.1, 11.2-11.12, and
11.15-11.19 shall survive, and (ii) to the extent that such termination results
from the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, the
non-defaulting parties' rights to pursue all legal or equitable remedies for
breach of contract or otherwise, including the right to specific performance or
damages or both, shall survive and the non-prevailing party in any lawsuit
related to any such pursuit shall pay the attorney's fees of the prevailing
party. Without limiting the generality of the foregoing, neither Option Holder,
on the one hand, nor Sellers, on the other hand, may rely on the failure of any
condition precedent set forth in Articles 7 or 8, as applicable, to be satisfied
if such failure was caused by such party's (or parties') failure to act in good
faith, or a breach of or failure to perform its representations, warranties,
covenants or other obligations in accordance with the terms of this Agreement.
(b) Anything in this Agreement or any applicable law to the contrary
notwithstanding, neither any Seller (except to the extent expressly provided for
in Section 11.2(a)) nor any partner, director, officer, employee, agent or
Affiliate of any Seller (including any shareholder, director, officer, employee,
agent or Affiliate of the general partner of the Seller) shall have any personal
liability to Option Holder as a result of the breach of any representation,
warranty, covenant or agreement of Seller contained herein or otherwise and
shall have no personal obligation to Option Holder for any of Option Holder's
remedies hereunder.
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11.3 Expenses. Subject to the provisions of Sections 3.4 and 4.4, each
party hereto shall bear all of its expenses incurred in connection with the
transactions contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith; provided, however,
that Sellers on the one hand, and Option Holder on the other, shall each pay
one-half of any sales or transfer taxes (including any real property transfer
taxes) arising from transfer of the License Assets and any FCC filing fees.
11.4 Assignments. This Agreement shall not be assigned by any party
hereto without the prior written consent of the other parties except as
specified herein, as follows:
(i) Option Holder or any permitted assignee of Option
Holder may assign its rights and interests hereunder with respect to any Option
provided that (1) Option Holder gives Sellers written notice thereof; (2) such
assignment shall not relieve Sinclair Broadcast Group, Inc. or any assignee
hereof or of any other Option Holder of any of its obligations or liabilities
hereunder; (3) such assignment would not violate any applicable laws, rules,
regulations or policies of any applicable governmental authority; and (4) if
Option Holder assigns an Option pursuant to this subsection (i) and if any
amounts are paid to Option Holder in connection therewith, Option Holder shall,
on the date any such payment is received, pay such amount to Sellers, which
amount shall be referred to as the "Option Assignment Price" for such Option.
(ii) To the extent of any such assignment by Option
Holder in accordance with the terms of this Section 11.4, Sellers shall deliver
any such documents contemplated under Section 2.4(a) to such assignee provided
that once such delivery shall have been made to such assignee, Sellers'
obligations hereunder with respect to such delivery shall be deemed to have been
discharged. It is understood and agreed that nothing herein shall be deemed to
prohibit a transfer of control of any Seller or Licensee or the assignment of
any FCC Authorizations or any of the other License Assets by Sellers provided
that Sellers agree to amend any filings contemplated under Section 5.8(a) to the
extent necessary in connection therewith. Any attempt to assign this Agreement
without the required consent shall be void. It is understood and agreed that
nothing herein shall be deemed to expand the rights granted hereunder to any
permitted assignee, which rights shall be in combination with, and not in
addition to, the rights of Option Holder. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
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11.5 Further Assurances. Subject to the terms and conditions of this
Agreement, from time to time prior to, at and after the Option Grant Date, each
party hereto will use commercially reasonable efforts to take, or cause to be
taken, all such actions and to do or cause to be done, all things, necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale contemplated by this Agreement and the consummation of the
other transactions contemplated hereby, including executing and delivering such
documents as the other party being advised by counsel shall reasonably request
in connection with the consummation of this Agreement and the consummation of
the other transactions contemplated hereby, including, without limitation, the
execution and delivery of any and all confirmatory and other instruments, in
addition to those to be delivered on either the Option Grant Date or any Option
Closing Date.
11.6 Notices. All notices, demands and other communications which may
or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid, or by registered or certified mail,
return-receipt requested, or by facsimile transmission, and shall be deemed to
have been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, when dispatched by facsimile
transmission, five (5) days after deposited in the mail, first class postage
prepaid, addressed as follows:
(a) If to any Seller:
River City Broadcasting, L.P.
1215 Cole Street
St. Louis, Missouri 63106-3897
Attn.: Mr. Barry A. Baker and Mr. Larry D. Marcus
Telecopier: (314) 259-5709
With a copy to:
Dow, Lohnes & Albertson
A Professional Limited Liability Company
1200 New Hampshire Ave., N.W.
Suite 800
Washington, D.C. 20036-6802
Attn.: Leonard J. Baxt, Esq.
Telecopier: (202) 776-2222
Baker & Botts
800 Trammell Crow Center
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2001 Ross Avenue
Dallas, Texas 75201-2916
Attn.: Andrew M. Baker, Esq.
Telecopier: (214) 953-6503
or to such other address as any Seller may from time to time designate.
(b) If to Option Holder:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn.: Mr. David D. Smith
Telecopier: (410) 467-5043
With a copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attn.: Steven A. Thomas, Esq.
Telecopier: (410) 752-2046
or to such other address Option Holder may from time to time designate.
11.7 Captions. The captions of Articles and Sections of this Agreement
are for convenience only, and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
11.8 Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REFERENCE
TO ITS PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW
OF THE UNITED STATES GOVERNS THE TRANSACTIONS CONTEMPLATED HEREBY.
11.9 Consent to Jurisdiction, Etc. EXCEPT AS SET FORTH IN SECTION 9.9
HEREOF, THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF ANY FEDERAL COURT LOCATED IN THE DISTRICT OF MARYLAND
(SOUTHERN DIVISION) OR TO THE EXTENT SUCH COURTS ARE NOT AVAILABLE, ANY COURT IN
THE STATE OF MARYLAND LOCATED IN THE COUNTY OF MONTGOMERY IN CONNECTION WITH ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES
HERETO HEREBY WAIVE PERSONAL SERVICE OF ANY PROCESS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING AND
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AGREE THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
ADDRESSED TO OR BY PERSONAL DELIVERY TO THE OTHER PARTY AT SUCH OTHER PARTY'S
ADDRESS SET FORTH PURSUANT TO PARAGRAPH 11.6 HEREOF. IN THE ALTERNATIVE, IN ITS
DISCRETION, ANY OF THE PARTIES HERETO MAY EFFECT SERVICE UPON ANY OTHER PARTY IN
ANY OTHER FORM OR MANNER PERMITTED BY LAW.
11.10 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall in no manner affect the right at a later date to enforce the same. No
waiver by any party of any condition or the breach of any provision, term,
covenant, representation, or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation, or warranty of
this Agreement.
11.11 Counterparts. This Agreement may be executed in two (2) or more
counterparts, and all counterparts so executed shall constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the same counterpart.
11.12 Entire Agreement/Amendments. This Agreement and the Group I TBA
(including the Exhibits and Schedules hereto and thereto) and to the extent
applicable, the Modification Agreement dated May 10, 1996 between RCB and Option
Holder and the letter dated May 10, 1996 from the parties' counsel to the
Department of Justice in connection therewith, and the documents delivered
pursuant to this Agreement or other written agreements among the parties, dated
the date hereof or hereafter, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede any and all prior and
contemporaneous agreements, understandings, negotiations, and discussions,
whether oral or written, between them relating to the subject matter hereof. No
amendment or waiver of any provision of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
11.13 Access to Books and Records. Option Holder shall preserve for at
least three (3) years after the Option Closing Date all books and records
included in the License Assets. At the request of Sellers, Option Holder agrees
to give to the officers, partners, employees, agents, accountants and counsel of
Sellers access, upon reasonable prior notice during normal
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business hours, to the property, accounts, books, contracts, records, accounts
payable and receivable, records of employees of Sellers (as Sellers may have
been reorganized) and other information concerning the affairs of any Station,
any of the License Assets, except as may be prohibited by law, and to the
employees of Option Holder as Sellers may reasonably request. Sellers shall have
no obligation to retain books and records relating to the License Assets,
subsequent to the Closing relating to such License Assets. To the extent any
such books and records are retained, then for a period not to exceed three (3)
years after the Closing Date, at the request of Option Holder, Sellers agree to
give the officers, employees, accountants and counsel of Option Holder access,
upon reasonable prior notice during normal business hours, to the books, records
and files retained by Sellers with respect to the business and operation of any
Station by Sellers as Option Holder may reasonably request in connection with an
audit of any Station. Each of Option Holder and Sellers shall be permitted at
their own expense to make extracts from or copies of the foregoing books,
records and files of the other party.
11.14 Waiver of Final Grant by FCC. Option Holder and Sellers agree to
proceed to effect a Closing with respect to a Station as provided in Section
2.2(b) hereof, on Initial Grant, as defined below. "Initial Grant" shall be
defined for the purposes of this Agreement as the date of the publication of the
FCC "Public Notice" announcing the grant of the "Assignment Application(s)" for
the FCC licenses for such Station to be transferred hereunder which contains no
conditions materially adverse to Option Holder. The terms "Public Notice" and
"Assignment Application(s)" have the same meaning herein as are generally given
to such terms under existing FCC rules, regulations and procedures.
11.15 Recitals, Headings. The Recitals contained in this Agreement
shall be deemed to be a binding part of this Agreement. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
11.16 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any
<PAGE>
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party. Upon such determination that any term or other provision is invalid or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the greatest extent possible.
11.17 Public Announcements and Press Releases. Prior to the later of
the final Option Closing Date, the Columbus Option Closing Date or the
termination of the Columbus Option Agreement, neither Sellers nor Option Holder
shall, except by mutual agreement, make any press release or other public
announcement (written or oral) concerning this Agreement or the transactions
contemplated by this Agreement, except as may be required by any law, rule or
regulation (including, without limitation, filings and reports required to be
made with or pursuant to the rules of the SEC) or any by existing contract,
license, or agreement to which it is a party and provided that the party
required to make such announcement shall provide a draft copy thereof to the
other parties hereto, and consult with such other parties concerning the timing
and content of such announcement, before such announcement is made. No press
releases or other public announcements concerning this Agreement or the
transactions contemplated hereby shall be made by any party hereto without the
prior written consent of the other parties unless the first such party is
legally compelled to do so.
11.18 Board of Directors and Committees. From and after the Asset
Purchase Agreement Closing Date, Option Holder shall cause (i) each of (1) Barry
Baker ("Baker") and (2) Roy F. Coppedge (or such other individual as may be
designated by Boston Ventures Limited Partnership IV and Boston Ventures Limited
Partnership IVA (collectively, "Boston Ventures")) (the "BV Designee") to
receive notice of all meetings of the Board of Directors of Option Holder and to
be permitted to attend such meetings, (ii) Baker to receive notice of all
meetings of any executive and finance committees, and to be permitted to attend
such meetings, and (iii) the BV Designee to receive notice of all meetings of
any compensation and finance committees, and to be permitted to attend such
meetings. In addition, if the Board of Directors or any executive, finance or
compensation committee of Option Holder plans to take actions by written consent
in lieu of a meeting, then Option Holder shall cause Baker (in the case of the
Board of Directors and any executive and finance committees) and the BV Designee
(in the case of the Board of Directors and any finance and compensation
committees) to receive a copy of the form of consent documents relating to such
actions at the same time that such documents are circulated or distributed to
the members of the Board of Directors, executive, finance or
<PAGE>
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compensation committees, as applicable. In addition, as soon as permissible
under the rules of the FCC and applicable laws, Option Holder shall cause (i)
each of Baker and the BV Designee to be appointed as members of the Board of
Directors of Option Holder, (ii) Baker to be appointed as a member of any
executive committee and, to the extent established, the finance committee and
(iii) the BV Designee to be appointed as a member of any finance committee, to
the extent established, and the compensation committee. Option Holder's Board of
Directors (which presently consists of seven (7) directors) has duly adopted
resolutions which have fixed the number of members of (x) directors of Option
Holder at nine (9) directors, (y) the executive committee at six (6) members,
and (z) the compensation committee at six (6) members and such resolutions also
have designated Baker and the BV Designee, as applicable, to fill the
directorships on the Option Holder's Board of Directors and memberships on such
committees pursuant to the terms of this Agreement. To the extent that the
Option Holder or the Board of Directors establishes a finance committee, it
shall designate each of Baker and the BV Designee as members of the finance
committee. Baker shall be entitled to be a director of Option Holder and a
member of the executive committee and, to the extent established, the finance
committee for so long as he remains an employee of Option Holder, and BV shall
be entitled to have the BV Designee be a director of Option Holder and a member
of the compensation committee and, to the extent established, the finance
committee until the first to occur of (i) the later of (a) the fifth anniversary
of the Asset Purchase Agreement Closing Date and (b) the expiration of the
initial five-year term of Barry Baker's Employment Agreement with Option Holder
and (ii) such time, after Option Holder has issued the Convertible Preferred
Stock to RCB or to its Partners, as Boston Ventures no longer owns, of record or
beneficially to the extent of its interest as a limited partner of RCB, at least
721,115 shares of Option Holder Common Stock, on an "as converted" basis, as
such number may be adjusted pursuant to stock splits, stock combinations,
reclassifications or recapitalizations of Option Holder occurring after the date
hereof.
11.19 List of Definitions. The following is a list of certain terms
used in this Agreement and a reference to the Section hereof in which such term
is defined:
Terms Section
----- ---------
AAA Section 9.9
Adjustment Amount Section 2.5(b)
Adjustment Date Section 2.5(a)
Affiliate Section 3.5
Agreement Preamble
<PAGE>
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Asset Purchase Agreement Recitals
Asset Purchase Agreement Closing Date Recitals
Asset Purchase Closing Recitals
Assumed Liabilities Section 1.3
Baker Section 11.18
Boston Ventures Section 11.18
BV Designee Section 11.18
Closing Section 2.2(b)
Columbus Option Agreement Recitals
Columbus Station Recitals
Columbus Station Excess Cash Flow Section 2.1.B(b)(ii)
Communications Act Section 3.5
Contract Section 1.1.A(d)
Conveyed Contracts Section 2.6
Disputing Party Section 2.5(b)
Escrow Agent Section 2.5(b)
Estimate Report Section 2.5(b)
Excluded Assets Section 1.2
Excluded Contracts Section 1.2(f)
Exercise Date Section 1.4
Exercise Notice Section 1.4
Exercise Period Section 1.5
FCC Recitals
FCC Authorizations Recitals
Group I Options Section 1.1
Group I Option Closing Price Section 2.1.B(a)
Group I Stations Recitals
Group I TBA Recitals
Group I TV Stations Recitals
Group I Unpaid Options Section 2.1.B(a)
Highest Capital Tax Rate Section 2.1.B(a)
HSR Act Section 5.9
Initial Grant Section 11.14
IRS Section 10.1(e)
Laws Section 2.6
Leasehold Interests Section 1.1.A(c)
Leases Section 3.7(a)
Lender Section 2.1.B(a)
Licensee Preamble
License Assets Section 1.1.A
Loss and Expense Section 9.2
Material Adverse Change Section 8.1(a)
New Mexico Stations Recitals
Option Assignment Price Section 11.4(a) (i)
Option Closing Date Section 2.2(b)
Option Closing Price Section 2.1.B(a)
Option Extension Fees Section 2.1.B(b)
Option Grant Section 2.2(a)
Option Grant Date Preamble
<PAGE>
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Option Grant Price Section 2.1.A
Option Holder Preamble
Option Holder's 401(k)Plan Section 10.1(e)
Option Holder's Lenders Section 5.1(i)
Other Contracts Section 1.1.A(d)
Permitted Encumbrances Section 1.3
Person Section 3.5
Post-Closing Estimate Fund Section 2.5(b)
Post-Closing Estimate Fund Deposit Section 2.5(b)
Pre-Closing Certificate Section 2.5(b)
Proceedings Section 2.6
Radio Stations Recitals
RCB Preamble
RCB Credit Agreement Section 2.1.B(a)
RCB's 401(k)Plan Section 10.1(e)
RCB Twin Peaks Equity Interests Recitals
Real Property Section 1.1.A(c)
Real Property Improvements Section 1.1.A(c)
Sale Price Section 5.1(i)
Sandia Recitals
Sandia Stock Recitals
Sellers Preamble
Standard Formula Section 5.1(i)
Station Employees Section 10.1(a)
Station Material Adverse Change Section 3.8
Stations Recitals
Terminations Section 7.6
Transaction Documents Section 9.8
Twin Peaks Recitals
Twin Peaks License Partnership Interest Recitals
Twin Peaks Partnership Interest Recitals
Twin Peaks Sale Recitals
Unpaid Amount Section 2.1.B(a)
11.20 No Third Party Beneficiaries. No person other than Option Holder
or Sellers shall have any right to enforce any provision of this Agreement or
have any "third party beneficiary" rights hereunder, other than Option Holder's
Lenders with respect to Section 11.4 hereof and Boston Ventures and Baker with
respect to Section 11.18 hereof and except as expressly provided in a separate
agreement dated as of the date of the Asset Purchase Agreement among Option
Holder, Sellers and Option Holder's Lenders.
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
RIVER CITY BROADCASTING, L.P.
By: Better Communications, Inc., its
General Partner
By: /s/ Larry D. Marcus
-------------------------
Name: Larry D. Marcus
Title: Vice President
RIVER CITY LICENSE PARTNERSHIP
By: River City Broadcasting, L.P.
By: Better Communications, Inc.,
its General Partner
By: /s/ Larry D. Marcus
------------------------
Name: Larry D. Marcus
Title: Vice President
OPTION HOLDER:
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
------------------------
Name: David B. Amy
Title: Chief Financial Officer
COLUMBUS
OPTION AGREEMENT
BY AND AMONG
RIVER CITY BROADCASTING, L.P.
AND
RIVER CITY LICENSE PARTNERSHIP,
AS SELLERS,
AND
SINCLAIR BROADCAST GROUP, INC.,
AS OPTION HOLDER
DATED AS OF May 31, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
OPTION TO ACQUIRE LICENSE ASSETS AND COLUMBUS STATION ASSETS
1.1 Options..............................................................2
1.1.A. Option to Acquire License Assets.....................................2
1.1.B Transfer of Columbus Assets..........................................4
1.2 Excluded Assets......................................................8
1.3 Liabilities.........................................................10
1.4 Option Exercise.....................................................12
1.5 Terms of Option. ..................................................13
ARTICLE 2
PAYMENTS AND CLOSING
2.1 Grant Price and Option Closing Price................................13
2.1.A Payment for Option Grant............................................13
2.1.B Payment of Columbus Option Closing Price and Option
Extension Fees......................................................14
2.2 Option Grant and Closing............................................17
2.3 Deliveries at Option Grant..........................................18
2.4 Deliveries at Closing...............................................19
2.5 Indemnity Adjustment................................................22
2.6 Effect of Certain Laws or Proceedings...............................22
2.7 Representations and Warranties of, and Operations by,
Sellers.............................................................24
2.8 Effect of RCB Credit Agreement......................................24
<PAGE>
- ii -
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Organization........................................................25
3.2 Approval/Authority..................................................25
3.3 No Conflicts........................................................25
3.4 Brokers.............................................................26
3.5 FCC Authorizations..................................................26
3.6 Condition of Assets.................................................27
3.7 Title...............................................................27
3.8 Call Letters, Trademarks, Etc.......................................28
3.9 Insurance...........................................................28
3.10 Contracts...........................................................28
3.11 Employees...........................................................29
3.12 Litigation..........................................................30
3.13 Compliance with Laws................................................30
3.14 Complete Disclosure.................................................31
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
4.1 Incorporation.......................................................31
4.2 Corporate Action....................................................31
4.3 No Conflicts........................................................31
4.4 Brokers.............................................................32
4.5 Litigation..........................................................32
4.6 Capitalization......................................................32
<PAGE>
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ARTICLE 5
COVENANTS OF SELLERS PENDING THE CLOSING
5.1 Maintenance of Business until Closing...............................33
5.2 Goodwill/Compliance with Agreements.................................35
5.3 Reports; Access to Facilities, Files and Records....................35
5.4 Notice of Proceedings...............................................36
5.5 Confidential Information............................................36
5.6 Consummation of Option Closing......................................37
5.7 Notice of Certain Developments......................................37
5.8 Covenants of Sellers After Option Exercise..........................37
5.9 Hart-Scott-Rodino...................................................38
5.10 Use of Excess Cash Flow.............................................38
5.11 New License Subsidiary..............................................39
ARTICLE 6
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
6.1 Confidential Information............................................40
6.2 Consummation of Agreement...........................................40
6.3 Notice of Proceedings...............................................41
6.4 Covenants of Option Holder After Option Exercise....................41
6.5 Notice of Material Impact...........................................42
6.6 Hart-Scott-Rodino...................................................42
6.7 New Employment Agreements...........................................42
<PAGE>
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLERS
7.1 Representations, Warranties, Covenants..............................43
7.2 Proceedings.........................................................43
7.3 Opinion of Counsel..................................................44
7.4 FCC Authorization...................................................45
7.5 Hart-Scott-Rodino...................................................45
7.6 Termination of Certain Agreements...................................45
7.7 New Employment Agreements...........................................45
7.8 Approval of Stock Options...........................................45
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
8.1 Representations, Warranties, and Covenants..........................46
8.2 Proceedings.........................................................47
8.3 Opinion of Counsel..................................................47
8.4 FCC Authorizations..................................................48
8.5 Hart-Scott-Rodino...................................................48
8.6 Termination of Certain Agreements...................................48
ARTICLE 9
INDEMNIFICATION
9.1 Survival............................................................48
9.2 Indemnification of Option Holder....................................49
9.3 Indemnification of Sellers..........................................49
9.4 Limitation of Liability.............................................50
<PAGE>
- v-
9.5 Bulk Sales Indemnity................................................52
9.6 Notice of Claims....................................................52
9.7 Defense of Third Party Claims.......................................52
9.8 Indemnity as Sole Remedy............................................53
9.9 Arbitration.........................................................53
ARTICLE 10
EMPLOYEE MATTERS
10.1 Employee Matters....................................................55
ARTICLE 11
TERMINATION/MISCELLANEOUS
11.1 Termination of Columbus Option; Notice and Cure; Certain
Remedies............................................................58
11.1.A In General..........................................................58
11.1.B Notice and Cure.....................................................59
11.1.E Certain Remedies of Option Holder...................................64
11.2 Effect of Termination and Other Limitations.........................64
11.3 Expenses............................................................65
11.4 Assignments.........................................................65
11.5 Further Assurances..................................................66
11.6 Notices.............................................................66
11.7 Captions............................................................67
11.8 Law Governing.......................................................67
11.9 Consent to Jurisdiction, Etc........................................68
11.10 Waiver of Provisions................................................68
11.11 Counterparts........................................................68
<PAGE>
- vi-
11.12 Entire Agreement/Amendments.........................................68
11.13 Access to Books and Records.........................................69
11.14 Waiver of Final Grant by FCC........................................69
11.15 Recitals, Headings..................................................69
11.16 Severability........................................................70
11.17 Public Announcements and Press Releases.............................70
11.18 Board of Directors and Committees...................................70
11.19 List of Definitions.................................................72
11.20 No Third Party Beneficiaries........................................74
11.21 Columbus Receivables................................................74
Schedules
---------
Schedule 5.1 Maintenance of Business
Schedule 5.10 Excess Cash Flow
<PAGE>
COLUMBUS OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is dated as of May 31, 1996
(the "Option Grant Date"), and is by and among River City Broadcasting, L.P., a
limited partnership duly formed under the laws of the State of Delaware ("RCB"),
River City License Partnership, a general partnership duly formed under the laws
of the State of Missouri ("Licensee") (RCB and Licensee sometimes collectively
referred to herein as "Sellers" and individually as a "Seller"), and Sinclair
Broadcast Group, Inc., a corporation duly organized under the laws of the State
of Maryland ("Option Holder").
