UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER : 0-26076
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
----------------
Maryland 52-1494660
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(Address of principal executive offices)
(410) 467-5005
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, par value $.01 per share Series D
Preferred Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be files by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]
Indicate by check mark if disclosure of delinquent filings pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing sale price of $56 15/16 per share as of March 16, 1998, the
aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $803.4 million.
As of March 13, 1998, there are 14,380,770 shares of Class A Common stock, $.01
par value; 25,166,432 shares of Class B Common Stock, $.01 par value; 976,380
shares of Series B Preferred Stock, $.01 par value, convertible into 3,550,484
shares of Class A Common Stock; and 3,450,000 shares of Series D Preferred
Stock, $.01 par value, convertible into 3,780,822 shares of Class A Common Stock
of the Registrant issued and outstanding.
In addition, 2,000,000 shares of $200 million aggregate liquidation value of 11
5/8% High Yield Trust Offered Preferred Securities of Sinclair Capital, a
subsidiary trust of Sinclair Broadcast Group, Inc., are issued and outstanding.
<PAGE>
PART I
FORWARD-LOOKING STATEMENTS
The matters discussed in this Form 10-K include forward-looking statements.
In addition, when used in this Form 10-K, the words "intends to," "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to a number of risks and
uncertainties. Actual results in the future could differ materially and
adversely from those described in the forward-looking statements as a result of
various important factors, including the impact of changes in national and
regional economies, successful integration of acquired television and radio
stations (including achievement of synergies and cost reductions), pricing
fluctuations in local and national advertising, volatility in programming costs,
the availability of suitable acquisitions on acceptable terms and the other risk
factors set forth in the Company's prospectus filed with the Securities and
Exchange Commission on December 12, 1997, pursuant to rule 424(b)(5). The
Company undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements that may be made to reflect any future
events or circumstances.
ITEM 1. BUSINESS
BUSINESS OF SINCLAIR
The Company is a diversified broadcasting company that currently owns or
programs pursuant to LMAs 35 television stations, and upon consummation of all
pending acquisitions and dispositions, the Company will own or program pursuant
to LMAs 56 television stations. The Company owns or programs pursuant to LMAs 52
radio stations and upon consummation of all pending acquisitions and
dispositions, the Company will own or program pursuant to LMAs 51 radio
stations. The Company also has options to acquire two additional radio stations.
The Company believes that upon completion of all pending acquisitions and
dispositions it will be one of the top 10 radio groups in the United States,
when measured by the total number of radio stations owned or programmed pursuant
to LMAs.
The 35 television stations the Company owns or programs pursuant to LMAs
are located in 24 geographically diverse markets, with 23 of the stations in the
top 51 television DMAs in the United States. Upon consummation of all pending
acquisitions and dispositions, the Company will own or program television
stations in 37 geographically diverse markets (with 30 of such stations in the
top 51 DMAs) and will reach approximately 22.5% of the television households in
the United States. The Company currently owns or programs 11 stations affiliated
with Fox, 10 with WB, four with ABC, two with NBC, two with UPN, and one with
CBS. Five stations operate as independents. Upon consummation of all pending
acquisitions and dispositions and the transfer of affiliations pursuant to
existing agreements, 23 of the Company's owned or programmed television stations
will be Fox affiliates, 11 will be WB affiliates, seven will be UPN affiliates,
five will be ABC affiliates, three will be NBC affiliates, one will be a CBS
affiliate and six will be operated as independents. Upon consummation of all
pending acquisitions and dispositions and transfers of affiliations pursuant to
existing agreements, the Company will own or program more stations affiliated
with Fox than any other broadcaster.
The Company's radio station group is geographically diverse with a variety
of programming formats including country, urban, news/talk/sports, rock and
adult contemporary. Of the 52 stations owned or provided programming services by
the Company, 19 broadcast on the AM band and 33 on the FM band. The Company owns
between three and eight stations in all but one of the 12 radio markets it
serves.