RECITALS
WHEREAS, Licensee is the licensee of Television Station WSYX(TV),
Columbus, Ohio pursuant to certain authorizations (the "FCC Authorizations")
issued by the Federal Communications Commission (the "FCC") (the "Columbus
Station" or the "Station"); and
WHEREAS, RCB owns certain Other Assets (as defined herein);
and
WHEREAS, RCB has entered with Option Holder into an Amended and
Restated Asset Purchase Agreement, dated as of April 10, 1996, as amended and
restated as of May ___, 1996 (as amended, the "Asset Purchase Agreement"),
pursuant to which Option Holder is purchasing on the date hereof certain assets
and rights of RCB, as provided in the Asset Purchase Agreement; and
WHEREAS, on the date hereof (the "Asset Purchase Agreement Closing
Date") in connection with the closing of the Asset Purchase Agreement (the
"Asset Purchase Closing"), Sellers and Option Holder have entered into the
"Group I TBA" (which term when used herein shall have the meaning assigned to
such term in the Group I Option Agreement, as defined below) pursuant to which
Option Holder will provide certain television and radio programming to Sellers
for the Group I Stations, all on the terms and conditions contained in the Group
I TBA; and
WHEREAS, RCB and Licensee desire to grant an option to the Option
Holder to acquire the License Assets (as defined in Section 1.1.A herein), and
the Columbus Station Assets (as defined below), and Option Holder desires to
acquire an option to acquire the License Assets, and the Columbus Station
Assets, all on the terms described herein; and
<PAGE>
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WHEREAS, on the Columbus Option Closing Date (as defined in Section
2.2(b) herein), Sellers will transfer and assign to Option Holder all of the
License Assets and the Columbus Station Assets;
WHEREAS, on the Asset Purchase Agreement Closing Date in connection
with the Asset Purchase Closing, Sellers and Option Holder are entering into a
Group I Option Agreement (the "Group I Option Agreement") pursuant to which
Option Holder will acquire an option to acquire the License Assets (as defined
in the Group I Option Agreement);
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows:
ARTICLE 1
---------
OPTION TO ACQUIRE LICENSE ASSETS AND COLUMBUS STATION ASSETS
------------------------------------------------------------
1.1 Options. Upon and subject to the terms and conditions stated
in this Agreement, Sellers hereby as of the date hereof grant to Option Holder
an option to acquire concurrently in their entirety at one Closing, all of
Sellers' rights, title and interest in, to and under the License Assets with
respect to the Columbus Station, the NewVenco Other Assets relating to the
Columbus Station and the Columbus Station Assets (the "Columbus Option" or the
"Option").
1.1.A. Option to Acquire License Assets. Subject to the terms and
conditions stated in this Agreement, on the Columbus Option Closing Date,
Sellers shall convey, transfer, assign and deliver to Option Holder, and Option
Holder shall acquire from Sellers, all of Sellers' rights, title and interest
in, to and under all License Assets used or held for use by Sellers with respect
to the Columbus Station. As used in this Agreement, "License Assets" used or
held for use with respect to the Station means all of Sellers' rights in, to and
under the following, on the Columbus Option Closing Date:
(a) FCC Authorizations. All FCC Authorizations issued to Licensee
with respect to the Station, including, without limitation, those shown on
Schedule 1.1.A(a) to the Group I Option Agreement, and all applications
therefor, together with any renewals, extensions or modifications thereof and
additions thereto.
<PAGE>
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(b) Tangible Personal Property. All equipment, vehicles,
furniture, transmitters, antennae, engineering equipment, office materials and
supplies, spare parts and other tangible personal property of every kind and
description owned as of the date of this Agreement by Sellers and used in
connection with the business and operations of the Station, including, without
limitation, those shown on Schedule 1.1.A(b) to the Group I Agreement, and any
additions, improvements, replacements and alterations thereto made between the
date of this Agreement and the Columbus Option Closing Date, but excluding all
such property which is consumed, retired or disposed of by Sellers in the
ordinary course of their business between the date of this Agreement and the
Columbus Option Closing Date or as otherwise permitted by this Agreement.
(c) Real Property. (i) All real property owned by Sellers relating
to the Columbus Station listed on Schedule 1.1.A(c) to the Group I Option
Agreement (the "Real Property"), (ii) all buildings, structures, towers,
improvements, transmitting towers and other fixtures thereon (the "Real Property
Improvements"), owned by Seller and used in the business and operations of the
Station; (iii) all other leaseholds and other interests in real property held by
Sellers relating to the Columbus Station (the "Leasehold Interests") listed and
so designated on Schedule 1.1.A(c) to the Group I Option Agreement; and (iv)
real property, and all buildings, structures and improvements thereon and
leasehold interests that are acquired by Sellers between the date hereof and the
Columbus Option Closing Date for the Station.
(d) Other Contracts. All contracts relating to the Station to
which either Seller is a party (in addition to and not included in those set
forth in Sections 1.1.A(b) and 1.1.A(c) hereof) and the Consent Contracts, as
defined in, and contemplated under, Section 1.3(c) of the Asset Purchase
Agreement (collectively, "Other Contracts"), including all agreements, equipment
leases and other leases relating to the Columbus Station listed on Schedules
1.1.A(d) and 3.11 (as may be entered into, amended, renewed or extended pursuant
to Section 5.1) to the Group I Option Agreement, together with all such
contracts that will have been entered into in the ordinary course of business of
the Station between the date of this Agreement and the Columbus Option Closing
Date and all other such Contracts that will have been entered into between the
date of this Agreement and the Columbus Option Closing Date the making of which
by Sellers is permitted by this Agreement, to the extent existing as of the
Columbus Option Closing Date. As used in this Agreement, "Contract" means, with
respect to the Columbus Station, any agreement, lease, arrangement, commitment
or
<PAGE>
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understanding, written or oral, expressed or implied, to which the Station or
Sellers with respect to the Station are a party or are bound.
(e) Trademarks, Etc. All trademarks, service marks, patents, trade
names, jingles, slogans and logotypes owned and used by Sellers in connection
with the business and operations of the Station as of the date hereof,
including, without limitation, Sellers' rights to use the call letters of the
Station and any related names and phrases and those shown on Schedule 1.1.A(e)
to the Group I Option Agreement and those acquired between the date hereof and
the Columbus Option Closing Date for the Station.
(f) FCC Records. All FCC logs and other records that relate to the
operations of the Station.
(g) Files and Records. All files and other records of Sellers
relating solely to the business and operations of the Station other than account
books of original entry and other than such files and records that are
maintained at the corporate offices of Sellers or RCB's general partner for tax
accounting purposes.
(h) Goodwill. All of Sellers' goodwill in and going concern value
associated with the Station.
(i) Other Assets. All other assets of Sellers relating to the
business and operations of the Station not expressly excluded in Section 1.2
hereof.
1.1.B Transfer of Columbus Assets. Subject to the terms and
conditions stated in this Agreement, on the Columbus Option Closing Date, RCB
shall convey, transfer and deliver to Option Holder, and Option Holder shall
acquire from RCB, in addition to acquiring the License Assets relating to the
Columbus Station described in Section 1.1.A on such date, all of RCB's right,
title and interest in and to all of the assets and properties of RCB, real and
personal, tangible and intangible, which are owned and used by RCB in connection
with the business and operations of the Columbus Station, including, without
limitation, rights under contracts and leases, real and personal property, plant
and equipment, inventories and intangibles, contracts and rights, but excluding
the Excluded Assets described in Section 1.2 hereof.
The rights, assets, property and business of RCB with respect to the
Columbus Station to be transferred to Option Holder pursuant to this Section
1.1.B are hereinafter referred to as the "Columbus Station Assets." The Columbus
Station Assets
<PAGE>
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include the following, except to the extent excluded pursuant to Section 1.2:
(a) Tangible Personal Property. All equipment, vehicles,
furniture, office materials and supplies, spare parts and other tangible
personal property of every kind and description owned as of the date of this
Agreement by RCB and used in connection with the business and operations of the
Columbus Station, including, without limitation, those shown on Schedule
1.1.B(a) to the Group I Option Agreement, and any additions, improvements,
replacements and alterations thereto made between the date of this Agreement and
the Columbus Option Closing Date, but excluding all such property which is
consumed, retired or disposed of by RCB in the ordinary course of its business
between the date of this Agreement and the Columbus Option Closing Date or as
otherwise permitted by this Agreement.
(b) Real Property. (i) All real property owned by RCB relating to
the Station listed on Schedule 1.1.B(b) to the Group I Option Agreement (the
"Columbus Real Property"); (ii) all buildings, structures, improvements,
transmitting towers and other fixtures thereon (the "Columbus Real Property
Improvements") owned by RCB and used in the business and operations of the
Columbus Station; (iii) the leaseholds and other interests in real property held
by RCB relating to the Columbus Station (the "Columbus Leasehold Interests")
listed and so designated on Schedule 1.1.B(b) to the Group I Option Agreement;
and (iv) real property, and all buildings, structures and improvements thereon
and leasehold interests relating to the Columbus Station that are acquired by
RCB between the date hereof and the Columbus Option Closing Date.
(c) Other Contracts. All contracts relating to the Columbus
Station to which RCB or the Columbus Station is a party, including trade or
barter arrangements (in addition to and not included in those set forth in
Sections 1.1.B(b) and 1.1.B(k) hereof) (collectively, "Columbus Other
Contracts"), including all agreements, equipment leases and other leases
relating to the Station listed on Schedule 1.1.B(c) to the Group I Option
Agreement and Schedules 1.1(e) and 3.10 to the Asset Purchase Agreement (and on
the list of employment agreements delivered to Option Holder pursuant to Section
3.10 of the Asset Purchase Agreement) (as may be entered into, amended, renewed
or extended pursuant to Section 5.1 hereof and Section 5.1 of the Asset Purchase
Agreement), together with all such contracts that will have been entered into by
RCB or the Columbus Station in the ordinary course of business between the date
of this Agreement and the Columbus Option Closing Date, and all such other
contracts that will have been entered into by RCB or the Columbus
<PAGE>
- 6 -
Station between the date of this Agreement and the Columbus Option Closing Date,
the making of which by RCB is permitted by this Agreement to the extent existing
as of the Columbus Option Closing Date. As used in this Agreement, "Columbus
Contract" means any agreement, lease, arrangement, commitment or understanding,
written or oral, expressed or implied, to which the Columbus Station, or RCB
with respect to the Columbus Station, is a party or is bound.
(d) Trademarks, Etc. All trademarks, service marks, patents, trade
names, jingles, slogans and logotypes owned and used by RCB primarily in
connection with the business and operations of the Columbus Station as of the
date hereof listed on Schedule 1.1.B(d) to the Group I Option Agreement as well
as any others acquired by RCB primarily in connection with operation of the
Columbus Station between the date hereof and the Columbus Option Closing Date
(collectively, "Columbus Trademarks, Etc.").
(e) Programming Copyrights. All program and programming materials
and elements of whatever form or nature owned by RCB and used in connection with
the business and operations of the Columbus Station as of the date hereof,
whether recorded on tape or any other substance or intended for live
performance, and whether completed or in production, and all related common law
and statutory copyrights owned by or licensed to RCB and used in connection with
the business and operations of the Columbus Station, together with all such
programs, materials, elements and copyrights acquired by RCB between the date
hereof and the Columbus Option Closing Date relating to the Station, including,
without limitation, those set forth on Schedule 1.1.B(e) to the Group I Option
Agreement (collectively, the "Columbus Programming Copyrights").
(f) Files and Records. All files and other records of RCB relating
solely to the business and operations of the Columbus Station and any other
Columbus Station Assets prior to the Columbus Option Closing Date, other than
account books of original entry and such files and records that are maintained
at the corporate offices of RCB's general partner for tax and accounting
purposes.
(g) Prepaid Items. All deposits and prepaid expenses with respect
to items that are prorated in Section 2.2 of the Asset Purchase Agreement.
(h) Financial Statements, Books and Records. Copies of all
financial statements (whether internal, compilation, reviewed or audited),
including all books, records, accounts, checks, payment records, tax records
(including payroll,
<PAGE>
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unemployment, real estate and other tax records) and other such similar books
and records, of RCB (or, to the extent RCB owns such materials, of any previous
owner) with respect to the Columbus Station for each of the years to the extent
reasonably available to RCB and all interim periods following the date hereof
through and including the Columbus Option Closing Date.
(i) News Materials. All news files, archives, tapes, and other
materials stored or used by RCB relating to the news operation of the Columbus
Station, including, but not limited to, any raw film footage and other similar
materials, existing as of the date of this Agreement and through the Columbus
Option Closing Date, except for any such materials that may be disposed of or
consumed in the ordinary course of business.
(j) Television Affiliation Agreements and NewVenco Other Assets.
All television network affiliation agreements relating to the Columbus Station
(the "Affiliation Agreements"), as listed on Schedule 1.1(m) to the Asset
Purchase Agreement, if any, together with all television Affiliation Agreements
that will have been entered into by Seller in the ordinary course of business
between the date hereof and the Closing Date, and any RCB's interest set forth
in Schedule 1.1.B(j) to the Group I Option Agreement in NewVenco, Inc. relating
to the Columbus Station, if any (the "NewVenco Other Assets").
(k) Program Contracts. All program licenses and contracts listed
on Schedule 1.1(d) to the Asset Purchase Agreement relating to the Columbus
Station, together with any usage reports, under which either Seller is
authorized to broadcast film or radio product or programs on the Columbus
Station, other than the Excluded Contracts (as defined in Section 1.2(f),
together with all program licenses and contracts that will have been entered
into by either Seller in the ordinary course of business, between the date of
this Agreement and the Columbus Option Closing Date, and all other program
licenses and contracts entered into between the date of this Agreement and the
Columbus Option Closing Date the making of which by Sellers is permitted by this
Agreement, to the extent existing as of the Columbus Option Closing Date
(collectively, the "Program Contracts").
(l) Agreements for Sale of Time. All orders and agreements now
existing or entered into by the Columbus Station or by Seller relating to the
Columbus Station, in the ordinary course of business between the date hereof and
the Columbus Option Closing Date for the sale of advertising time on the
Columbus Station, to the extent unperformed as of the Columbus Option Closing
Date.
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(m) Certain Receivables. All notes and accounts receivable and
other receivables of Seller that arise out of and relate to the operation of the
Columbus Station after the Option Grant Date, including, without limitation,
under network affiliation agreements, if any, and only to the extent such items
accrue on and after the Option Grant Date and have not been collected by and
expended by Sellers in connection with the operations of the Station.
(n) Cash. All cash, cash equivalents and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank balances and
rights in and to bank accounts, Treasury bills and marketable securities and
other securities of either Seller, that arise out of and relate to the
operations of the Columbus Station after the Option Grant Date and only to the
extent such items accrue on and after the Option Grant Date and have not been
expended by Sellers in connection with the operations of the Station or used by
Sellers to make interest or other payments under the RCB Credit Agreement (as
hereinafter defined) or in accordance with Section 5.10.
1.2 Excluded Assets. There shall be excluded from the License
Assets relating to the Columbus Station and from the Columbus Station Assets and
retained by Sellers, to the extent in existence on the Columbus Option Closing
Date, the following assets (the "Excluded Assets"):
(a) Cash. All cash, cash equivalents and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank balances and
rights in and to bank accounts, Treasury bills and marketable securities and
other securities of either Seller, except as provided in Section 1.1.B(n) above.
(b) Personal Property Disposed Of. All tangible personal property
disposed of or consumed in the ordinary course of the business of the Columbus
Station between the date of this Agreement and the Closing relating to the
Columbus Station.
(c) Insurance, Bonds, Etc. All contracts of insurance and all
insurance plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto.
(d) Claims. Any and all claims of Sellers with respect to
transactions occurring prior to the occurrence of the Columbus Option Closing
Date, including, without limitation, rights and interests of Sellers in and to
any claims for tax refunds (including, but not limited to, federal, state or
local franchise, income or other taxes) and all causes of action and
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claims of Sellers under contracts and with respect to other transactions with
respect to events occurring prior to the Columbus Option Closing Date and all
claims for other refunds of monies paid to any governmental agency and all
claims for copyright royalties for broadcast prior to the Columbus Option
Closing Date.
(e) Pension Assets, Etc. Except as otherwise provided under
Section 10.1, pension, profit sharing, retirement, bonus, stock purchase,
savings plans and trusts, 401(k) plans, health insurance plans (including any
insurance contracts or policies related thereto), and the assets thereof and any
rights thereto, and all other plans, agreements or understandings to provide
employee benefits of any kind for employees of Sellers.
(f) Certain Contracts. The agreements listed on Schedule 1.2(f) of
the Group I Option Agreement (the "Excluded Contracts").
(g) Certain Books and Records. Sellers' partnership records and
other books and records that pertain to internal partnership matters of Sellers
and Sellers' account books of original entry with respect to the Station, and
all books, records, accounts, checks, payment records, tax records (including
payroll, unemployment, real estate and other tax records) and other similar
books, records and information of Sellers relating to Sellers' operation of the
business of the Columbus Station prior to the Closing relating to the Columbus
Station, with the proviso that Option Holder shall be allowed to maintain copies
of all such records relating to the Columbus Station, the License Assets or the
Columbus Station Assets and/or upon a written request for same shall be allowed
further access to all excluded records to the extent retained by Sellers at all
reasonable times during the term of this Agreement for a period of the (3) years
after the Columbus Option Closing Date relating thereto.
(h) Certain Prepaid Expenses. The prepaid expenses of Sellers with
respect to items that are not subject to adjustment under Section 2.2 of the
Asset Purchase Agreement.
(i) Interests in Certain Subsidiaries. All of Sellers' interests
in the subsidiaries described in Schedule 1.2(i) to the Group I Option
Agreement.
(j) River City Name. All rights to and goodwill in the name "River
City Broadcasting" and any logo, variation or derivation thereof.
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(k) Columbus Receivables. All notes and accounts receivable and
other receivables of Seller that arise out of and relate to the operation of the
Columbus Station prior to the Option Grant Date, including, without limitation,
under network affiliation agreements, if any (collectively, the "Columbus
Receivables").
1.3 Liabilities. (a) Liens. For the Columbus Station, the License
Assets used or held for use by Sellers with respect to the Columbus Station, and
the Columbus Station Assets used or held for use by RCB with respect to the
Columbus Station, shall be sold and conveyed to Option Holder, as of the
Columbus Option Closing Date, free and clear of all liens, security interests
and encumbrances except (i) all matters of record including, without limitation,
those matters disclosed on Schedule 1.3 of the Group I Option Agreement hereto
as "continuing" and, including, without limitation, the rights of lessors with
respect to any leasehold interests in real property or operating leases for
personal property; (ii)(1) liens or encumbrances on the Real Property, Real
Property Improvements, Leasehold Interests, Columbus Real Property, Columbus
Real Property Improvements and Columbus Leasehold Interests currently of record;
and (2) other liens or encumbrances on the Real Property, Real Property
Improvements and Leasehold Interests included in the License Assets and the
Columbus Real Property, Columbus Real Property Improvements and Columbus
Leasehold Interests included in the Columbus Station Assets that with respect to
(ii)(2) hereof do not materially affect the value or the current or continued
use and enjoyment (to the extent such continued use and enjoyment conforms with
current use and enjoyment) thereof in the operation of the Columbus Station;
(iii) liens for taxes not yet due and payable; and (iv) the Assumed Liabilities
(as hereinafter defined) and "Assumed Liabilities" as defined in the Asset
Purchase Agreement (all of the foregoing in clauses (i) through (iv) are
sometimes collectively referred to herein collectively as "Permitted
Encumbrances" but shall be deemed to exclude any judgment liens, mortgages,
capital leases or security interests or trust arrangements providing for similar
effect (including, without limitation, purchase money mortgages and purchase
money security interests granted by Sellers in favor of any third party securing
obligations for borrowed money)).
(b) Assumption of Liabilities. (i) Option Holder agrees that, on
the Columbus Option Closing Date, Option Holder shall assume, undertake and
agree to pay, satisfy, perform, discharge and be liable for, with respect to the
Station, and Sellers shall not thereafter be liable for (1) any liabilities and
obligations of Sellers that Option Holder has not previously assumed and as the
same shall exist on the Option Grant Date that arise on or
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after the Option Grant Date, including all such liabilities and obligations
arising out of and related to the ownership and operation of the Station that
Option Holder has not previously assumed, including the License Assets and the
Columbus Station Assets (including under the contracts assigned pursuant to
Sections 1.1.A(c), 1.1.A(d), 1.1.B(b), 1.1.B(c), 1.1.B(j) and 1.1.B(k),
including the collective bargaining agreement referenced on Schedule 3.10 of the
Asset Purchase Agreement with respect to the Station and any contracts that are
entered into after the date hereof with respect to the Station and those
liabilities and obligations referred to in Section 10.1 hereof); (2) any
liability or obligation arising out of the business or operations of the Station
or any of the License Assets, arising on or after the Option Grant Date; (3) any
Assumed Liabilities, including under any contracts assumed by Option Holder
hereunder, with respect to the Columbus Station Assets; (4) any other
liabilities or obligations incurred or assumed by Option Holder with respect to
any of the License Assets; (5) any liability or obligation to any Station
Employee for the Columbus Station relating to the period on and after the Option
Grant Date; and (6) any duty, obligation or liability relating to any pension,
401(k) or other similar plan, agreement or arrangement provided by Option Holder
to any Station Employee for the Columbus Station.
(ii) Additionally, but without relieving Sellers of their
obligations under Section 5.10, with respect to the Columbus Station, Option
Holder shall assume, undertake and agree to pay, satisfy, perform, discharge and
be liable for, and Sellers shall not be liable for (1) any liability or
obligation arising out of the business or operations of the Columbus Station or
any of the Columbus Station Assets arising on or after the Option Grant Date;
(2) any liability or obligation of Option Holder for any federal, state or local
income or other taxes or, to the extent of any prorations pursuant to Section
2.2 of the Asset Purchase Agreement, for real estate or payroll taxes
attributable to any period of time on or after the Option Grant Date and any
liability or obligation for real estate and payroll taxes of Sellers to the
extent a proration was provided for in Section 2.2 of the Asset Purchase
Agreement attributable to the period of time prior to the Option Grant Date; (3)
any liability or obligation of Option Holder for any payroll taxes attributable
to any period of time on or after the Asset Purchase Agreement Closing Date and
any liability or obligation for payroll taxes of Sellers to the extent a
proration was provided for in Section 2.2 of the Asset Purchase Agreement
attributable to the period of time prior to the Asset Purchase Agreement Closing
Date; (4) any liability or obligation to any former employee of Sellers at the
Columbus Station who has been hired by Option Holder,
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attributable to any period of time on or after the Asset Purchase Agreement
Closing Date; (5) any liability or obligation arising out of any litigation,
proceeding or claim by any person or entity relating to the business or
operations of the Columbus Station, any of the Columbus Station Assets with
respect to any events or circumstances that happen or exist on or after the
Option Grant Date; and (6) any severance or other liability arising out of the
termination of any employee's employment with or by Option Holder on or after
Asset Purchase Agreement Closing Date; and (7) any duty, obligation or liability
relating to any pension, 401(K) or other similar plan, agreement or arrangement
provided by Option Holder to any employee or former employee of Seller on or
after the Asset Purchase Agreement Closing Date (all of the foregoing in this
paragraph, together with other liabilities or obligations in the preceding
paragraph and all other liabilities or obligations expressly assumed by Option
Holder hereunder, are referred to herein collectively as the "Assumed
Liabilities"). All liabilities and obligations arising out of the License Assets
that do not constitute Assumed Liabilities shall be retained by Sellers and are
referred to herein as "Retained Liabilities".
To the extent, if any, any Seller makes a payment to Option Holder as a
result of any adjustment pursuant to Section 2.2 of the Asset Purchase
Agreement, Option Holder shall on the Option Closing Date assume and be
obligated to pay such obligations and liabilities for which such adjustment was
made pursuant to Section 2.2 of the Asset Purchase Agreement.
(c) Consents to Contracts. Option Holder agrees that on the
Columbus Option Closing Date, Option Holder will assume contracts included in
the Columbus Station Assets and the License Assets relating to the Columbus
Station (together with any Consent Contracts, as defined in and pursuant to
Section 1.3 of the Asset Purchase Agreement), regardless of whether consent has
been obtained in connection therewith. The liabilities and obligations in
connection with all such contracts shall also constitute "Assumed Liabilities"
for purposes of this Agreement.
1.4 Option Exercise. In order to exercise the Option, Option
Holder must deliver to Sellers written notice (an "Exercise Notice") of Option
Holder's intention to so exercise the Option and designating that the Columbus
Option is being exercised. The date upon which any Exercise Notice is given with
respect to the Option shall be referred to as the "Exercise Date" for the
Option. Option Holder may withdraw any Exercise Notice at any time prior to the
Columbus Option Closing Date by written notice to that effect to Sellers. Upon
withdrawal of any Exercise Notice, Option Holder shall reimburse Sellers for all
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reasonable out-of-pocket expenses, including, without limitation, reasonable
attorneys' fees, incurred by Sellers in connection with its compliance with
Section 5.8(a) and Section 5.8(b) with respect to such Exercise Notice. Nothing
contained in this Section 1.4 is intended to prohibit the Option Holder from
subsequently exercising the Option during the Exercise Period defined in Section
1.5 hereof after any such withdrawal nor shall any withdrawal of any Exercise
Notice extend the terms of the Option or affect the payments referred to in
Section 1.5 below.
1.5 Terms of Option. Option Holder shall have the right to
exercise the Columbus Option from the date hereof to and including June 30,
1999, (the "Exercise Period"). Upon the failure of Option Holder either to
deliver the Exercise Notice for the Columbus Option during the Exercise Period
as provided herein, to pay any Option Extension Fee with respect to any Group I
Unpaid Option (as provided in Section 2.1.B of the Group I Option Agreement) or
to pay the Option Extension Fees on the Columbus Option as provided in Section
2.1.B of this Agreement, subject to the notice and cure periods set forth in
Section 11.1.B, the Columbus Option shall expire. Notwithstanding anything to
the contrary herein, the Closing on the Columbus Option may take place after the
expiration of the Exercise Period so long as Option Holder has (i) delivered the
Exercise Notice for the Columbus Option to Sellers in accordance with Section
1.4 prior to the expiration of the then current Exercise Period, (ii) paid all
Option Extension Fees with respect to all Group I Unpaid Options, and (iii) paid
all Option Extension Fees on the Columbus Option, but in no event shall the
Closing of the Columbus Option take place later than June 30, 1999.
ARTICLE 2
PAYMENTS AND CLOSING
2.1 Grant Price and Option Closing Price.
2.1.A Payment for Option Grant. In consideration of Sellers' grant
of the Option, Option Holder shall pay to Sellers Seventy Thousand Dollars
($70,000) (the "Option Grant Price"). The Option Grant Price shall be allocated
between the Sellers as determined by Seller and paid by Option Holder to Sellers
by wire transfer of immediately available funds to such bank account(s) as
Sellers may designate on or prior to the Option Grant Date.
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2.1.B Payment of Columbus Option Closing Price and
Option Extension Fees.
(a) In consideration of Sellers' performance of this Agreement and
the transfer, assignment and delivery of the Columbus Station Assets and the
License Assets relating to the Columbus Station, Option Holder will pay to
Sellers (as set forth in the next paragraph) the "Columbus Option Closing
Price," which shall be an amount equal to One Hundred Thirty Million Dollars
($130,000,000), (x) increased by (i) the Unpaid Amount (as defined below), and
(ii) any payments to the Lender pursuant to Section 2.1.B(a) of the Group I
Option Agreement and (y) reduced by payments made by Option Holder under Section
11.1.E(a), and as adjusted pursuant to Section 2.5 below. Option Holder shall
pay (or be deemed to have paid as specified below) the Columbus Option Closing
Price as follows:
(i) if the Columbus Option is exercised and the Closing of the
Columbus Option occurs as provided herein, Option Holder shall pay the Columbus
Option Closing Price on the Columbus Option Closing Date, or
(ii) if the Columbus Option is terminated and the Columbus Station
is disposed of in a disposition resulting in a Deficiency Amount pursuant to
Section 11.1.C(b), Option Holder shall be deemed to have paid the Columbus
Option Closing Price on the date the Option Holder pays the Deficiency Amount;
or
(iii) if the Columbus Option is terminated and the Columbus
Station is disposed of other than in a disposition resulting in a Deficiency
Amount pursuant to Section 11.1.C(b), Option Holder shall be deemed to have paid
the Columbus Option Closing Price on the date of such disposition.
The "Columbus Option Payment Date" means the date on which the Option Holder
pays, or is deemed to have paid, in full the Columbus Option Closing Price.
The Columbus Option Closing Price shall be paid for the benefit of
Sellers hereunder to the lenders (the "Lenders") under that certain Credit
Agreement dated as of May 31, 1996 by and among the Sellers, The Chase Manhattan
Bank, N.A., as agent and other lenders thereunder (as the same may be amended,
modified or supplemented and including any successor credit agreement or
refinancing or refunding of obligations under such credit agreement,
collectively, the "RCB Credit Agreement") to the extent, but only to the extent,
of the remaining unpaid amount of the principal, accrued and unpaid interest and
any other obligation due thereunder and under documents related thereto,
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including any security documents (the "Unpaid Amount" or "Unpaid Amounts")as of
the date of payment of the Columbus Option Closing Price. At least one (1)
business day prior to Closing, Sellers will provide to Option Holder a
certificate setting forth whether there are any Unpaid Amounts, and, if so,
Sellers' calculation of the amount of the Columbus Option Closing Price (which
shall be made in good faith and shall be conclusive absent manifest error) that
should be paid to Lender in connection therewith. Any amount in excess of the
Unpaid Amounts shall be paid directly to Sellers.
(b) As used herein, at any time, for the purposes of calculating
the Option Extension Fees at such time, the "Columbus Unpaid Closing Price"
shall mean (x) One Hundred Thirty Million Dollars ($130,000,000), (y) plus any
payments to the Lender pursuant to Section 2.1.B(a) of the Group I Option
Agreement; provided, however, that if the Columbus Option is terminated and (z)
minus payments made by Option Holder under Section 11.1.E(a), "Columbus Unpaid
Closing Price" shall mean the amount of the Columbus Unpaid Closing Price
immediately prior to such termination, plus on each March 31, June 30, September
30 and December 31 on which Option Holder fails to pay any Option Extension Fee
with respect to any Group I Unpaid Option or the Option Extension Fee on the
Columbus Option as provided below, the amount of any such unpaid Option
Extension Fees; and provided further that if the Columbus Station is disposed of
in a disposition resulting in a Deficiency Amount pursuant to Section 11.1.C(b),
"Columbus Unpaid Closing Price" shall thereafter mean such Deficiency Amount,
minus the Closing Price for all Group I Unpaid Options, and plus, on each March
31, June 30, September 30 and December 31 on which Option Holder fails to pay
any Option Extension Fee with respect to any Group I Unpaid Option or the Option
Extension Fee on the Columbus Option as provided below, the amount of any such
unpaid Option Extension Fees.
Until the Columbus Option Payment Date, Option Holder shall be
required to pay to Sellers, on December 31, 1996, and on each March 31, June 30,
September 30 and December 31 thereafter and on the Columbus Option Payment Date,
an extension fee with respect to the Columbus Option (each, an "Option Extension
Fee" and collectively, the "Option Extension Fees"). The Option Extension Fees
shall accrue on the Columbus Unpaid Closing Price on the basis of a 365-day year
based on the actual number of days elapsed in the period during which the Option
Extension Fees accrue. The Option Extension Fees shall be paid as follows:
(i) December 31, 1996 (or the Columbus Option Payment
Date, if earlier), Option Holder shall pay to Sellers an
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Option Extension Fee in an amount equal to (A) the product of (Y) eight percent
(8%) and (Z) the Columbus Unpaid Closing Price from time to time minus, in the
case that the Columbus Option has been assigned pursuant to Section 11.4 hereof,
the Option Assignment Price for the Columbus Option, multiplied by (B) a
fraction, the numerator of which is the number of days elapsed from the Option
Grant Date to December 31, 1996 (or the Columbus Option Payment Date, if
earlier) and the denominator of which is 365;
(ii) thereafter, on each March 31, June 30, September
30 and December 31, and on the Columbus Option Payment Date, Option Holder shall
pay to Sellers an Option Extension Fee calculated as follows:
(A) for the period beginning on January 1,
1997 and ending on the first anniversary of the Option Grant Date, an amount
equal to (A) the product of (Y) eight percent (8%) and (Z) the Columbus Unpaid
Closing Price from time to time during such period minus, in the case that the
Columbus Option has been assigned pursuant to Section 11.4 hereof, the Option
Assignment Price for the Columbus Option, multiplied by (B) a fraction, the
numerator of which is equal to the number of days elapsed since the due date of
the previous payment of an Option Extension Fee and the denominator of which is
365;
(B) for the period beginning on the first
day after the first anniversary of the Option Grant Date and ending on the
second anniversary of the Option Grant Date, an amount equal to (A) the product
of (Y) fifteen percent (15%) and (Z) the Columbus Unpaid Closing Price from time
to time during such period minus, in the case that the Columbus Option has been
assigned pursuant to Section 11.4 hereof, the Option Assignment Price for the
Columbus Option, multiplied by (B) a fraction, the numerator of which is equal
to the number of days elapsed since the later of (I) the due date of the
previous payment of an Option Extension Fee and (II) the first anniversary of
the Option Grant Date, and the denominator of which is 365; and
(C) for the period beginning on the first
day after the second anniversary of the Option Grant Date and ending on the
Columbus Option Payment Date, an amount equal to (A) the product of (Y)
twenty-five percent (25%) and (Z) the Columbus Unpaid Closing Price from time to
time during such period minus, in the case that the Columbus Option has been
assigned pursuant to Section 11.4 hereof, the Option Assignment Price for the
Columbus Option, multiplied by (B) a fraction, the numerator of which is equal
to the number of days elapsed since the later of (I) the due date of the
previous payment of an
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Option Extension Fee and (II) the second anniversary of the Option Grant Date,
and the denominator of which is 365.
(c) The Option Holder shall assume the Assumed Liabilities and
other obligations and liabilities to be assumed by Option Holder hereunder with
respect to the Columbus Station on the Columbus Option Closing Date.
(d) Notwithstanding any other provision contained herein, except
and subject to Section 11.1.B, (i) the Columbus Option shall expire on the first
to occur of (a) June 30, 1999 and (b) whether or not the Columbus Option has
been exercised, the date on which an Option Extension Fee for any Group I Unpaid
Option or the Columbus Option is due if Option Holder shall not have paid such
Option Extension Fee by such date; (ii) it is understood and agreed by Option
Holder that in no event shall any Option Extension Fee be refundable to Option
Holder hereunder; and (iii) if the Columbus Option is terminated, Option Holder
shall continue to pay the Option Extension Fees required by Section 2.1.B until
Option Holder pays, or is deemed to have paid, the Columbus Option Closing Price
on the Columbus Option Payment Date.
(e) The Columbus Option Closing Price and Extension Fees
attributable to the Columbus Option shall be allocated between the Sellers in
such manner as determined by the Sellers and shall be paid by Option Holder to
Sellers by wire transfer of immediately available federal funds in United States
dollars to such bank account(s) as Sellers may designate; provided, however,
that payments of One Hundred Dollars ($100.00) or less may be made by check.
2.2 Option Grant and Closing.
(a) Option Grant. The grant of the Columbus Option (the "Option
Grant") shall become effective on the Option Grant Date upon the execution of
this Agreement by all parties and the receipt of the Option Grant Price referred
to in Section 2.1(a)(i).
(b) Closing. The closing of the purchase and sale with respect to
the Station upon the exercise of the Columbus Option (the "Closing") shall be
held in the offices of Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W.,
Suite 800, Washington, D.C. 20036, at 10:00 a.m., local time, on a regular
business day specified by Option Holder by written notice to Sellers not less
than twenty (20) business days in advance of such specified business day, or at
such other place and/or such other day as Sellers and Option Holder may agree in
writing,
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provided that in no event shall the Closing take place after June 30, 1999
(hereinafter referred to with respect to such Option as the "Columbus Option
Closing Date").
2.3 Deliveries at Option Grant.
(a) Deliveries by Sellers. On the Option Grant Date, Sellers have
delivered to Option Holder such customary documentation reasonably satisfactory
to Option Holder and its counsel in order to effect the transaction contemplated
by this Agreement, including, without limitation, the following:
(i) a certified copy of the resolutions or proceedings of
Sellers authorizing Sellers' consummation of the transactions contemplated by
this Agreement;
(ii) a certificate as to the existence and good standing of
RCB issued by the Secretary of State of Delaware not more than ten (10) days
before this Option Grant Date, certifying as to the incorporation and/or
organization of RCB in Delaware and, certificates issued by an appropriate
governmental authority of RCB to do business in Ohio, to the extent such
certificates are available, dated not more than ten (10) days before the Option
Grant Date;
(iii) a receipt for the Option Grant Price;
(iv) the opinion of Sellers' counsel in the form attached as
Exhibit 8.3 to the Asset Purchase Agreement, dated as of this Option Grant Date;
and
(v) such other documents as Option Holder may reasonably
request.
(b) Deliveries by Option Holder. On the Option Grant Date, Option
Holder have delivered to Sellers the Option Grant Price and such instruments and
other customary documentation reasonably satisfactory to Sellers and their
counsel in order to effect the transactions contemplated by this Agreement,
including, without limitation, the following:
(i) a certified copy of resolutions or proceedings of
Option Holder authorizing the consummation of the transactions contemplated by
this Agreement;
(ii) a certificate issued by the Maryland Department of
Assessments and Taxation dated not more than ten (10) days before this Option
Grant Date certifying as to the incorporation and good standing and/or
qualification of Option
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Holder in Maryland and, to the extent available, a certificate of the
appropriate governmental authorities as to the qualification of Option Holder,
or an appropriate wholly-owned operating subsidiary of Option Holder, to
transact business in Ohio from the Secretary of State or analogous entity of
Ohio, dated not more than ten (10) days before the Option Grant Date;
(iii) opinions of Option Holder's counsel and special
counsel in the forms attached as Exhibits 7.3(a) and 7.3(b), respectively, to
the Asset Purchase Agreement, and an opinion confirming the representations set
forth in Section 4.3 each dated as of this Option Grant Date; and
(iv) such further documents as Sellers may reasonably
request.
2.4 Deliveries at Closing. All actions at each Closing shall be
deemed to occur simultaneously, and no document or payment shall be deemed to be
delivered or made until all documents and payments are delivered or made to the
reasonable satisfaction of Option Holder, Sellers and their respective counsel.
(a) Deliveries by Sellers.
(i) At the Closing, Sellers shall deliver to Option Holder
such instruments of conveyance and other customary documentation as shall in
form and substance be reasonably satisfactory to Option Holder and its counsel,
including, without limitation, the following:
(a) one or more bills of sale conveying the personal
property and all leases, contracts, and other intangible assets included in (i)
the License Assets for the Columbus Station and (ii) the Columbus Station
Assets;
(b) one or more assignments conveying the FCC
Authorizations included in the License Assets for the Columbus Station;
(c) any mortgage discharges or releases of liens that are
necessary in order to transfer (i) the License Assets for the Columbus Station
as contemplated by Section 1.3 and (ii) the Columbus Station Assets;
(d) a receipt for (i) the Columbus Option Closing Price,
(ii) the Option Closing Price (as defined in the Group I Option Agreement) of
all Unpaid Options, and (iii) the Extension Fees applicable to the Columbus
Option and such Unpaid Options
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that have accrued since the due date of the previous payment of Option Extension
Fees for such Options;
(e) all consents received by Sellers through the Columbus
Option Closing Date to the assignment to or assumption by Option Holder of
licenses, contracts and leases included in (i) the License Assets for the
Columbus Station and (ii) the Columbus Station Assets;
(f) the Terminations as required by Section 8.6 hereof;
(g) documents of conveyance evidencing transfer of (i) the
Real Property included in the License Assets for the Columbus Station that is
the subject of the Closing, and (ii) the Columbus Real Property;
(h) to the extent (1) consent is obtained to the transfer
thereof and (2) made available by NewVenco, Inc., in the case of the Closing of
the Columbus Option only, (a) a stock certificate of NewVenco, Inc. representing
all of RCB's interest in NewVenco, Inc. in connection with the Columbus Station
(together with a stock power endorsed in blank for such stock of NewVenco, Inc.)
or (b) a stock certificate of NewVenco, Inc. representing Option Holder's
interest in NewVenco, Inc. in connection with the Columbus Station;
(i) the list of Qualified Beneficiaries entitled to
Continuation Coverage as of the Closing Date, as contemplated under Section
10.1(b).
(ii) At the Closing, and upon the written request of Option
Holder at least ten (10) business days prior to the Closing, Sellers shall
deliver to Option Holder, to the extent requested by Option Holder, the
following:
(a) a certified copy of the resolutions or proceedings
of each Seller authorizing the transactions contemplated at the Closing by this
Agreement;
(b) a certificate of Sellers as required by Section
8.1(c) hereof;
(c) the opinion of counsel required by Section 8.3
hereof;
(d) a certificate as to the existence and good
standing of RCB issued by the Secretary of State of the State of Delaware dated
not more than ten (10) days before the Columbus
<PAGE>
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Option Closing Date and a certificate of the appropriate governmental
authorities as to RCB's qualification to transact business in Delaware and,
certificates issued by the appropriate governmental authority of Ohio to the
extent RCB then transacts business in Ohio and to the extent such certificates
are available, dated not more than ten (10) days before the Columbus Option
Closing Date;
(e) such other documents as Option Holder shall
reasonably request.
(b) Deliveries by Option Holder.
(i) At the Closing, Option Holder shall deliver to Sellers and
to Lender to the extent set forth in Section 2.1.B(a) above, the Columbus Option
Closing Price and to Sellers such instruments of assumption and other customary
documentation as shall in form and substance be reasonably satisfactory to
Sellers and their counsel, including, without limitation, the following:
(a) (i) the Columbus Option Closing Price, (ii)
the Group I Option Closing Price (as defined in the Group I Option Agreement) of
all Group I Unpaid Options, and (iii) the Extension Fees applicable to the
Columbus Option and such Group I Unpaid Options that have accrued since the due
date of the previous payment of Option Extension Fees for such Options; provided
that such amounts shall be delivered in the manner set forth in Section 2.1.B
hereof;
(b) an assumption of liabilities pursuant to which
Option Holder will assume the Assumed Liabilities relating to the Columbus
Station;
(c) the Terminations as required by Section 7.6; and
(d) the New Employment Agreements contemplated by
Section 7.7.
(ii) At the Closing, and upon the written request of Sellers
at least ten (10) business days prior to the Closing, Option Holder shall
deliver to Sellers, to the extent requested by Sellers, the following:
(a) a certified copy of the resolutions or proceedings
of Option Holder authorizing the transactions contemplated by this Agreement;
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(b) a certificate of Option Holder as required by
Section 7.1(c) hereof;
(c) a certificate as to the existence and good
standing of Option Holder issued by the Maryland Department of Assessments and
Taxation dated not more than ten (10) days before the Columbus Option Closing
Date and a certificate of the appropriate governmental authorities as to the
qualification of Option Holder or an appropriate wholly-owned operating
subsidiary of Option Holder to transact business in Ohio to the extent RCB then
transacts business in Ohio and to the extent such certificates are available
from the Secretary of State or analogous entity of Ohio dated not more than 10
days before the Columbus Option Closing Date;
(d) the opinion of counsel required by Section 7.3
hereof;
(e) such other documents as Sellers shall reasonably
request.
2.5 Indemnity Adjustment. To the extent that Sellers are liable
for any Loss or Expense under Article 9 hereof or under Article 9 of the Asset
Purchase Agreement, the Columbus Option Closing Price shall be reduced by the
amount that Sellers are liable for in connection with such Loss or Expense,
subject to the limitations set forth in Section 9.4 hereof.
2.6 Effect of Certain Laws or Proceedings. The parties hereto
acknowledge and agree that notwithstanding anything in this Agreement or any
other documents related hereto to the contrary (including, without limitation,
any representations or warranties made by Sellers, covenants of the Sellers made
herein, any condition precedent to the obligations of Option Holder set forth in
this Agreement, or any provisions relating to indemnification to be made by
Sellers hereunder), matters relating to, in connection with or resulting or
arising from: (a) the effect, for purposes of any laws, statutes, ordinances,
rules, regulations, orders or other actions whenever promulgated or enacted,
including communications or communications-related laws, statutes, ordinances,
rules, regulations, orders or other actions, whenever promulgated or enacted,
and any licenses, permits or authorizations issued by any governmental authority
(including, without limitation, the FCC) (collectively, "Laws") or any contract
or agreement to be conveyed to or assumed, directly or indirectly, by Option
Holder pursuant hereto or under the Asset Purchase Agreement (collectively, the
"Conveyed Contracts"), of (1) the transfer of the Station Assets, as defined in
and pursuant to the terms of the Asset Purchase
<PAGE>
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Agreement, to Option Holder and the transfer by Sellers of the License Assets
and the Columbus Station Assets hereunder and the License Assets (as defined in
the Group I Option Agreement); (2) the grant by Sellers of the Columbus Option
and the Options (as defined in the Group I Option Agreement); (3) the execution,
delivery and performance of any of the Transaction Documents; or (4) the
consummation of the other transactions contemplated hereby, by the Group I
Option Agreement or by the Asset Purchase Agreement; (b) any conflict with,
violation of, termination of or breach or default under any Laws or Conveyed
Contracts as a result of the consummation of any of the transactions
contemplated hereby, by the Group I Option Agreement or by the Asset Purchase
Agreement (including, without limitation, the Transaction Documents); or (c) any
claims, actions, suits or other proceedings of any nature whatsoever
("Proceedings"), by any person or entity (including, without limitation, any
governmental entity) by or before any court, administrative agency or otherwise,
alleging a conflict, violation of, breach or default under, termination of or
other inconsistency with Laws or Conveyed Contracts as a result of the
consummation of any of the transactions contemplated hereby, by the Group I
Option Agreement or by the Asset Purchase Agreement (including, without
limitation, the Transaction Documents), shall not:
(i) cause or constitute, directly or indirectly, a breach by
either Seller of any of its representations, warranties, covenants or
agreements set forth in this Agreement or any other document related
hereto (and such representations, warranties, covenants and agreements
shall hereby be deemed to be modified appropriately to reflect and
permit the impact and existence of such Laws, Conveyed Contracts and
Proceedings and to permit any action by Seller to comply with or
attempt in good faith to comply with such Laws, Conveyed Contracts and
Proceedings);
(ii) otherwise cause or constitute, directly or indirectly, a
default or breach by Sellers under this Agreement or any other
documents related hereto;
(iii) result in the failure of any condition precedent to the
obligations of Option Holder under this Agreement or any other document
related hereto to be satisfied;
(iv) otherwise excuse Option Holder's performance of its
obligations under this Agreement or any other document related hereto;
or
<PAGE>
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(v) give rise to any claim for indemnification or other
compensation by Option Holder or any adjustment of the Columbus Option
Closing Price;
provided that the foregoing clauses (i) through (v) shall not apply to (1) any
claim brought by a partner of Sellers alleging a violation of any Seller's
partnership agreement or any claim brought by any partner, officer, director,
agent or Affiliate of Sellers; (2) any breach by Sellers of their covenants set
forth in this Agreement; or (3) any action instituted by the Federal Trade
Commission or the Department of Justice relating to the HSR Act, in each case
which shall be governed by other applicable provisions of this Agreement.
2.7 Representations and Warranties of, and Operations by, Sellers.
The parties hereto acknowledge and agree that notwithstanding anything in this
Agreement or any other documents related hereto to the contrary, and without
expanding any obligations of Sellers hereunder, Sellers shall have no liability
hereunder (for indemnification or otherwise) (i)for the breach of any
representation or warranty hereunder relating to events occurring after the date
hereof unless such breach was caused by a negligent, grossly negligent or
intentional wrongful action taken by Sellers or (ii) in connection with the
operations of the Station after the Option Grant Date unless Sellers' conduct
was grossly negligent or intentionally wrongful actions were taken by Sellers in
connection therewith.
2.8 Effect of RCB Credit Agreement. Notwithstanding anything to
the contrary in this Agreement, including, without limitation, Article 5 hereof,
to the extent that (i) Sellers take any action that Sellers are required to take
or that Sellers deem necessary to take, or fail to take any action that Sellers
are prohibited from taking, under the terms of the RCB Credit Agreement or any
document related thereto (including the security documents related thereto) but
which in any event would cause Sellers to be in breach of, or in default under,
this Agreement or (ii) Lender takes any action under that RCB Credit Agreement
or any document related thereto (including the security documents related
thereto), the result of which would cause Sellers to be in breach of, or in
default under, this Agreement, such action or inaction shall be deemed to be
permitted hereunder; Sellers and Lender shall be permitted to take such action
or Sellers shall be permitted to not take such action, and Sellers shall have no
liability whatsoever to Option Holder in connection therewith.
Option Holder and RCB agree that notwithstanding anything to the
contrary in the Cure Rights Agreement dated as of May 31, 1996 by and among
Option Holder, certain subsidiaries of Option
<PAGE>
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Holder, The Chase Manhattan Bank, N.A. and Sellers or in the RCB Credit
Agreement (and documents related thereto), none of the rights and obligations of
Option Holder hereunder shall be affected thereby.
Notwithstanding anything to the contrary in this Agreement, to the
extent that there is a disposition of any of the partnership interests in
Licensee in connection with any exercise by Lender of its remedies under the RCB
Credit Agreement, all rights of Licensee under this Agreement shall be deemed to
be rights of RCB hereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the exceptions set forth in Section 8.1(a) hereof, Sellers
represent and warrant to Option Holder as follows:
3.1 Organization. RCB is a limited partnership duly formed,
validly existing and in good standing under the law of the State of Delaware.
Licensee is a general partnership duly formed and validly existing under the
laws of the State of Missouri. Each Seller has the requisite partnership power
and authority to carry on the business of the Columbus Station now being
conducted by it, to own and operate the License Assets owned and operated by it,
and to enter into and consummate the transactions contemplated by this
Agreement. RCB is qualified to conduct the business of the Columbus Station now
being conducted by it in Ohio.
3.2 Approval/Authority. All requisite partnership actions and
proceedings necessary to be taken by or on the part of each Seller in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and necessary to make the same effective have
been, or with respect to each Closing will be, duly and validly taken. This
Agreement has been duly and validly authorized, executed and delivered by each
Seller and constitutes its valid and binding agreement, enforceable in
accordance with and subject to its terms, except as enforceability may be
limited by laws affecting the enforcement of creditors' rights or contractual
obligations generally and by the application of general principles of equity.
3.3 No Conflicts. Except as set forth on Schedule 3.3 to the Group
I Option Agreement, on this Option Grant Date (after giving effect to all
approvals and consents which have been
<PAGE>
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obtained), neither the execution and delivery by Sellers of this Agreement, nor
the consummation by either Seller of the transactions contemplated hereby would
constitute, a material violation of or would conflict in any material respect
with or result in any material breach of or any material default under, any of
the terms, conditions or provisions of any law or regulation to which either
Seller is subject, or of RCB's agreement of limited partnership or Licensee's
agreement of general partnership, as the case may be, or any contract, agreement
or instrument that is required by the terms hereof to be listed on the Schedules
to the Group I Option Agreement to which either Seller is a party or by which
either Seller is bound.
3.4 Brokers. Except for the fees payable to Communications Equity
Associates referenced in Section 3.14 of the Asset Purchase Agreement, there is
no broker or finder or other person or entity who would have any valid claim
against Sellers for a commission or broker's fee in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by any Seller or any Affiliate of Seller.
3.5 FCC Authorizations. Licensee is the holder of the FCC
Authorizations relating to the Columbus Station listed in Schedule 1.1.A(a) to
the Group I Option Agreement. Such FCC Authorizations constitute all of the
licenses and authorizations required under the Communications Act of 1934, as
amended (the "Communications Act") or the current rules and regulations and
published policies of the FCC for and/or used in the operation of the Columbus
Station as now operated by Sellers. The material FCC Authorizations are in full
force and effect and will not be subject to or scheduled for renewal until the
dates set forth in Schedule 1.1.A(a) to the Group I Option Agreement. Except as
set forth on Schedule 3.5 to the Group I Option Agreement, there is not pending,
or to the actual knowledge of Sellers, threatened, any action by or before the
FCC to revoke, cancel, rescind, modify or refuse to renew in the ordinary course
any of the FCC Authorizations, and except as set forth on Schedule 3.5 to the
Group I Option Agreement, there is not now pending, or to the actual knowledge
of Sellers, threatened, issued or outstanding by or before the FCC, any
investigation, order to show cause, notice of violation, notice of apparent
liability or notice of forfeiture or complaint against Sellers with respect to
the Columbus Station, except to the extent that the result of such action,
investigation, order, notice or complaint would not be attributable to (i)
factors affecting the television or radio industries generally, (ii) general
national, regional or local economic or financial conditions, (iii) governmental
or
<PAGE>
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legislative laws, rules or regulations, (iv) any affiliation agreement or the
lack thereof or the non-transfer to Option Holder thereof or (v) actions taken
by Option Holder or any Affiliate of Option Holder). To Sellers' actual
knowledge, the Columbus Station is operating in compliance in all material
respects with the FCC Authorizations, the Communications Act and the current
rules and regulations of the FCC. For purposes of this Agreement, "Affiliate"
means with respect to a party, any Person, directly or indirectly, controlling
or controlled by such party, or any Person under direct or indirect common
control with such party (as such terms are interpreted from time to time
pursuant to the Securities Act of 1933, as amended); "Person" means and includes
natural persons, corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof;
and "actual knowledge" with respect to Sellers means the conscious awareness of
facts of Sellers' Columbus Station general manager and the officers of the
general partner of Sellers after reasonable inquiry by the Columbus Station
general managers and such officers with respect to the matters related to herein
as to which the Sellers are stating their knowledge.
3.6 Condition of Assets. The material tangible assets included in
the License Assets are, in all material respects, in good and technically sound
operating condition to permit the owner thereof to operate the Columbus Station
(in the manner in which the Columbus Station is operated by the Sellers) in
compliance with the terms of the FCC Authorizations, the Communications Act and
current FCC rules and regulations.
3.7 Title.
(a) Schedule 1.1.A(c) to the Group I Option Agreement
contains a description of the material real property leases (the "Leases") to
which either Seller is a party as a tenant (or subtenant) or landlord with
respect to the License Assets as of the date of this Agreement. To the actual
knowledge of Sellers, Sellers or either of them, as the case may be, are not in
material default under any of the Leases.
(b) Except for this Option, the Permitted Encumbrances, as
set forth on Schedule 1.3 to the Group I Option Agreement and as otherwise
provided herein, Sellers have on this Option Grant Date good, insurable and
marketable (only, with respect to insurability and marketability, as to tangible
property constituting Real Property) and indefeasible title to
<PAGE>
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the tangible assets included in the License Assets owned by them and good and
marketable title to the Real Property, and all such assets and Real Property are
free and clear of all liens and encumbrances except for Permitted Encumbrances.
(c) On the Option Grant Date, except for Permitted
Encumbrances, Sellers shall cause the FCC Authorizations to be free and clear of
all liens, security interests and encumbrances of any kind whatsoever and shall
cause the FCC Authorizations to remain free and clear of all such liens,
security interests and encumbrances from the Option Grant Date through the
Columbus Option Closing Date.
3.8 Call Letters, Trademarks, Etc. Except as set forth on Schedule
1.1.A(e) to the Group I Option Agreement, Sellers possess, and on the Columbus
Option Closing Date shall possess, adequate rights, licenses or other authority
to use all call letters, trademarks and trade names necessary to conduct the
business of the Columbus Station as presently conducted by Sellers except where
the failure to so possess would not cause a material adverse change in financial
condition or business of the Station, (provided that the foregoing shall not
include any material adverse change attributable to (i) factors affecting the
television or radio industries generally, (ii) general national, regional or
local economic or financial conditions, (iii) governmental or legislative laws,
rules or regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Option Holder thereof or (v) actions taken by Option Holder or
any Affiliate of Option Holder) (a "Station Material Adverse Change"). Except as
set forth on Schedule 1.1.A(e), Sellers have not received any notice with
respect to any alleged infringement or unlawful or improper use of any
copyright, trademark, trade name or other intangible property right owned or
alleged to be owned by others and used in connection with the Station. Sellers
represent and warrant that, except as set forth on Schedule 1.1.A(e) to the
Group I Option Agreement, none of the trademarks listed thereon have been
registered.
3.9 Insurance. The Station and the License Assets are, as of the
Option Grant Date, insured by Sellers against loss or damage by fire and other
hazards and risks of the character usually insured against by persons operating
similar properties and business under policies issued by insurers of recognized
responsibility.
3.10 Contracts. Schedules 1.1.A(c), 1.1.A(d) and 3.11 to the Group
I Option Agreement contain a list of the following contracts as to which the
Station or either Seller with respect to the Station is a party, and which have
been excluded from
<PAGE>
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transfer under, or excluded from the representations and warranties set forth
in, the Asset Purchase Agreement, as of the Option Grant Date, other than the
Excluded Contracts:
(a) contracts evidencing time sales to advertisers or
advertising agencies that are "trade" or "barter" transactions that require the
furnishing of advertising time on the Station at any time after the Option Grant
Date and that individually involve annual payments of more than $250,000;
(b) sales agency or advertising representation contracts
ending more than one year after the date of this Agreement;
(c) employment contracts that individually involve annual
base salaries of more than $100,000;
(d) material licenses or agreements under which either Seller
is authorized to broadcast on the Station filmed or taped programming supplied
by others;
(e) leases of personal property which have a term, including
renewal options exercisable by any other party thereto, ending more than one
year after the date of this Agreement and which involve annual payments of more
than $50,000 or $250,000 in the aggregate;
(f) material contracts not made in the ordinary and usual
course of business; and
(g) any other contracts which are material to the business
and operation of the Station and involve annual payments of more than $100,000
individually.
Notwithstanding anything to the contrary in the foregoing, it is
understood and agreed that Sellers are not required to list contracts entered
into in the ordinary course of business for the sale or sponsorship of
advertising time on the Station for cash at the Station's prevailing rate with
not more than one year remaining in any of their terms.
3.11 Employees. Sellers have heretofore delivered to Option Holder
a list of all employees of the Sellers as of the Option Grant Date and their
respective salaries and dates of hire. Except as described on such list or on
Schedule 3.11 to the Group I Option Agreement or on Schedule 3.10 to the Asset
Purchase Agreement, after giving effect to the consummation of the Asset
Purchase Agreement Closing Sellers have no written contracts of employment with
any employee. Except as described on Schedule
<PAGE>
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3.11 to the Group I Option Agreement or on Schedule 3.10 to the Asset Purchase
Agreement after giving effect to the consummation of the Asset Purchase
Agreement Closing, neither Seller is a party to or subject to any collective
bargaining agreements with respect to the Station nor, except as described in
Schedule 3.11 to the Group I Option Agreement or Schedule 3.10 to the Asset
Purchase Agreement after giving effect to the consummation of the Asset Purchase
Agreement Closing, does either Seller have any other contracts with any labor
union or other labor organization with respect to the Station. Except as
described on Schedule 3.11 to the Group I Option Agreement or Schedule 3.10 to
the Asset Purchase Agreement after giving effect to the consummation of the
Asset Purchase Agreement Closing, Sellers are not a party to any pending or, to
their actual knowledge, threatened labor dispute affecting the Station that
would cause a Station Material Adverse Change.
3.12 Litigation. Except as set forth on Schedule 3.12 to the Group
I Option Agreement hereto: (i) Sellers, with respect to the Station, have not
been operating under or subject to or in default with respect to any order,
writ, injunction or decree of any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality which has
caused or could reasonably be expected to cause a Station Material Adverse
Change; (ii) neither Seller is a party to any pending or, to Sellers' actual
knowledge, threatened litigation affecting any of the License Assets that would
cause a Station Material Adverse Change. There are no attachments, executions or
assignments for the benefit of creditors or voluntary or involuntary proceedings
in bankruptcy pending against or contemplated by Sellers, and to Sellers' actual
knowledge, no such actions have been threatened against Sellers or the Station
or any subsidiary of Seller. On the date hereof, except for ongoing or planned
FCC rulemakings affecting the television or radio industry generally, there is
no litigation or proceeding pending or, to Sellers' actual knowledge, threatened
against or affecting Sellers that would affect Sellers' ability to carry out the
transactions contemplated by this Agreement or restrain, enjoin, prohibit or
render illegal the consummation of the transactions contemplated by this
Agreement.
3.13 Compliance with Laws. Except as set forth on Schedule 3.5 to
the Group I Option Agreement, Sellers, with respect to the Station, are to their
actual knowledge, in compliance, except where the failure to so comply would not
cause a Station Material Adverse Change, with all applicable laws, regulations
and orders, and the present uses by Sellers of the License Assets do not, to
Sellers' actual knowledge, violate any such laws, regulations or
<PAGE>
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orders, except to the extent that any such violation would not result in a
Station Material Adverse Change.
3.14 Complete Disclosure. The representations and warranties in
this Article 3 do not include any untrue statements of material fact or, when
combined with the representations and warranties made under the Asset Purchase
Agreement, do not omit to state a material fact required to be stated therein
necessary to make the statements not misleading in light of the circumstances
under which they were made.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
Option Holder represents and warrants to Sellers as follows:
4.1 Incorporation. Option Holder is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
and Option Holder or an appropriate wholly-owned subsidiary of Option Holder
shall be qualified to transact business in the State of Ohio and any other state
in which the Station is doing business as of the Columbus Option Closing Date of
the acquisition of License Assets in such jurisdiction, and each of Option
Holder has the corporate power and authority to enter into and consummate the
transactions contemplated by this Agreement.
4.2 Corporate Action. All corporate actions and proceedings
necessary to be taken by or on the part of Option Holder in connection with the
execution and delivery of this Agreement and the respective consummation of the
transactions contemplated hereby and necessary to make the same effective have
been duly and validly taken. This Agreement has been duly and validly
authorized, executed and delivered by Option Holder, and constitutes its valid
and binding agreement, enforceable in accordance with and subject to its terms
except as enforceability may be limited by laws affecting the enforcement of
creditors' rights or contractual obligations generally and by the application of
general principles of equity.
4.3 No Conflicts. Neither the execution and delivery by Option
Holder of this Agreement, nor the consummation by Option Holder of the
transactions contemplated hereby (including, without limitation, the performance
of the obligations under Section 11.1.C(b)(iv), would constitute or, with the
giving of notice or the passage of time or both, would constitute a material
violation of or would conflict with or result in any
<PAGE>
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material breach of or any material default under any of the terms, conditions or
provisions of any law or regulation to which Option Holder is subject, or the
articles of incorporation or bylaws of Option Holder, or any contract, agreement
or instrument (including, without limitation, Option Holder's Debt Documents) to
which Option Holder is a party or by which it is or will be bound.
4.4 Brokers. Except for the fees payable to Smith Barney Inc. as
referenced in Section 4.4 of the Asset Purchase Agreement, there is no broker or
finder or other person who would have any valid claim against any of the parties
to this Agreement for a commission or brokerage in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by Option Holder.
4.5 Litigation. There is no litigation, proceeding or
investigation of any nature pending or, to the best of Option Holder's actual
knowledge, threatened against or affecting Option Holder that would affect
Option Holder's ability fully to carry out the transactions contemplated by this
Agreement or which has or could reasonably expected to restrain, enjoin,
prohibit or render illegal the consummation of the transactions contemplated by
this Agreement. There are no attachments, executions or assignments for the
benefit of creditors or voluntary or involuntary proceedings in bankruptcy
pending against or contemplated by Option Holder, and no such actions have been
threatened against Option Holder. For purposes of this Agreement "actual
knowledge" with respect to Option Holder means the conscious awareness of facts
of the officers of Option Holder after reasonable inquiry by such officers with
respect to the matters referred to herein as to which Option Holder is stating
its knowledge.
4.6 Capitalization. As of May 22, 1996, Option Holder contributed
all of the capital stock of each subsidiary of Option Holder that carries on any
business related to the broadcast industry (collectively, the "Broadcasting
Subsidiaries"), to SCI (as defined below).
ARTICLE 5
COVENANTS OF SELLERS PENDING THE CLOSING
Sellers covenant and agree, from the date hereof to and including the
Columbus Option Closing Date (or the earlier termination of the Columbus
Option), (i) that they will act as follows with respect to the Station, and (ii)
that they will act
<PAGE>
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as set forth in Article 5 of the Asset Purchase Agreement (including, without
limitation, Section 5.9), and to the extent any conflict exists in the terms of
Article 5 hereof and Article 5 of the Asset Purchase Agreement, the terms hereof
shall govern with respect to the License Assets, and the terms of Article 5 of
the Asset Purchase Agreement shall govern with respect to the Columbus Station
and the Columbus Station Assets:
5.1 Maintenance of Business until Closing. Sellers shall operate
the Station in all material respects in accordance with the terms of the FCC
Authorizations and in compliance in all material respects with all applicable
laws and FCC rules, regulations and published policies. Sellers will promptly
execute and file any necessary applications for the renewal of the FCC
Authorizations.
Sellers will maintain in full force and effect through the Columbus
Option Closing Date property damage, liability and other insurance with respect
to the License Assets used or held for use by Sellers with respect to the
Station consistent with Sellers' present practices as set forth in Section 3.9.
Nothing contained in this Agreement shall give Option Holder any right
to control the programming, operations or any other matter relating to the
Station prior to the Columbus Option Closing Date, and Sellers shall have
complete control of the programming, operations and all other matters relating
to the Station up to the Columbus Option Closing Date.
Prior to the Columbus Option Closing Date, except as set forth on
Schedule 5.1 to this Agreement and the last paragraph of this Section 5.1,
Sellers will not, without the prior written consent of Option Holder (to the
extent the following restrictions are permitted by the FCC and all applicable
law) take any of the following actions relating to the Station:
(a) enter into (i) any written contract of employment or any
collective bargaining agreement that will be binding on Option Holder or (ii)
permit any increases in the compensation of any of the Station's employees,
except in the case of (i) and (ii) or past practices or as required by law or
existing contract, in which case such contracts and agreements shall be assumed
by Option Holder and treated as Assumed Liabilities hereunder; provided,
however, that Sellers may pay bonuses to any of their employees so long as such
bonuses do not create a binding obligation upon Option Holder after the Columbus
Option Closing Date;
<PAGE>
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(b) apply to the FCC for any construction permit that would
materially restrict the Station's present operations or make any material change
in the Station's buildings or leasehold improvements;
(c) (i) create or permit any lien or encumbrance, other than the
Permitted Encumbrances, on the License Assets or the Columbus Station Assets; or
(ii) make capital expenditures or commitments for additions to property, plant
or equipment constituting capital assets on behalf of the Station outside the
ordinary course of business; provided, however, that Seller shall consult with
Option Holder to the extent Seller seeks to make significant capital
expenditures prior to making such capital expenditures;
(d) violate, breach or default under, in any material respect,
or take or fail to take any action that (with or without notice or lapse of time
or both) would constitute a material violation or breach of, or default under,
any term or provision of any material contract or license of the Station, other
than as a result of this Agreement, the Option Agreement, and the transactions
contemplated hereby and thereby;
(e) incur, purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date with
respect to, or waive any right of Sellers under, any liability of or owing to
Sellers in connection with the Station, other than (i) in the ordinary course of
business consistent with past practice, (ii) as contemplated pursuant to this
Agreement, (iii) the pay-off of any debt of Seller on or prior to the Closing or
(iv) in an aggregate amount (when combined with amounts under Section 5.1(e)(iv)
of the Group I Option Agreement) not to exceed $1,000,000; provided, however,
that notwithstanding the foregoing, except as otherwise contemplated under the
last paragraph of this Section 5.1, Sellers will not incur or suffer to exist
any additional indebtedness (whether in connection with the Station or
otherwise, but excluding trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered).
(f) engage with any Person in any business combination, except
as otherwise contemplated hereunder;
(g) engage in any transaction with respect to the Station with
any officer, director, or Affiliate of Sellers (or any Affiliate thereof),
either outside the ordinary course of
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business consistent with past practice or ther than on an arm's- length basis;
(h) enter into any contract, agreement or commitment to do or
engage in any of the foregoing;
(i) except as otherwise expressly provided for herein, sell,
lease, transfer or agree to sell, lease or transfer the Option or any License
Assets; or
(j) enter into and record any easements or restrictive covenants
that would materially adversely affect the value or the current or continued use
and enjoyment (to the extent such continued use and enjoyment conforms with
current use and enjoyment) of the property to which they relate without the
consent of Option Holder, which consent will not be unreasonably withheld;
Notwithstanding anything in this Agreement to the contrary, Sellers
shall be entitled to renew or extend the term of any contract relating to the
Station listed on Schedules 1.1.A(c), 1.1.A(d), 1.1.A(i)(1) or 3.11 to the Group
I Option Agreement which, by its terms, expires or will expire prior to June 30,
1999 and, in connection therewith, agree not to increase the amounts payable
thereunder during any such renewal term except in accordance with the Station's
usual practices.
Notwithstanding anything in this Agreement to the contrary, if Option
Holder has defaulted or breached in any material respect its economic
obligations or liabilities hereunder, during the applicable cure period under
Section 11.1.B, Sellers shall be permitted to borrow an aggregate amount, when
combined with amounts borrowed under the third from the last paragraph of
Section 5.1 of the Group I Option Agreement, does not exceed Three Million
Dollars ($3,000,000) the proceeds of which shall be used to continue to operate
the Station.
5.2 Goodwill/Compliance with Agreements. Sellers shall diligently
make all commercially reasonable efforts to preserve the License Assets and the
business organization of the Station and preserve the goodwill of the Station's
suppliers, customers and others having business relations with the Station.
5.3 Reports; Access to Facilities, Files and Records. From time to
time during the Exercise Period at the request of Option Holder, Sellers shall
give or cause to be given to the officers, employees, agents and representatives
of Option Holder (a) access (in the presence of any representative designated by
Sellers), upon reasonable prior notice, during normal business hours, to
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the License Assets and to all books and records relating thereto, and (b) all
such other information in Sellers' possession concerning the affairs of the
Station as Option Holder may reasonably request, provided that the foregoing
does not unreasonably disrupt or interfere with the business and operations of
Sellers or the Station.
5.4 Notice of Proceedings. Sellers will promptly notify Option
Holder in writing upon becoming aware of 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 department, court, agency or commission of its
intention to institute an investigation into or to 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.
5.5 Confidential Information. Sellers shall not use or disclose to
any third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Option
Holder, including delivery of a copy of the subpoena or request, if applicable)
this Agreement or any information received from Option Holder or its agents in
the course of investigating, negotiating and performing the transactions
contemplated by this Agreement; provided, however, that Sellers may disclose
such information to Sellers' respective officers, partners, employees, lenders,
advisors, attorneys and accountants who need to know such information in
connection with the consummation of the transactions contemplated by the
Agreement and who are informed by Sellers of the confidential nature of such
information. Nothing shall be deemed confidential information that: (a) is known
to either Seller at the time of the disclosure of such information to such
Seller; (b) becomes publicly known or available other than as a result of
disclosure by or through either Seller; (c) is rightfully received by Sellers
from a third party; or (d) is independently developed by either Seller. In the
event this Agreement is terminated and the transactions contemplated hereby
abandoned, Sellers will return to the Option Holder all copies of documents,
work papers and other written confidential material obtained by Sellers in
connection with the transactions contemplated hereby.
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5.6 Consummation of Option Closing. Subject to the express terms
and conditions of this Agreement, and without expanding such terms and
conditions, Sellers shall diligently make and cooperate with Option Holder in
making all commercially reasonable efforts in connection with any steps to be
taken as part of its respective obligations under this Agreement, and each of
Sellers shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts to fulfill and perform all conditions and
obligations on their part to be fulfilled and performed under this Agreement and
to cause all terms and conditions set forth herein to be fulfilled and to cause
the transactions contemplated by this Agreement in connection with the Option
Exercise and Closing to be fully carried out.
5.7 Notice of Certain Developments. Sellers shall give prompt
written notice to Option Holder if prior to the Columbus Option Closing Date:
(a) License Assets shall have suffered damage on account of fire, explosion or
other cause of any nature that is sufficient to prevent operation of the Station
in any material respect for more than twenty-four (24) consecutive hours, or (b)
the regular broadcast transmission of the Station in the normal and usual manner
in which it heretofore has been operating is interrupted in any material manner
for a period of more than twenty-four (24) consecutive hours.
5.8 Covenants of Sellers After Option Exercise. Sellers covenant
and agree that, after their receipt of any Exercise Notice for the exercise of
the Option, until either the Closing occurs or such Exercise Notice is withdrawn
pursuant to Section 1.4:
(a) Application for Commission Consent and Defense of
Claims. Within ten (10) days after receipt by Sellers of such Exercise Notice,
Sellers will complete Sellers' portion of applications to the FCC requesting its
written consent to the assignment of the FCC Authorizations for the Station (and
any extension or renewals thereof and any necessary waiver required under the
terms of 47 C.F.R. ss. 73.3555(b) with respect thereto) to Option Holder, and
upon receipt of Option Holder's portions of such applications, will promptly
file such applications with the FCC jointly with Option Holder. Sellers will
diligently take and cooperate in the taking of all commercially reasonable steps
that are necessary, proper or desirable to expedite the preparation of such
applications and their prosecution to a grant. Sellers will promptly provide
Option Holder with a copy of any pleading, order or other document served on
them relating to such applications. Sellers shall take, and cooperate with
Option Holder in taking, all commercially reasonable steps to oppose any
petition for
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reconsideration, application for review, or request for judicial review of, or
any other protest filed with respect to, the issuance of the FCC consents
contemplated by this Section 5.8(a).
(b) Consents. Sellers will diligently make and cooperate
with Option Holder in making all commercially reasonable efforts (without being
required to make any payment) to obtain or cause to be obtained prior to the
Columbus Option Closing Date consents to the assignment to or assumption by
Option Holder of all material licenses, leases and other contracts included in
the License Assets used or held for use by Sellers with respect to the Station
that require the consent of any third party by reason of the transactions
provided for in this Agreement.
(c) Consummation of Agreement. Subject to the terms and
conditions of this Agreement, and without expanding such terms and conditions,
Sellers shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts to fulfill and perform all conditions and
obligations on their part to be fulfilled and performed under this Agreement and
to cause the transactions contemplated by this Agreement to be fully carried
out.
5.9 Hart-Scott-Rodino. To the extent required by law, Sellers, as
promptly as practicable, shall prepare and jointly file with Option Holder all
documents with the Federal Trade Commission and the United States Department of
Justice, as are required to comply with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), and shall promptly furnish all
materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any filing fees (including by Sellers and Option Holder, with
respect to the transaction, including the transfer of the License Assets and the
Columbus Station Assets under the HSR Act shall be borne one-half (1/2) by
Sellers and one-half (1/2) by Option Holder.
5.10 Use of Excess Cash Flow. With respect to each fiscal year of
Sellers, Sellers shall use the Excess Cash Flow (as defined in Schedule 5.10)
for such fiscal year as follows:
(a) Sellers shall have the right to distribute to its partners
an amount equal to the product of (i) the Tax Percentage (as herein defined),
and (ii) such Excess Cash Flow; and
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(b) Thereafter, Sellers shall use the Excess Cash Flow
remaining after Section 5.10(a) as follows:
(i) Sellers shall retain 10% of such remaining Excess
Cash Flow for use in the operation of the Columbus Station; and
(ii) Sellers shall use the Excess Cash Flow remaining
after Sections 5.10(a) and 5.10(b)(i) to prepay principal under the RCB Credit
Agreement at the times specified under the RCB Credit Agreement.
As used herein, "Tax Percentage" means a fraction, expressed as a percentage,
the numerator of which is the Grossed-Up Rate Differential (as defined herein)
and the denominator of which is one (1) plus the Grossed-Up Rate Differential.
The "Grossed-Up Rate Differential" means (i) the excess of (A) the Highest
Ordinary Tax Rate, over (B) .40, divided by (ii) one (1) minus (B) the Highest
Ordinary Tax Rate. The "Highest Ordinary Tax Rate" means the greater of (a) the
combined marginal federal, state, and local income tax rate applicable to the
ordinary income of an individual residing in New York City as of the end of the
fiscal year to which a distribution pursuant to Section 5.10 relates, or (b) the
combined marginal federal, state, and local income tax rate applicable to the
ordinary income of a corporation located in New York City as of the end of the
fiscal year to which a distribution pursuant to Section 5.10 relates.
5.11 New License Subsidiary. As soon as practicable after the date
hereof, Sellers will use commercially reasonable efforts to form a license
partnership subsidiary similar to Licensee ("Licensee II") and to file
appropriate applications with the FCC to cause the transfer of the FCC
Authorizations held by Licensee to Licensee II. Upon completion of the transfer
of the FCC Authorizations, Licensee II will become a party to this Agreement and
replace Licensee hereunder.
ARTICLE 6
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
Option Holder covenants and agrees that from and after the date hereof
through and including the Columbus Option Closing Date that it will act as
follows with respect to the Station, and that it will act as set forth in
Article 6 of the Asset Purchase Agreement (including, without limitation,
Section 6.4), and to the extent any conflict exists in the terms of Article 6
hereof and Article 6 of the Asset Purchase Agreement with respect to the
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Columbus Station, the terms hereof shall govern with respect to the License
Assets and the terms of Article 6 of the Asset Purchase Agreement shall govern
with respect to the Columbus Station and the Columbus Station Assets:
6.1 Confidential Information. Option Holder shall not use or
disclose to third parties (except as may be necessary for the consummation of
the transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Sellers,
including delivery of a copy of the subpoena or request, if applicable) this
Agreement or any information (including, without limitation, financial
information and information regarding program contracts and revenue) received
from Sellers or their agents in the course of investigating, negotiating and
performing the transactions contemplated by this Agreement; provided, however,
that the Option Holder may disclose such information to Option Holder's
officers, directors, employees, lenders, advisors, attorneys and accountants who
need to know such information in connection with the consummation of the
transactions contemplated by this Agreement and who are informed by Option
Holder of the confidential nature of such information. Nothing shall be deemed
to be confidential information that: (a) is known to Option Holder at the time
of its disclosure to it; (b) becomes publicly known or available other than as a
result of disclosure by or through Option Holder; (c) is rightfully received by
Option Holder from a third party; or (d) is independently developed by Option
Holder. In the event this Agreement is terminated and the purchase and sale
contemplated hereby abandoned, Option Holder will return to the appropriate
Seller all copies of documents, work papers and other written confidential
material obtained by Option Holder in connection with the transactions
contemplated hereby.
6.2 Consummation of Agreement. Subject to the provisions of
Section 11.1 of this Agreement, and subject to the express terms and conditions
of this Agreement, and without expanding such terms and conditions, Option
Holder shall diligently make and cooperate with Sellers in making all
commercially reasonable efforts in connection with any steps to be taken as part
of their obligations under this Agreement, and Option Holder shall diligently
make and cooperate with Sellers in making all commercially reasonable efforts to
fulfill and perform all conditions and obligations on its part to be fulfilled
and performed under this Agreement and to cause the transactions contemplated by
this Agreement to be fully carried out. Option Holder will not take any actions
in contravention of this
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Agreement, including, without limitation, Buyer will not enter into any
agreement, or take any action, that would prohibit or restrict Option Holder's
performance of the obligations under Section 11.1.C(b)(iv). Option Holder agrees
to diligently cooperate with Sellers in connection with obtaining consents to
the assignment to, or assumption by, Option Holder of licenses, leases and other
contracts included in the License Assets, and to execute such assumption
instruments as may be required in connection with obtaining such consents on
monetary terms no less favorable to Option Holder than those Sellers under such
licenses, leases and other contracts on the date of such assumption.
6.3 Notice of Proceedings. Option Holder will promptly notify
Sellers in writing upon becoming aware of 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 department, court, agency or commission 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.
6.4 Covenants of Option Holder After Option Exercise. Option
Holder covenants and agrees that after Option Holder gives any Exercise Notice
for the exercise of the Option, and until either the Closing occurs or such
Exercise Notice is withdrawn or deemed to be withdrawn pursuant to Section 1.4:
(a) Application For Commission Consent. Within ten
(10) days after delivery to Sellers of such Exercise Notice, the Option Holder
will complete Option Holder's portion of applications to the FCC requesting its
written consent to the assignment of the FCC Authorizations for the Station (and
any extension or renewals thereof and any necessary waiver required under the
terms of 47 C.F.R. ss. 73.3555(b) with respect thereto) to Option Holder, and
upon receipt of Sellers' portion of such applications pursuant to Section
5.8(a), hereof will promptly file such applications with the FCC jointly with
Sellers. Option Holder will diligently take and cooperate in the taking of all
commercially reasonable steps that are necessary, proper or desirable to
expedite the preparation of all such applications and their prosecution to a
grant. Option Holder will promptly provide Sellers with the copy of any
pleading, order or other documents served on Option Holder relating to such
applications. Option Holder shall take, and cooperate with Sellers in taking,
all commercially reasonable steps to oppose any petition for
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reconsideration, application for review, or request for judicial review of, or
any other protest filed with respect to, the FCC consents contemplated by this
Section 6.4(a).
(b) Consents for Closing. Option Holder will diligently
make and cooperate in making all reasonable efforts jointly with Sellers to
obtain or cause to be obtained for the Closing prior to the Columbus Option
Closing Date all necessary consents relating to the License Assets used or held
for use by Sellers with respect to the Station and to execute such assumption
instruments as may be required in connection with obtaining such consents.
Without limitation of the foregoing, Option Holder covenants and agrees that it
shall provide on request, to any third party from whom such consent is sought,
such financial or other information as such third party may reasonably request
in order for such third party to grant such consent.
6.5 Notice of Material Impact. Option Holder will promptly notify
the Sellers in writing of any significant developments that have, or could
reasonably be expected to have, a material adverse impact on the condition
(financial or otherwise) of the business or any material asset of Option Holder.
6.6 Hart-Scott-Rodino. To the extent required by law, Option
Holder, as promptly as practicable, shall prepare and jointly file with Sellers
all documents with the Federal Trade Commission and the United States Department
of Justice as are required to comply with the HSR Act, and shall promptly
furnish all materials thereafter requested by any of the regulatory agencies
having jurisdiction over such filings. In such event, the parties shall
cooperate fully and shall use their commercially reasonable efforts to expedite
compliance with the HSR Act. Any related filing fees under the HSR Act shall be
paid in accordance with Section 5.9 hereof.
6.7 New Employment Agreements. On or prior to the Columbus Option
Closing Date, Option Holder shall have caused Sinclair Communications, Inc.
("SCI"), or the SBG Entity, as defined in, and specified under, the Amended
Employee Letter Agreement (which term when used herein shall have the meaning
assigned to such term in the Asset Purchase Agreement), as the case may be, to
have executed and delivered to Sellers the New Employment Agreements relating to
Station Employees (as defined in Section 7.7).
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLERS
In the case of a closing of the Columbus Option, all of the conditions
set forth below apply with respect to the Columbus Station. The obligations of
Sellers to consummate the transactions contemplated by this Agreement with
respect to the duly exercised Option from this Option Grant Date to the Columbus
Option Closing Date are, at their option, subject to the fulfillment of the
following conditions prior to or at the Columbus Option Closing Date:
7.1 Representations, Warranties, Covenants.
(a) The representations and warranties of Option
Holder contained in this Agreement (and as contained in the Asset Purchase
Agreement, with respect to the Columbus Station Assets only) shall have been
true and accurate in all material respects as of the date when made and shall be
true and accurate in all material respects as of the Columbus Option Closing
Date except to the extent any such representation or warranty is expressly
stated only as of a specified earlier date or dates, in which case such
representation or warranty shall be true and accurate in all material respects
as of such earlier date or dates and except to the extent changes are permitted
or contemplated pursuant to this Agreement (or the Asset Purchase Agreement, to
the extent applicable, in the case of the Columbus Station as set forth above);
(b) Option Holder shall have performed and complied in
all material respects with the covenants and agreements required by this
Agreement (including those included by reference under Article 6 hereof that are
set forth in the Asset Purchase Agreement) to be performed or complied with by
them prior to or at the Columbus Option Closing Date (including the delivery by
Option Holder of the Option Closing Price due, the Option Closing Price (as
defined in the Group I Option Agreement) of all Unpaid Options, and the
Extension Fees applicable to such Option and such Unpaid Options that have
accrued since the due date of the previous payment of Option Extension Fees for
such Options); and
(c) If requested by Sellers in accordance with Section
2.4(b)(ii), Option Holder shall have delivered to Sellers a certificate of an
officer of Option Holder dated as of the Columbus Option Closing Date certifying
to the fulfillment of the conditions set forth in Section 7.1.
7.2 Proceedings.
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(a) As of the Columbus Option Closing Date, no action
or proceeding shall have been instituted and be pending before any court or
governmental body to materially restrain or prohibit, or to obtain material
damages in respect of, the consummation of this Agreement that may reasonably be
expected to result in a permanent injunction against such consummation or, if
the transactions contemplated hereby were consummated, an order to nullify or
render ineffective this Agreement or such transactions or for the recovery
against Sellers of such material damages; and as of the Columbus Option Closing
Date, none of the parties to this Agreement shall have received written notice
(other than a letter of inquiry) from any governmental body of its intention to
institute any action or proceeding to materially restrain or enjoin or nullify,
or to obtain material changes in respect of, this Agreement or the transactions
contemplated hereby that may reasonably be expected to result in a permanent
injunction against such consummation or, if the transactions contemplated hereby
were consummated, an order to nullify or render ineffective this Agreement or
such transactions or the recovery against Sellers of substantial damages;
provided, however, that the foregoing (a) and (b) shall not be deemed to fall
within the provisions hereof, qualify as a condition hereunder to the extent
such action or proceeding is (1) brought or caused to be brought by (i) any
partner, officer, director, agent, Affiliate or creditor of Sellers, or any
other party claiming by, through or against Sellers that is not related to
Option Holder, (ii) any third party or agent of such party to any Contract
relating to any consent required to convey any such Contract, or (iii) any party
or agent of such party, who is currently a party to such affiliation agreement
with Sellers, or any Affiliate of Sellers or in any way relating to any
television or radio network affiliation agreement of any Seller, any Affiliate
of any Seller, Option Holder or any Affiliate of Option Holder; or (2) a
Proceeding referred to in Section 2.6 hereof.
7.3 Opinion of Counsel. If requested by Sellers in accordance with
Section 2.4(b)(ii), Sellers shall have received an opinion of Option Holder's
counsel dated as of the Columbus Option Closing Date in substantially the form
attached to the Group I Option Agreement as Exhibit 7.3(i) (with such changes as
may be necessary to reference this Agreement, rather than the Group I Option
Agreement) and an opinion confirming the representation set forth in Section 4.3
and an opinion of Option Holder's special communications counsel, dated as of
the Columbus Option Closing Date in substantially the form attached to the Group
I Option Agreement as Exhibit 7.3(ii) (with such changes as may be necessary to
reference this Agreement, rather than the Group I Option Agreement).
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7.4 FCC Authorization. As of the Columbus Option Closing Date, all
FCC consents and approvals contemplated by this Agreement with respect to the
Station shall have been granted.
7.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or be terminated and there shall not
be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
7.6 Termination of Certain Agreements. The Sellers shall have
received from Option Holder the termination of the Leases and Subleases (as such
terms are defined in the Asset Purchase Agreement) entered into by Option Holder
and RCB with respect to the Station (the "Terminations").
7.7 New Employment Agreements. Option Holder shall have caused
SCI, or the SBG Entity, as defined in, and specified under, the Amended Employee
Letter Agreement, as the case may be, to have executed and delivered employment
agreements with the persons listed under the Columbus Station on Schedule 7.8 to
the Asset Purchase Agreement (or any replacement person designated by Seller,
including any person designated to fill a "TBD" position, to fill such position)
substantially in the form of Exhibit 7.8 to the Asset Purchase Agreement and
subject to the limitations set forth in the Amended Employee Letter Agreement
(the "New Employment Agreements").
7.8 Approval of Stock Options. All necessary consents of the
directors (including any committees thereof) of Option Holder to approve all of
the stock options relating to the Station Employees contemplated by the Amended
Employee Letter Agreement and the Station Employee Stock Option Agreement (as
such terms are defined in the Asset Purchase Agreement) shall not have been
rescinded or revoked and shall be in full force and effect.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
In the case of a closing of the Columbus Option, all of the conditions
set forth below apply with respect to the Columbus Station. Subject to Section
2.6 hereof, the obligations of Option Holder to consummate the transactions
contemplated by this Agreement of the duly exercised Option are, at its option,
subject to the fulfillment of the following conditions prior to or at the
Columbus Option Closing Date:
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8.1 Representations, Warranties, and Covenants.
(a) The representations and warranties of Sellers contained
in this Agreement (and as contained in the Asset Purchase Agreement, with
respect to the Columbus Station Assets only) shall have been true and accurate
as of the date when made and shall be true and accurate as of the Columbus
Option Closing Date (except that such representations and warranties in the
Asset Purchase Agreement with respect to the Columbus Station Assets shall only
be required to be true and accurate as of the Asset Purchase Closing Date),
except to the extent (i) any such representation or warranty is expressly stated
only as of a specified earlier date or dates, in which case such representation
and warranty shall be true and accurate as of such earlier date or dates except
as set forth in (iii) below of this Section 8.1(a); (ii) changes are permitted
as contemplated pursuant to this Agreement (or the Asset Purchase Agreement, to
the extent applicable, in the case of the Columbus Station as set forth above)
and the Group I TBA, (iii) the consequence of the matter set forth in such
representation and warranty having failed to be true and accurate as of the date
when made, on the Columbus Option Closing Date or on such earlier specified date
would not result in a material adverse change in the financial condition or
business of the Group I Stations and the Columbus Station taken as a whole, or
of the License Assets taken as a whole (provided that the foregoing shall not
include any material adverse change attributable to (v) factors affecting the
television or radio industries generally, (w) general national, regional or
local economic or financial conditions, (x) governmental or legislative laws,
rules or regulations, (y) any affiliation agreement or the lack thereof or the
non- transfer to Option Holder thereof, or (z) actions taken by Option Holder or
any Affiliate of Option Holder) (a "Material Adverse Change").
(b) Each Seller shall have performed and complied in all
respects with covenants and agreements required by this Agreement (including
those included by reference under Article 5 hereof that are set forth in the
Asset Purchase Agreement) to be performed or complied with by it prior to or at
the Columbus Option Closing Date, including the delivery to Option Holder of the
instruments conveying the License Assets to Option Holder and the Columbus
Station Assets, except to the extent that the consequence of the failure of
Seller to have so performed or complied would not result in a Material Adverse
Change.
(c) If requested by Option Holder in accordance with
Section 2.4(a)(ii), Sellers shall have delivered to Option Holder a certificate
of an officer of the general partner of RCB and of
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Licensee dated the Columbus Option Closing Date certifying to the fulfillment of
the conditions set forth in Sections 8.1(a) and 8.1(b).
8.2 Proceedings.
(a) As of the Columbus Option Closing Date, no action or
proceeding shall have been instituted and be pending before any court or
governmental body to materially restrain or prohibit, or to obtain material
damages in respect of, the consummation of this Agreement that may reasonably be
expected to result in a permanent injunction against such consummation or, if
the transactions contemplated hereby were consummated, an order to nullify or
render ineffective this Agreement or such transactions or for the recovery
against Option Holder of such material damages; and (b) as of the Columbus
Option Closing Date, none of the parties to this Agreement shall have received
written notice (other than a letter of inquiry) from any governmental body of
its intention to institute any action or proceeding to materially restrain or
enjoin or nullify, or to obtain material damages in respect of, this Agreement
or the transactions contemplated hereby that may reasonably be expected to
result in a permanent injunction against such consummation or, if the
transactions contemplated hereby were consummated, an order to nullify or render
ineffective this Agreement or such transactions or the recovery against Option
Holder of substantial damages; provided, however, that the foregoing (a) and (b)
shall not be deemed to fall within the provisions hereof or qualify as a
condition hereunder to the extent such action or proceeding is (1) brought or
caused to be brought by (i) any stockholder, bondholder, officer, director,
agent, Affiliate or creditor of Option Holder or any other party claiming by,
through or against Option Holder that is not related to Sellers, (ii) any third
party or agent of such party to any Contract relating to any consent required to
convey any such Contract, or (iii) any party or agent of such party, who is
currently a party to any such affiliation agreement with Option Holder or any
Affiliate of Option Holder or in any way relating to any television or radio
network affiliation agreement of any Seller, any Affiliate of any Seller, Option
Holder or any Affiliate of Option Holder; or (2) a Proceeding referred to in
Section 2.6 hereof.
8.3 Opinion of Counsel. If requested by Option Holder, in
accordance with Section 2.4(a)(ii), Option Holder shall have received an opinion
of Seller's counsel dated as of the Columbus Option Closing Date in
substantially the form attached to the Group I Option Agreement as Exhibit
8.3(i) (with such changes as may be necessary to reference this Agreement,
rather than the Group I Option Agreement), and an opinion of Sellers' special
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communications counsel dated as of the Columbus Option Closing Date in
substantially the form attached to the Group I Option Agreement as Exhibit
8.3(ii) (with such changes as may be necessary to reference this Agreement,
rather than the Group I Option Agreement.
8.4 FCC Authorizations. As of the Columbus Option Closing Date,
all FCC consents and approvals as contemplated by this Agreement with respect to
the Station shall have been granted.
8.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or been terminated and there shall
not be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
8.6 Termination of Certain Agreements. The Option Holder shall
have received from RCB the Terminations.
ARTICLE 9
INDEMNIFICATION
9.1 Survival. The representations and warranties of Sellers and
Option Holder contained in this Agreement (including the Schedules hereto) or in
any certificate delivered by it pursuant to Sections 2.4, 7.1 and 8.1 of this
Agreement and the covenants of Sellers and Option Holder under this Agreement to
be performed on or before the Columbus Option Closing Date (a) that relate to
the Station shall survive until the Columbus Option Closing Date, and (b) that
do not relate to the Station shall survive for one year from the Option Grant
Date. Option Holder's obligation to pay, perform or discharge the Assumed
Liabilities shall survive until such Assumed Liabilities have been paid,
performed or discharged in full. Sellers' obligations with respect to all
obligations and liabilities not assumed by Option Holder pursuant to this
Agreement shall survive until such obligations and liabilities have been paid,
performed or discharged in full. The covenants and agreements contained in this
Article 9 shall continue in full force and effect until fully discharged. Any
other covenants or agreements contained herein or made pursuant hereto which by
their terms are to be performed after the Columbus Option Closing Date shall
survive until fully performed and discharged in full, including without
limitation all obligations and liabilities with respect to the Assumed
Liabilities and the Retained Liabilities. In the case of the representations and
warranties with respect to the Columbus
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Station Assets or otherwise made with respect to the Columbus Station under the
Asset Purchase Agreement, such representations and warranties shall survive only
until the first anniversary of the Asset Purchase Closing Date.
9.2 Indemnification of Option Holder. Sellers agree that, after
the Closing, subject to the limitations in Section 9.4 below, they shall
indemnify and hold Option Holder and its officers, directors, employees, agents
and Affiliates harmless from and against any and all damages, claims, losses,
expenses, costs, obligations and liabilities, including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees and
expenses ("Loss and Expense") suffered (whether any such claim arises out of a
third party action or is made by Option Holder against Sellers) by Option Holder
resulting from (i) any material breach of a representation or warranty made by
Sellers pursuant to this Agreement; (ii) any material failure by Sellers to
perform or fulfill any of their covenants or agreements set forth in this
Agreement; (iii) any failure by Sellers to pay, perform or discharge any
liabilities or obligations not specifically assumed by Option Holder pursuant to
this Agreement; (iv) any litigation, proceeding or claim by any third party
arising from the business or operations of the License Assets by Sellers prior
to the Option Grant Date, except to the extent arising from obligations or
liabilities that have been disclosed to Option Holder in this Agreement or the
Asset Purchase Agreement or the Schedules to the Group I Option Agreement (other
than those set forth on Schedule 9.2 to the Group I Option Agreement relating to
the Station) and except to the extent arising from obligations or liabilities of
or assumed by Option Holder pursuant to this Agreement.
9.3 Indemnification of Sellers. Option Holder agrees that, after
the Closing, it shall indemnify and hold Sellers and their respective officers,
directors, partners, employees, agents and Affiliates harmless from and against
any and all Loss and Expense suffered (whether any such claim arises out of a
third party action or is made by any Seller against Option Holder) by any Seller
resulting from (i) any material breach of representation or warranty made by
Option Holder pursuant to this Agreement; (ii) any material failure by Option
Holder to perform or fulfill any of its covenants or agreements set forth in
this Agreement; (iii) any failure by Option Holder to pay, perform or discharge
any Assumed Liabilities or any other obligations or liabilities of or assumed by
Option Holder under this Agreement (including, without limitation, those set
forth in Section 10.1 hereof); or (iv) any litigation, proceeding or claim
arising from the business or operations of the Station on or after the Option
Grant Date.
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9.4 Limitation of Liability. (i) Notwithstanding any other
provision of this Agreement, after the Closing, neither Sellers nor Option
Holder shall indemnify or otherwise be liable to the other, unless (a) the party
seeking indemnification has complied with the terms of, including the time
limits set forth in, Section 9.6 and (b) the aggregate amount of Option Holder's
Loss and Expense hereunder when combined with any Loss and Expense under the
Group I Option Agreement (in the case of Sellers' indemnification of Option
Holder) or Sellers' Loss and Expense hereunder when combined with any Loss and
Expense under the Group I Option Agreement (in the case of Option Holder's
indemnification of Sellers) exceeds $500,000, in which event the indemnified
party shall be entitled to recover its aggregate Loss and Expense inclusive of
$500,000 threshold; provided that such limitation shall not apply to any
indemnification obligation of Option Holder pursuant to Section 9.3(ii), (iii)
or (iv) hereunder or under the Group I Option Agreement or Sellers pursuant to
Section 9.2(ii), (iii) or (iv) hereunder or under the Group I Option Agreement.
Notwithstanding any provision contained herein, in no event shall Sellers be
liable for any amount, which, when combined with any other amount for which
Sellers previously have been liable under Section 9.2 hereof and any amount for
which RCB is liable, or previously has been liable, under Section 9.2 of the
Asset Purchase Agreement and any amount for which Sellers are liable, or
previously have been liable under Section 9.2 of the Group I Option Agreement,
is in excess of $50,000,000.
(ii) Notwithstanding anything in this Agreement to the
contrary, it is understood and agreed that any amounts owed to Option Holder by
Sellers for such Loss and Expense as determined in accordance with this Article
9 hereof, Article 9 of the Group I Option Agreement and Article 9 of the Asset
Purchase Agreement shall be made solely and exclusively in the form of a
deduction from the Columbus Option Closing Price that has not yet been paid to
Sellers hereunder and that once the Columbus Option Closing Price has been paid
in full or portion thereof placed in the Indemnification Fund to Sellers or if
the Columbus Option is terminated hereunder, Option Holder shall have no further
recourse against Sellers, and no other payment by Sellers shall be required,
hereunder, except for any pending claims against the amount of the Columbus
Option Closing Price placed in the Indemnification Fund.
(iii) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither Sellers (except to the extent expressly
provided for in Section 9.4(ii)) nor any partner, director, officer, employee,
agent or Affiliate of any Seller (including any shareholder, director, officer,
employee,
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agent or Affiliate of the general partners of any Seller) shall have any
personal liability to Option Holder as a result of the breach of any
representation, warranty, covenant or agreement of Sellers contained herein or
otherwise and shall have no personal obligation to indemnify Option Holder for
any of Option Holder's Losses or Expenses.
If Option Holder has any pending claim for indemnification against
Sellers with respect to any Loss or Expense hereunder, under the Group I Option
Agreement or under the Asset Purchase Agreement on the Columbus Option Closing
Date, at the closing of the Columbus Option the difference (if any) between the
amount of the Columbus Option Closing Price and the good faith estimate of the
amount of such indemnification claim (such amount, the "Indemnification Fund
Deposit") will be paid to Seller and the amount of the good faith estimate of
such indemnification claim will be transferred by the Option Holder to Magna
Trust Company, St. Louis, Missouri or such other bank as mutually agreed to by
the parties (the "Indemnification Escrow Agent"), to be held by the
Indemnification Escrow Agent, pursuant to the Indemnification Escrow Agreement
substantially in the form of Exhibit 9.4 to the Group I Option Agreement (with
such changes as may be necessary to refer to this Agreement, rather than the
Group I Option Agreement, and as the Indemnification Escrow Agent may reasonably
request), and pending final determination of such claim for indemnification
pursuant to this Article 9, as a fund in escrow (the "Indemnification Fund") to
provide security for the payment of such claim. Sellers shall bear the risk of
loss of the Indemnification Fund Deposit to the extent that any institutional
failure by Magna Trust Company results in the loss of the Indemnification Fund
Deposit.
If any funds are transferred to the Indemnification Escrow Agent to be
held in the Indemnification Fund, then any amount which becomes payable to
Option Holder or Sellers pursuant to a determination of such claim for
indemnification, together with any interest earned thereon, will be paid to
Option Holder or Sellers from the Indemnification Fund, to the extent of the
funds therein. To the extent any amount is payable to Option Holder from the
Indemnification Fund, Option Holder shall receive such amount plus any interest
accrued in such account allocable to such amount, and the balance of such
account, if any, shall be paid to Sellers. To the extent any amount is payable
to Sellers from the Indemnification Fund, Sellers shall receive such amount plus
any interest accrued in such account allocable to such amount, and Option Holder
shall pay to Sellers the difference, if any, between any such interest accrued
in such account and the interest that would have accrued with respect to the
amount payable to Sellers from the Indemnification Fund, utilizing the
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Applicable Interest Rate (as defined below) applicable on the Columbus Option
Closing Date through the date such funds are paid to Sellers, as such may change
from time to time in accordance with the following sentence. For purposes of
this Section 9.4, "Applicable Interest Rate" means (i) on or before the first
anniversary of the Option Grant Date, eight percent (8%) per annum, (ii) after
the first anniversary of the Option Grant Date but on or before the second
anniversary of the Option Grant Date, fifteen percent (15%) per annum, and (iii)
after the second anniversary of the Option Grant Date, twenty-five percent (25%)
per annum, which amount shall accrue on the basis of a 365-day year based on the
number of days elapsed in the period during which it accrues.
9.5 Bulk Sales Indemnity. Option Holder hereby waives compliance
with the provisions of any applicable bulk transfer laws. Subject to the
limitations set forth in Section 9.4 above, Sellers further agree to indemnify
and hold Option Holder harmless from and indemnify Option Holder against any and
all Loss and Expense relating to any claims made by creditors with respect to
non-compliance with any bulk transfer law, except to the extent that such claims
result from the Assumed Liabilities and other obligations or liabilities to be
paid or discharged by Option Holder as a result of this Agreement, the Group I
Option Agreement and the Group I TBA and/or Option Holder's failure to pay the
same when due.
9.6 Notice of Claims. If either Option Holder, on the one hand, or
Sellers on the other hand, believes in good faith that it has suffered or
incurred any Loss and Expense, such Seller shall notify the Option Holder in
writing within the applicable periods specified in Section 9.1 above, describing
such Loss and Expense, the factual basis for such claim, the amount thereof,
estimated in good faith, and the method of computation of such Loss and Expense,
all with reasonable particularity and containing a reference to the provisions
of this Agreement in respect of which such Loss and Expense shall have occurred.
If any action at law or suit in equity is instituted by a third party with
respect to which any of the parties intends to claim any liability or expense as
Loss and Expense under this Article 9, such party shall within twenty (20) days
after receiving written notice thereof (or sooner to the extent the indemnifying
party would not have time to adequately take the actions contemplated under
Section 9.7) notify the indemnifying party of such action or suit.
9.7 Defense of Third Party Claims. The indemnifying party under
this Article 9 shall have the right to conduct and control through counsel of
its own choosing the defense of any third
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party claim, action or suit (and the indemnified party shall cooperate fully
with the indemnifying party), but the indemnified party may, at its election,
participate in the defense of any such claim, action or suit at its sole cost
and expense provided that, if the indemnifying party shall fail to defend any
such claim, action or suit, then the indemnified party may defend through
counsel of its own choosing such claim, action or suit, and (so long as it gives
the indemnifying party at least fifteen (15) days' notice of the terms of the
proposed settlement thereof and permits the indemnifying party to then undertake
the defense thereof) settle such claim, action or suit, and to recover from the
indemnifying party the amount of such settlement or of any judgment and the
costs and expenses of such defense. The indemnifying party shall not compromise
or settle any third party claim, action or suit without the prior written
consent of the indemnified party, which consent will not be unreasonably
withheld or delayed.
9.8 Indemnity as Sole Remedy. After the Columbus Option Closing
Date, indemnification pursuant to this Article 9 shall be the sole and exclusive
remedy of any party to this Agreement for any breach of a representation,
warranty or covenant made or obligation undertaken by any other party, or for
any Loss or Expense arising out of or relating to the items listed in Sections
9.2 and 9.3 or otherwise related to the transactions contemplated hereby, other
than in respect of the Asset Purchase Agreement (subject to Section 9.4), the
Group I Option Agreement (subject to Section 9.4 thereof), the Registration
Rights Agreement, the Group I TBA, the Employment Agreement, the Consulting
Agreement, the Baker Stock Option Agreement, the Corporate Employee Stock Option
Agreement, the Station Employee Stock Option Agreement, the Amended Employee
Letter Agreement, the Voting Agreement, the ISO Amendment, the LTIP, the Amended
Charter or the Articles Supplementary (as such documents are described in the
Asset Purchase Agreement and, collectively, the "Transaction Documents"), which
shall be governed by their terms, whether such claim may be asserted as a breach
of contract, tort or otherwise.
9.9 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to Article 9 of this
Agreement, including the determination of the scope or applicability of this
agreement to arbitrate, shall be settled by final and binding arbitration in
accordance with the rules then in effect of the American Arbitration Association
("AAA"), as modified or supplemented under this Section, and subject to the
Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16. The decision of the arbitrators
shall be final and binding provided that, where a remedy for breach is
prescribed hereunder or
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limitations on remedies are prescribed, the arbitrators shall be bound by such
restrictions, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
If any series of claims arising out of the same or related transactions
shall involve claims which are arbitrable under the preceding paragraph and
claims which are not, the arbitrable claims shall first be finally determined
before suit may be instituted upon the others and the parties will take such
action as may be necessary to toll any statutes of limitations, or defenses
based upon the passage of time, that are applicable to such non-arbitrable
claims during the period in which the arbitrable claims are being determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 9.9, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. The
arbitration panel shall consist of three arbitrators, appointed in accordance
with the procedures set forth in this paragraph. Within ten (10) business days
of delivery of the notice of commencement of arbitration referred to above,
Sellers, on the one hand, and Option Holder, on the other hand, shall each
appoint one arbitrator, and the two arbitrators so appointed shall within ten
(10) business days of their appointment mutually agree upon and appoint one
additional arbitrator (or, if such arbitrators cannot agree on an additional
arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules) provided, that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least 15 years as an attorney
specializing in either general commercial litigation or general corporate and
commercial matters and (iii) are experienced in matters involving the
broadcasting industry.
The arbitration hearing shall commence no later than thirty (30)
business days after the completion of the selection of the arbitrators.
Consistent with the intent of the parties hereto that the arbitration be
conducted as expeditiously as possible, the parties agree that (i) discovery
shall be limited to the production of such documents and the taking of such
depositions as the arbitrators determine are reasonably necessary to the
resolution of the controversy, claim or dispute and (ii) the arbitrators shall
limit the presentation of evidence by each side in such arbitration to not more
than ten (10) full days (or the equivalent thereof) or such shorter period as
the arbitrators shall determine to be necessary in order to resolve the
controversy, claim or dispute. The arbitrators shall be
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instructed to render a decision within ten (10) business days of the close of
the arbitration hearing. If arbitration has not been completed within ninety
(90) days of the commencement of such arbitration, any party to the arbitration
may initiate litigation upon ten (10) days written notice to the other
party(ies); provided, however, that if one party has requested the other to
participate in an arbitration and the other has failed to participate, the
requesting party may initiate litigation before the expiration of such
ninety-day period; and provided further, that if any party to the arbitration
fails to meet any of the time limits set forth in this Section 9.9 or set by the
arbitrators in the arbitration, any other party may provide ten (10) days
written notice of its intent to institute litigation with respect to the
controversy, claim or dispute without the need to continue or complete the
arbitration and without awaiting the expiration of such ninety-day period. The
parties hereto further agree that if any of the rules of the AAA are contrary to
or conflict with any of the time periods provided for hereunder, or with any
other aspect of the matters set forth in this Section 9.9, that such rules shall
be modified in all respects necessary to accord with the provisions of this
Section 9.9 (and the arbitrators shall be so instructed by the parties). The
arbitrators shall base their decision on the terms of this Agreement and
applicable law and judicial precedent which a United States District Court
sitting in the District of Maryland (Southern Division) would apply in the event
the dispute were litigated in such court, and shall render their decision in
writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrators shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Rockville, Maryland.
ARTICLE 10
EMPLOYEE MATTERS
10.1 Employee Matters. The following provisions shall act
exclusively for the benefit of parties to this Agreement and not for the benefit
of any other person or entity:
(a) Effective as of the Columbus Option Closing Date, the
Option Holder shall offer employment to each employee of Sellers who is employed
at the Station immediately prior to the Columbus Option Closing Date (the
"Station Employees") on terms and conditions which are substantially similar in
the aggregate to the terms and conditions of employment of the Option Holder's
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employees as of the Columbus Option Closing Date, including the provision of
retirement and health care benefits, except as otherwise provided in this
Section 10.1 or any employment agreement between Option Holder and any Station
Employee may otherwise require. The Option Holder shall assume all contracts of
employment of the Station Employees and notwithstanding anything in the
foregoing to the contrary, to the extent such employment contract or collective
bargaining agreement assumed hereunder provides for terms and conditions in
addition to those referenced in the preceding sentence, Option Holder shall
assume the terms thereof. Each Station Employee shall receive credit for past
service with the Sellers for all purposes under the Option Holder's benefit
plans.
(b) Option Holder shall assume full responsibility and
liability for offering and providing "Continuation Coverage" to any "Qualified
Beneficiary" who is covered by a "Group Health Plan" sponsored or contributed to
by the Sellers or any entity required to be combined with the Sellers (within
the meaning of Sections 414(b), (c), (m) or (o) of the Code) and who has
experienced a "Qualifying Event" or is receiving "Continuation Coverage" arising
with respect to employment at the Station on or prior to the Columbus Option
Closing Date. For purposes of this Section 10.1(b), a Qualified Beneficiary will
be deemed to experience a Qualifying Event or to be receiving Continuation
Coverage "arising with respect to employment" at the Station if such Qualified
Beneficiary is or was an employee of the Station or is or was the spouse or
other covered dependent of such employee. Schedule 10.3 to the Asset Purchase
Agreement identifies all Qualified Beneficiaries entitled to Continuation
Coverage under any Seller's Group Health Plan on the date of this Agreement, and
Sellers shall deliver on the Columbus Option Closing Date a list of Qualified
Beneficiaries entitled to Continuation Coverage as of such date. "Continuation
Coverage," "Qualified Beneficiary," "Qualifying Event" and "Group Health Plan"
all shall have the meanings given such terms under Section 4980B of the Code and
Section 601 et seq. of ERISA.
(c) Option Holder shall offer health plan coverage to all
Station Employees under the terms and conditions generally applicable to the
Option Holder's employees as of the Columbus Option Closing Date. For purposes
of providing such coverage, the Option Holder shall waive all preexisting
condition limitations for all Station Employees covered by any Seller's group
health plan as of the Columbus Option Closing Date and shall provide such health
care coverage effective as of the Columbus Option Closing Date without the
application of any eligibility period for coverage. In addition, the Option
Holder shall credit all employee payments toward deductible and co-
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payment obligations limits under the Seller's health care plans for the plan
year which includes the Columbus Option Closing Date as if such payments had
been made for similar purposes under the Option Holder's health care plans
during the plan year which includes the Columbus Option Closing Date, with
respect to the Station Employees.
(d) Option Holder shall grant Station Employees credit for
and shall assume and be responsible for any liabilities with respect to sick
leave and personal days accrued but unused by any Station Employees as of the
Closing Date, and, subject to the proration provided for in Section 2.2(a) of
the Asset Purchase Agreement Option Holder shall grant Station Employees credit
for and shall be responsible for any liabilities with respect to any accrued but
unused vacation for such employees as of the Columbus Option Closing Date.
(e) Except as otherwise provided in Section 10.1(f), within a
reasonable period of time after the Columbus Option Closing Date, RCB shall
transfer from the River City Investment and Retirement Plan ("RCB's 401(k)
Plan") to the Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and
Trust ("Option Holder's 401(k) Plan") an amount, in cash, equal to the aggregate
account balances held in the RCB's 401(k) Plan as of the date of transfer with
respect to all Station Employees. Prior to the date of such transfer, and as
preconditions thereto: (1) the Option Holder shall use commercially reasonable
efforts to deliver to Sellers a copy of the most recently issued Internal
Revenue Service ("IRS") determination letter (or other proof satisfactory to
counsel for the Sellers) that Option Holder's 401(k) Plan is qualified under the
Code, and (2) Sellers shall use commercially reasonable efforts to deliver to
the Option Holder a copy of the most recently issued IRS determination letter
(or other proof satisfactory to counsel for the Option Holder) that RCB's 401(k)
Plan is qualified under the Code. Sellers shall not take any action with respect
to RCB's 401(k) Plan to create a right on behalf of the Station Employees to
distribution of plan assets from RCB's 401(k) Plan prior to such transfer.
Subsequent to the transfer of assets to the Option Holder's 401(k) Plan, neither
the Sellers nor RCB's 401(k) Plan shall retain any liability with respect to
such Station Employees to provide them with benefits in accordance with the
terms of RCB's 401(k) Plan. On or prior to the Columbus Option Closing Date,
Sellers shall deliver to Option Holder a list of all Station Employees,
indicating thereon the total amount deferred in pre-tax dollars to RCB's 401(k)
Plan by each of the Station Employees under the terms of Section 402(g) of the
Code with respect to the plan year of RCB's 401(k) Plan in which Closing occurs.
Sellers and the Option Holder agree to cooperate with
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respect to any government filing, including, but not limited to, the filing of
IRS Forms 5310-A, if necessary, to effect the transfer of assets contemplated by
this Section 10.1.
(f) The Option Holder agrees, effective as of the later of
the Columbus Option Closing Date, the termination of this Agreement and the
final Option Closing Date under the Group I Option Agreement, to fully assume
sponsorship of RCB's 401(k) Plan including all obligations of the sponsor to
contribute to and administer the plan. Sellers and the Option Holder agree to
perform all acts necessary or proper to consummate the assumption of RCB's
401(k) Plan, including but not limited to the making of all proper filings with
the IRS and the Department of Labor and the receipt of all necessary notices or
approvals from governmental agencies.
(g) The Option Holder agrees that the Sellers may inform its
employees that the Option Holder has agreed that the Station Employees will be
offered employment as provided in this Section 10.1; provided, however, that
Option Holder shall have the right to approve any written statement to be made
by Sellers in connection therewith.
ARTICLE 11
TERMINATION/MISCELLANEOUS
11.1 Termination of Columbus Option; Notice and Cure;
Certain Remedies.
11.1.A In General. The Columbus Option shall expire and terminate if
RCB is in default under the RCB Credit Agreement and Lender has begun to
exercise its remedies under the security documents relating to the RCB Credit
Agreement, subject to the terms of the Cure Rights Agreement dated as of May 31,
1996, among Sellers, Buyer and The Chase Manhattan Bank, N.A. Subject to Section
11.1.B below, the Columbus Option may also be terminated at any time on or prior
to June 30, 1999 as follows:
(a) By Sellers:
(i) if any of the conditions provided in Article 7 hereof
have not been met by the date scheduled for the Closing of the Columbus Option
pursuant to Section 2.2 and have not been waived, provided that Sellers are not
in default under or breach in any material respect of their representations and
warranties, covenants or agreements under this Agreement and the failure to meet
such conditions is not due to Sellers' breach of the Agreement;
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(ii) if Option Holder fails to deliver any payment with
respect to the Group I Options or the Columbus Option as required by Sections
2.1.A or 2.1.B hereof or under any applicable provision of the Group I Option
Agreement by or at the time such payment is due thereunder;
(iii) if the Columbus Option Closing Date has not occurred on
or prior to June 30, 1999.
(b) By Option Holder:
(i) if any of the conditions provided in Article 8
hereof have not been met by the date scheduled for the Closing of such Option
pursuant to Section 2.2 and have not been waived provided that Option Holder is
not in default or breach in any material respect of its representations and
warranties, covenants or agreements under this Agreement, and the failure to
meet such conditions is not due to Option Holder's breach of the Agreement; or
(ii) upon written notice by Option Holder to Sellers.
(c) By Either Option Holder or Sellers as follows: by
mutual written consent of Option Holder and Sellers.
11.1.B Notice and Cure. Notwithstanding anything to the contrary in
the foregoing, to the extent that Option Holder has taken, or failed to take,
any of the actions otherwise contemplated under Section 11.1.A(a)(i) or (ii)
prior to a termination under such provisions by Sellers, Sellers shall give
Option Holder and Option Holder's lenders ("Option Holder's Lenders") under its
then existing senior credit facility (the name and notice information regarding
which Option Holder shall provide to Sellers) notice thereof, and (x) in the
case of a breach under Section 11.1.A(a)(i), Option Holder shall be given thirty
(30) days from the date of receipt of such notice to cure such breach and the
Option Holder's Lenders shall be given ninety (90) days from the date of receipt
of such notice to cure such breach and (y) in the case of a breach under Section
11.1.A(a)(ii), Option Holder shall be given fifteen (15) days from the date of
receipt of such notice to cure such breach and Option Holder's Lenders shall be
given ninety (90) days from the date of receipt of such notice to cure such
breach. After the applicable cure periods with respect to such breach have
expired without such breach having been cured within such periods, Sellers shall
have the right to terminate hereunder.
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11.1.C Certain Remedies. (a)(i) The "Columbus Sale Price" means the
excess, if any, of (A) any amount received as payment for the Columbus Station
(including amounts received that are used to discharge the Unpaid Amount), over
(B) the sum of (i) any non-recurring reasonable out-of-pocket costs incurred by
Sellers in connection with such disposition, other than any sales commissions
paid by Sellers in connection therewith, (ii) the total amount of all federal,
state and local taxes incurred by Sellers in connection with such sale, (iii)
the Standard Formula (as defined below) on the amount received by Sellers on
such disposition, (iv) the Columbus Option Closing Price and the Closing Price
for all Group I Unpaid Options, (v) all Option Extension Fees with respect to
the Columbus Option and all Group I Unpaid Options that are due but have not
been paid through the date of such disposition, and (vi) any other amounts owed
by Option Holder to Sellers, including, without limitation, in connection with
any economic breach by Option Holder under Section 11.1.A(a).
(ii) The "Deficiency Amount" means the excess, if
any, of (A) the sum of (i) any non-recurring reasonable out-of-pocket costs
incurred by Sellers in connection with such disposition, other than any sales
commissions paid by Sellers in connection therewith, (ii) the total amount of
all federal, state and local taxes incurred by Sellers in connection with such
sale, (iii) the Standard Formula (as defined below) on the amount received by
Sellers on such disposition, (iv) the Columbus Option Closing Price and the
Closing Price for all Group I Unpaid Options, (v) all Option Extension Fees with
respect to the Columbus Option and all Group I Unpaid Options that are due but
have not been paid through the date of such disposition, and (vi) any other
amounts owned by Option Holder to Sellers, including, without limitation, in
connection with any economic breach by Option Holder under Section 11.1.A(a),
over (B) the amount received by Sellers on such disposition (including amounts
received that are used to discharge the Unpaid Amount).
(b) (i) To the extent Sellers (A) terminate the Columbus
Option in accordance with Section 11.1.A(a), and (B) sell the Columbus Station,
Sellers shall, upon receipt thereof, pay to Option Holder the Columbus Sale
Price.
(ii) If (x) at any time, including, without
limitation, upon or after expiration or termination of the Columbus Option, the
Columbus Station (or the assets thereof) is sold or otherwise disposed of by
Sellers or through foreclosure or otherwise under the RCB Credit Agreement (or
documents related thereto, including any security documents), whether pursuant
to this Section 11.1 or otherwise, and whether directly or indirectly, through a
sale of assets or partnership interests in
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RCB and/or Licensee, or any combination thereof, and (y) such disposition
results in a Deficiency Amount, Option Holder (notwithstanding any assignment by
Option Holder of any of its rights hereunder pursuant to Section 11.4) shall pay
such Deficiency Amount in immediately available funds to Sellers on the date of
such disposition of the Columbus Station.
(iii) Notwithstanding anything in the foregoing
to the contrary, other than as provided in subsection (iv) of this Section
11.1.C(b), Option Holder shall not be obligated to pay the Deficiency Amount to
the extent that making such payment would cause a default, or otherwise be
prohibited, under the credit agreement relating to Option Holder's then existing
senior credit facility or under the Indenture relating to Option Holder's 10%
Senior Subordinated Notes due 2003 or under the Indenture relating to Option
Holder's 10% Senior Subordinated Notes due 2005 (such credit agreement and
indentures collectively referred to herein as "Option Holder's Debt Documents").
To the extent that making a payment in an amount less than the total amount of
the Deficiency Amount would not cause such a default or otherwise be so
prohibited, Option Holder shall pay the maximum amount of the Deficiency Amount
without causing such default or violating such prohibition. Without limiting the
rights of Sellers as specified in subsection (iv) of this Section 11.1.C(b) and
to the extent not otherwise satisfied under such subsection (iv), Option Holder
shall pay the Deficiency Amount, plus all Option Extension Fees with respect to
the Columbus Option and all Group I Unpaid Options that have accrued after the
date of such disposition and through the payment of the Deficiency Amount, to
the extent not already paid to Sellers on the first business day when such
payment would not cause such default or violate such prohibition, and Option
Holder shall use commercially reasonable efforts to make such payments as soon
as possible.
(iv)(1) If any such default or prohibition would occur
as a result of the payment of the Deficiency Amount (in whole or in part),
Option Holder shall, within ninety (90) days after the date the Deficiency
Amount was otherwise due, if the Deficiency Amount (and any accrued Extension
Fees) have not otherwise been satisfied in full, issue to Sellers registered
(with the SEC and any applicable state agencies), publicly tradeable, common
equity securities of Option Holder in an amount set forth in clause (2) below.
Such securities shall be duly and validly issued, fully paid and nonassessable
and shall be free of preemptive rights. Such securities shall be allocated among
Sellers as Sellers shall determine and shall notify Option Holder in writing
prior to the date of issuance. Such securities shall be listed on any national
securities exchange on which Option Holder's other equity securities are listed
(or, if Option Holder's other securities are not listed at such time, the
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securities shall be listed on NASDAQ or the New York Stock Exchange) and such
securities shall be able to immediately be sold by Sellers or the Distributees
(as defined below) in a public or private offering and shall not be subject to
any restrictions under applicable securities laws on disposition by Sellers or
their Distributees (as defined below). If requested by Sellers, such securities
will be issued directly to the partners of RCB and to the shareholders of the
general partner of RCB (collectively, the "Distributees"), and RCB shall have
the right to distribute any securities received by it to its Distributees, and
in the event of such direct issuance or distribution, such securities in the
hands of the Distributees shall have the same characteristics as if held by the
Sellers as provided in the preceding sentences hereof.
(2) The securities to be issued pursuant to clause (1) above,
shall have a fair market value on the date of issuance equal to the Deficiency
Amount not yet paid, plus all Option Extension Fees with respect to the Columbus
Option and all Group I unpaid options that have accrued after the date of
disposition of the Columbus Station and through the date of issuance of the
securities that have not been paid.
(3) To the extent Sellers (or the Distributees through the
general partner of RCB) elect to sell all or any portion of such securities to
be issued pursuant to clause (1) above on the date of issuance in an
underwritten secondary offering to be consummated on the date of issuance,
Sellers (or the Distributees) shall give Option Holder notice of such election a
reasonable amount of time in advance of the projected date of issuance. If
Sellers (or Distributees) make such election, consummation of such offering and
the receipt by Sellers (or Distributees) of net proceeds therefrom equal to not
less than the Deficiency Amount shall be a condition to the issuance of such
securities by Option Holder. Sellers (or Distributees) shall have the right to
select a managing underwriter for such offering who, after consultation with
Option Holder, shall have the right to determine the sale price for such
securities and the number of shares to be issued. Option Holder will cooperate
with the managing underwriter and Sellers (and Distributees) in connection with
such sale, and will take such actions and execute such documents as the managing
underwriter and Sellers (or Distributees) may reasonably request, including,
without limitation, filing all necessary registration statements and related
documents and prosecuting such filings diligently, executing an underwriting
agreement in customary form, entering into a contribution and indemnification
agreement with Sellers and Distributees in customary form and making senior
officers available for "road show" presentations.
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If Sellers or Distributees elect to sell all or any portion of the
securities to be issued pursuant to clause (1) above after the date of issuance
in an underwritten secondary offering, the provisions of the preceding paragraph
shall apply and Option Holder shall take all actions reasonably necessary to
enable Sellers or Distributees to effect a public offering of the securities
after receipt of such securities by Sellers or Distributees.
(4) Option Holder shall promptly pay after request by Sellers
(or Distributees) all expenses incurred by Sellers (or Distributees) in
connection with any offering and sale of the securities to be issued pursuant to
clause (1) above, including without limitation, commissions payable in
connection with such sale, underwriters discounts and reasonable attorneys fees.
(c) For purposes of this Agreement, "Standard Formula" means
(a) five percent (5%) on the first one million dollars ($1,000,000.00) of the
total amount paid for the Columbus Station; (b) four percent (4%) on the next
one million dollars ($1,000,000.00) of the total amount paid for the Columbus
Station; (c) three percent (3%) on the next one million dollars ($1,000,000.00)
of the total amount paid for the Columbus Station; (d) two percent (2%) on the
next one million dollars ($1,000,000.00) of the total amount paid for the
Columbus Station; and (e) one percent (1%) on any excess over four million
dollars ($4,000,000.00) of the total amount paid for the Columbus Station. For
purposes of this Section 11.1.C(c), the total amount paid for the Columbus
Station shall include amounts received that were used to discharge the Unpaid
Amount.
(d) Sellers agree to act in a commercially reasonable manner
in connection with the sale of the Columbus Station, and Option Holder shall
cooperate with Sellers in connection therewith. The Columbus Option shall
terminate upon the Columbus Option Payment Date. Option Holder's rights
hereunder shall be subject to any actions as may be taken by Sellers pursuant
hereto.
(e) TO THE EXTENT SELLERS HAVE ACTED IN A COMMERCIALLY
REASONABLE MANNER IN CONNECTION WITH THE SALE OF THE COLUMBUS STATION, NO CLAIM
MAY BE MADE BY OPTION HOLDER AGAINST SELLERS OR ITS PARTNERS, AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE
CLAIM THEREFOR IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION
WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND
RELATIONSHIP ESTABLISHED BY THE FOREGOING PARAGRAPH, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH; AND OPTION HOLDER HEREBY WAIVES,
RELEASES
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AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
11.1.E Certain Remedies of Option Holder. (a) To the extent that
Sellers have made distributions to their partners in violation of Section 5.10
and Sellers do not have funds to pay amounts due and owing under the RCB Credit
Agreement, Sellers will use commercially reasonable efforts to provide notice to
Option Holder that such payment will not be made by Sellers. Option Holder shall
have the right to make any payments due and owing under the RCB Credit Agreement
for a period of sixty (60) days following such notice. Any amounts so paid by
Option Holder shall be subtracted from the One Hundred Thirty Million Dollars
($130,000,000) due under the Columbus Option Closing Price.
(b) To the extent Sellers have not made distributions to their
partners in violation of Section 5.10 but Sellers do not have the funds to pay
amounts due and owing under the RCB Credit Agreement, Sellers will use
commercially reasonable efforts to provide notice to Option Holder that such
payment will not be made. Option Holder shall have the right to make any
payments due and owing under the RCB Credit Agreement for a period of sixty (60)
days following such notice.
11.2 Effect of Termination and Other Limitations. (a) In the event
of termination, as provided in Section 11.1, the obligations of the parties
hereto shall terminate without any liability or obligation on the part of
Sellers or Option Holder, except that (i) the provisions of Sections 2.1.B, 3.4,
4.4, 5.5, 6.1, 11.1-11.12, and 11.15-11.19 shall survive, and (ii) to the extent
that such termination results from the willful and material breach by a party of
any of its representations, warranties, covenants or agreements set forth in
this Agreement, the non-defaulting parties' rights to pursue all legal or
equitable remedies for breach of contract or otherwise, including the right to
specific performance or damages or both, shall survive and the non-prevailing
party in any lawsuit related to any such pursuit shall pay the attorney's fees
of the prevailing party. Without limiting the generality of the foregoing,
neither Option Holder, on the one hand, nor Sellers, on the other hand, may rely
on the failure of any condition precedent set forth in Articles 7 or 8, as
applicable, to be satisfied if such failure was caused by such party's (or
parties') failure to act in good faith, or a breach of or failure to perform its
representations, warranties, covenants or other obligations in accordance with
the terms of this Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither any Seller (except to the
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extent expressly provided for in Section 11.2(a)) nor any partner, director,
officer, employee, agent or Affiliate of any Seller (including any shareholder,
director, officer, employee, agent or Affiliate of the general partner of the
Seller) shall have any personal liability to Option Holder as a result of the
breach of any representation, warranty, covenant or agreement of Seller
contained herein or otherwise and shall have no personal obligation to Option
Holder for any of Option Holder's remedies hereunder.
11.3 Expenses. Subject to the provisions of Sections 3.4 and 4.4,
each party hereto shall bear all of its expenses incurred in connection with the
transactions contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith; provided, however,
that Sellers on the one hand, and Option Holder on the other, shall each pay
one-half of any sales or transfer taxes (including any real property transfer
taxes) arising from transfer of the License Assets and the Columbus Station
Assets and any FCC filing fees.
11.4 Assignments. This Agreement shall not be assigned by any
party hereto without the prior written consent of the other parties except as
specified herein, as follows:
(i) Option Holder or any permitted assignee of Option Holder
may assign its rights and interests hereunder with respect to the Option
provided that (1) Option Holder gives Sellers written notice thereof; (2) such
assignment shall not relieve Sinclair Broadcast Group, Inc. or any assignee
hereof or of any other Option Holder of any of its obligations or liabilities
hereunder; (3) such assignment would not violate any applicable laws, rules,
regulations or policies of any applicable governmental authority; and (4) if
Option Holder assigns the Option pursuant to this subsection (i) and if any
amounts are paid to Option Holder in connection therewith, Option Holder shall,
on the date any such payment is received, pay such amount to Sellers, which
amount shall be referred to as the "Option Assignment Price" for such Option.
Notwithstanding the foregoing, it is understood and agreed that Option Holder
shall not assign its obligations to pay any Deficiency Amount or to perform the
obligations set forth in Section 11.1.C(b)(iv).
(ii) To the extent of any such assignment by Option Holder in
accordance with the terms of this Section 11.4, Sellers shall deliver any such
documents contemplated under Section 2.4(a) to such assignee provided that once
such delivery shall have been made to such assignee, Sellers' obligations
hereunder with respect to such delivery shall be deemed to have been discharged.
It is understood and agreed that nothing herein
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shall be deemed to prohibit a transfer of control of any Seller or Licensee or
the assignment of any FCC Authorizations or any of the other License Assets by
Sellers provided that Sellers agree to amend any filings contemplated under
Section 5.8(a) to the extent necessary in connection therewith. Any attempt to
assign this Agreement without the required consent shall be void. It is
understood and agreed that nothing herein shall be deemed to expand the rights
granted hereunder to any permitted assignee, which rights shall be in
combination with, and not in addition to, the rights of Option Holder. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
11.5 Further Assurances. Subject to the terms and conditions of
this Agreement, from time to time prior to, at and after the Option Grant Date,
each party hereto will use commercially reasonable efforts to take, or cause to
be taken, all such actions and to do or cause to be done, all things, necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale contemplated by this Agreement and the consummation of the
other transactions contemplated hereby, including executing and delivering such
documents as the other party being advised by counsel shall reasonably request
in connection with the consummation of this Agreement and the consummation of
the other transactions contemplated hereby, including, without limitation, the
execution and delivery of any and all confirmatory and other instruments, in
addition to those to be delivered on either the Option Grant Date or the
Columbus Option Closing Date.
11.6 Notices. All notices, demands and other communications which
may or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid, or by registered or certified mail,
return-receipt requested, or by facsimile transmission, and shall be deemed to
have been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, when dispatched by facsimile
transmission, five (5) days after deposited in the mail, first class postage
prepaid, addressed as follows:
If to any Seller:
River City Broadcasting, L.P.
1215 Cole Street
St. Louis, Missouri 63106-3897
Attn.: Mr. Barry A. Baker and Mr. Larry D. Marcus
Telecopier: (314) 259-5709
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With a copy to:
Dow, Lohnes & Albertson A Professional Limited Liability
Company 1200 New Hampshire Ave., N.W.
Suite 800
Washington, D.C. 20036-6802
Attn.: Leonard J. Baxt, Esq.
Telecopier: (202) 776-2222
Baker & Botts
800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2916
Attn.: Andrew M. Baker, Esq.
Telecopier: (214) 953-6503
or to such other address as any Seller may from time to time designate.
If to Option Holder:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn.: Mr. David D. Smith
Telecopier: (410) 467-5043
With a copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attn.: Steven A. Thomas, Esq.
Telecopier: (410) 752-2046
or to such other address Option Holder may from time to time designate.
11.7 Captions. The captions of Articles and Sections of this
Agreement are for convenience only, and shall not control or affect the meaning
or construction of any of the provisions of this Agreement.
11.8 Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICT OF
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LAWS, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.9 Consent to Jurisdiction, Etc. EXCEPT AS SET FORTH IN SECTION
9.9 HEREOF, THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF ANY FEDERAL COURT LOCATED IN THE DISTRICT OF MARYLAND
(SOUTHERN DIVISION) OR TO THE EXTENT SUCH COURTS ARE NOT AVAILABLE, ANY COURT IN
THE STATE OF MARYLAND LOCATED IN THE COUNTY OF MONTGOMERY IN CONNECTION WITH ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES
HERETO HEREBY WAIVE PERSONAL SERVICE OF ANY PROCESS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING AND AGREE THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED
OR REGISTERED MAIL ADDRESSED TO OR BY PERSONAL DELIVERY TO THE OTHER PARTY AT
SUCH OTHER PARTY'S ADDRESS SET FORTH PURSUANT TO PARAGRAPH 11.6 HEREOF. IN THE
ALTERNATIVE, IN ITS DISCRETION, ANY OF THE PARTIES HERETO MAY EFFECT SERVICE
UPON ANY OTHER PARTY IN ANY OTHER FORM OR MANNER PERMITTED BY LAW.
11.10 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall in no manner affect the right at a later date to enforce the same. No
waiver by any party of any condition or the breach of any provision, term,
covenant, representation, or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation, or warranty of
this Agreement.
11.11 Counterparts. This Agreement may be executed in two (2) or
more counterparts, and all counterparts so executed shall constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the same counterpart.
11.12 Entire Agreement/Amendments. This Agreement (including the
Exhibits and Schedules to the Group I Option Agreement and the Asset Purchase
Agreement relating to the Station) and to the extent applicable, the
Modification Agreement dated May 10, 1996 between RCB and Option Holder and the
letter dated May 10, 1996 from the parties' counsel to the Department of Justice
in connection therewith, and the documents delivered pursuant to this Agreement
or other written agreements among the parties, dated the date hereof or
hereafter, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede any and all prior and contemporaneous
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agreements, understandings, negotiations, and discussions, whether oral or
written, between them relating to the subject matter hereof. No amendment or
waiver of any provision of this Agreement shall be binding unless executed in
writing by the party to be bound thereby.
11.13 Access to Books and Records. Option Holder shall preserve for
at least three (3) years after the Columbus Option Closing Date all books and
records included in the License Assets and the Columbus Station Assets. At the
request of Sellers, Option Holder agrees to give to the officers, partners,
employees, agents, accountants and counsel of Sellers access, upon reasonable
prior notice during normal business hours, to the property, accounts, books,
contracts, records, accounts payable and receivable, records of employees of
Sellers (as Sellers may have been reorganized) and other information concerning
the affairs of the Station, any of the License Assets or any of the Columbus
Station Assets, except as may be prohibited by law, and to the employees of
Option Holder as Sellers may reasonably request. Sellers shall have no
obligation to retain books and records relating to the License Assets or the
Columbus Station Assets, subsequent to the Columbus Option Closing Date. To the
extent any such books and records are retained, then for a period not to exceed
three (3) years after the Closing Date, at the request of Option Holder, Sellers
agree to give the officers, employees, accountants and counsel of Option Holder
access, upon reasonable prior notice during normal business hours, to the books,
records and files retained by Sellers with respect to the business and operation
of the Station by Sellers as Option Holder may reasonably request in connection
with an audit of the Station. Each of Option Holder and Sellers shall be
permitted at their own expense to make extracts from or copies of the foregoing
books, records and files of the other party.
11.14 Waiver of Final Grant by FCC. Option Holder and Sellers agree
to proceed to effect a Closing with respect to the Station as provided in
Section 2.2(b) hereof, on Initial Grant, as defined below. "Initial Grant" shall
be defined for the purposes of this Agreement as the date of the publication of
the FCC "Public Notice" announcing the grant of the "Assignment Application(s)"
for the FCC licenses for the Station to be transferred hereunder which contains
no conditions materially adverse to Option Holder. The terms "Public Notice" and
"Assignment Application(s)" have the same meaning herein as are generally given
to such terms under existing FCC rules, regulations and procedures.
11.15 Recitals, Headings. The Recitals contained in this Agreement
shall be deemed to be a binding part of this Agreement. The Article and Section
headings contained in this
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Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
11.16 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid or unenforceable, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the greatest
extent possible.
11.17 Public Announcements and Press Releases. Prior to the Columbus
Option Closing Date, neither Sellers nor Option Holder shall, except by mutual
agreement, make any press release or other public announcement (written or oral)
concerning this Agreement or the transactions contemplated by this Agreement,
except as may be required by any law, rule or regulation (including, without
limitation, filings and reports required to be made with or pursuant to the
rules of the SEC) or any by existing contract, license, or agreement to which it
is a party and provided that the party required to make such announcement shall
provide a draft copy thereof to the other parties hereto, and consult with such
other parties concerning the timing and content of such announcement, before
such announcement is made. No press releases or other public announcements
concerning this Agreement or the transactions contemplated hereby shall be made
by any party hereto without the prior written consent of the other parties
unless the first such party is legally compelled to do so.
11.18 Board of Directors and Committees. From and after the Asset
Purchase Agreement Closing Date, Option Holder shall cause (i) each of (1) Barry
Baker ("Baker") and (2) Roy F. Coppedge (or such other individual as may be
designated by Boston Ventures Limited Partnership IV and Boston Ventures Limited
Partnership IVA (collectively, "Boston Ventures")) (the "BV Designee") to
receive notice of all meetings of the Board of Directors of Option Holder and to
be permitted to attend such meetings, (ii) Baker to receive notice of all
meetings of any executive and finance committees, and to be permitted to attend
such meetings, and (iii) the BV Designee to receive notice of all meetings of
any compensation and finance committees, and to be
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permitted to attend such meetings. In addition, if the Board of Directors or any
executive, finance or compensation committee of Option Holder plans to take
actions by written consent in lieu of a meeting, then Option Holder shall cause
Baker (in the case of the Board of Directors and any executive and finance
committees) and the BV Designee (in the case of the Board of Directors and any
finance and compensation committees) to receive a copy of the form of consent
documents relating to such actions at the same time that such documents are
circulated or distributed to the members of the Board of Directors, executive,
finance or compensation committees, as applicable. In addition, as soon as
permissible under the rules of the FCC and applicable laws, Option Holder shall
cause (i) each of Baker and the BV Designee to be appointed as members of the
Board of Directors of Option Holder, (ii) Baker to be appointed as a member of
any executive committee and, to the extent established, the finance committee
and (iii) the BV Designee to be appointed as a member of any finance committee,
to the extent established, and the compensation committee. Option Holder's Board
of Directors (which presently consists of seven (7) directors) has duly adopted
resolutions which have fixed the number of members of (x) directors of Option
Holder at nine (9) directors, (y) the executive committee at six (6) members,
and (z) the compensation committee at six (6) members and such resolutions also
have designated Baker and the BV Designee, as applicable, to fill the
directorships on the Option Holder's Board of Directors and memberships on such
committees pursuant to the terms of this Agreement. To the extent that the
Option Holder or the Board of Directors establishes a finance committee, it
shall designate each of Baker and the BV Designee as members of the finance
committee. Baker shall be entitled to be a director of Option Holder and a
member of the executive committee and, to the extent established, the finance
committee for so long as he remains an employee of Option Holder, and BV shall
be entitled to have the BV Designee be a director of Option Holder and a member
of the compensation committee and, to the extent established, the finance
committee until the first to occur of (i) the later of (a) the fifth anniversary
of the Asset Purchase Agreement Closing Date and (b) the expiration of the
initial five-year term of Barry Baker's Employment Agreement with Option Holder
and (ii) such time, after Option Holder has issued the Convertible Preferred
Stock to RCB or to its Partners, as Boston Ventures no longer owns, of record or
beneficially to the extent of its interest as a limited partner of RCB, at least
721,115 shares of Option Holder Common Stock, on an "as converted" basis, as
such number may be adjusted pursuant to stock splits, stock combinations,
reclassifications or recapitalizations of Option Holder occurring after the date
hereof.
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11.19 List of Definitions. The following is a list of certain terms
used in this Agreement and a reference to the Section hereof in which such term
is defined:
Terms Section
AAA Section 9.9
Affiliate Section 3.5
Agreement Preamble
Applicable Interest Rate Section 9.4(a)(i)
Asset Purchase Agreement Recitals
Asset Purchase Agreement Closing Date Recitals
Asset Purchase Closing Recitals
Assumed Liabilities Section 1.3
Baker Section 11.18
Boston Ventures Section 11.18
BV Designee Section 11.18
Broadcasting Subsidiaries Section 4.5
Closing Section 2.2(b)
Columbus Contract Section 1.1.B(c)
Columbus Leasehold Interest Section 1.1.B(b)
Columbus Option Section 1.1
Columbus Option Closing Date Section 2.2(b)
Columbus Option Closing Price Section 2.1.B(a)
Columbus Other Contracts Section 1.1.B(c)
Columbus Option Payment Date Section 2.1.B(a)
Columbus Programming Copyrights Section 1.1.B(e)
Columbus Real Property Section 1.1.B(b)
Columbus Real Property Improvements Section 1.1.B(b)
Columbus Receivables Section 1.2(k)
Columbus Sale Price Section 11.1.C
Columbus Station Recitals
Columbus Station Assets Section 1.1.B
Columbus Trademarks, Etc. Section 1.1.B(d)
Columbus Unpaid Closing Price Section 2.1.B(b)
Columbus Unpaid Option Section 2.1.B(a)
Communications Act Section 3.5
Contract Section 1.1.A(d)
Conveyed Contracts Section 2.6
Deficiency Amount Section 11.1.C(ii)
Excess Amount Section 11.1.C(i)
Excluded Assets Section 1.2
Excluded Contracts Section 1.2(f)
Exercise Date Section 1.4
Exercise Notice Section 1.4
Exercise Period Section 1.5
FCC Recitals
FCC Authorizations Recitals
Grossed-Up Rate Differential Section 5.10
Group I Option Agreement Recitals
Group I Stations Recitals
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Group I TBA Recitals
Group I Unpaid Options Section 2.1.B(a)
HSR Act Section 5.9
Indemnification Escrow Agent Section 9.4(a)(i)
Indemnification Fund Section 9.4(a)(i)
Indemnification Fund Deposit Section 9.4(a)(i)
Initial Grant Section 11.14
IRS Section 10.1(e)
Laws Section 2.6
Leasehold Interests Section 1.1.A(c)
Leases Section 3.7(a)
Lender Section 2.1.B(a)
Licensee Preamble
License Assets Section 1.1.A
Licensee II Section 5.11
Loss and Expense Section 9.2
Material Adverse Change Section 8.1(a)
New Employment Agreements Section 7.7
NewVenco Other Assets Section 1.1.B(j)
Option Section 1.1
Option Assignment Price Section 11.4(a)(i)
Option Extension Fees Section 2.1.B(b)
Option Grant Section 2.2(a)
Option Grant Date Preamble
Option Grant Price Section 2.1.A
Option Holder Preamble
Option Holder Debt Documents Section 11.1.C(b)(iii)
Option Holder's 401(k) Plan Section 10.1(e)
Option Holder's Lenders Section 11.1(c)
Other Contracts Section 1.1.A(d)
Permitted Encumbrances Section 1.3
Person Section 3.5
Proceedings Section 2.6
Program Contracts Section 1.1.B(k)
RCB Preamble
RCB Credit Agreement Section 2.1.B(a)
RCB's 401(k) Plan Section 10.1(e)
Real Property Section 1.1.A(c)
Real Property Improvements Section 1.1.A(c)
Retained Liabilities Section 1.3
SCI Section 6.7
Sellers Preamble
Standard Formula Section 11.1.C(c)
Station Employees Section 10.1(a)
Station Material Adverse Change Section 3.8
Station Recitals
Tax Percentage Section 5.10
Terminations Section 7.6
Transaction Documents Section 9.8
Unpaid Amounts Section 2.1.B(a)
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Unpaid Options Section 2.1.B(a)
11.20 No Third Party Beneficiaries. No person other than Option
Holder or Sellers shall have any right to enforce any provision of this
Agreement or have any "third party beneficiary" rights hereunder, other than
Option Holder's Lenders with respect to Section 11.4 hereof and Boston Ventures
and Baker with respect to Section 11.18 hereof and except as expressly provided
in a separate agreement dated as of the date of the Asset Purchase Agreement
among Option Holder, Sellers and Option Holder's Lenders.
11.21 Columbus Receivables. To the extent that after the Columbus
Option Closing Date, Option Holder receives amounts in respect of the Columbus
Receivables, Option Holder shall promptly pay to Sellers all amounts collected
by Option Holder in connection with the Columbus Receivables.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
RIVER CITY BROADCASTING, L.P.
By: Better Communications, Inc., its
General Partner
By: /s/ Larry D. Marcus
-----------------------------------
Name: Larry D. Marcus
Title: Vice President
RIVER CITY LICENSE PARTNERSHIP
By: River City Broadcasting, L.P.
By: Better Communications, Inc.,
its General Partner
By: /s/ Larry D. Marcus
-----------------------------------
Name: Larry D. Marcus
Title: Vice President
OPTION HOLDER:
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
----------------------------------
Name: David B. Amy
Title: Chief Financial Officer