The Company has undergone rapid and significant growth over the course of
the last seven years. Since 1991, the Company has increased the number of
stations it owns or provides programming services to from three television
stations to 35 television stations and 52 radio stations. From 1991 to 1997, net
broadcast revenues and Adjusted EBITDA (as defined herein) increased from $39.7
million to $471.2 million, and from $15.5 million to $229.0 million,
respectively. Pro forma for pending acquisitions and dispositions described
below (except the Montecito Acquisition, the Lakeland Acquisition, and the
execution of an LMA with respect to WSYX-TV), net broadcast revenue and Adjusted
EBITDA would have been $715.1 million and $345.7 million, respectively.
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The Company is a Maryland corporation formed in 1986. The Company's
principal offices are located at 2000 West 41st Street, Baltimore, Maryland
21211, and its telephone number is (410) 467-5005.
TELEVISION BROADCASTING
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET (C) RANK(D) FCC LICENSE
- ------------------------------ --------- ---------- ------------- --------- ------------- ---------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Minneapolis/St. Paul,
Minnesota ................... 14 KLGT Pending 23 WB 6 6 4/1/98 (f)
Pittsburgh, Pennsylvania ..... 19 WPGH O&O 53 FOX 6 4 8/1/99
WCWB LMA 22 WB 5 8/1/99
Sacramento, California ....... 20 KOVR O&O 13 CBS 7 3 12/1/98
St. Louis, Missouri .......... 21 KDNL O&O 30 ABC 6 5 2/1/06
Baltimore, Maryland .......... 23 WBFF O&O 45 FOX 5 4 10/1/04
WNUV LMA 54 WB 5 10/1/04
Indianapolis, Indiana ........ 25 WTTV LMA (e) 4 IND (h)(u) 8 5 8/1/05
WTTK LMA (e)(g) 29 IND (h) 5 8/1/05
Raleigh/Durham,
North Carolina .............. 29 WLFL O&O 22 FOX 7 4 12/1/04
WRDC LMA 28 UPN 5 12/1/04
Cincinnati, Ohio ............. 30 WSTR O&O 64 WB 5 5 10/1/05
Milwaukee, Wisconsin ......... 31 WCGV O&O 24 IND 6 5 12/1/97 (f)
WVTV LMA 18 WB 6 12/1/05
Kansas City, Missouri ........ 32 KSMO O&O 62 IND (h)(v) 8 5 2/1/06
Nashville, Tennessee ......... 33 WZTV Pending (q) 17 FOX 6 4 8/1/05
WUXP Pending (r) 30 UPN 5 8/1/05
Columbus, Ohio ............... 34 WTTE O&O 28 FOX 5 4 10/1/05
Asheville, North Carolina
and Greenville/
Spartanburg/ Anderson,
South Carolina .............. 35 WFBC LMA 40 IND (h) 6 5 12/1/04
WLOS O&O 13 ABC 6 3 12/1/04
San Antonio, Texas ........... 38 KABB O&O 29 FOX 7 4 8/1/98
KRRT LMA 35 WB 6 8/1/98
Norfolk, Virginia ............ 39 WTVZ O&O 33 FOX 6 4 10/1/04
Buffalo, New York ............ 40 WUTV Pending (q) 29 FOX 5 4 6/1/99
Oklahoma City, Oklahoma 44 KOCB O&O 34 WB 5 5 6/1/98 (f)
KOKH Pending (r) 25 FOX 4 6/1/98 (f)
Greensboro/Winston-
Salem/High Point,
North Carolina .............. 46 WXLV Pending (q) 45 ABC 7 4 12/1/04
WUPN Pending (r) 48 UPN 5 12/1/04
Birmingham, Alabama .......... 51 WTTO O&O (m) 21 WB 6 5 4/1/05
WABM LMA 68 IND (h) 6 4/1/05
Dayton, Ohio ................. 53 WKEF Pending (n) 22 NBC 4 3 10/1/05
WRGT Pending (r) 45 FOX 4 10/1/05
Charleston/Huntington,
West Virginia ............... 57 WCHS O&O 8 ABC 4 3 10/1/04
WVAH Pending (r) 11 FOX 4 10/1/04
Richmond, Virginia ........... 59 WRLH Pending (q) 35 FOX 5 4 10/1/04
Las Vegas, Nevada ............ 61 KUPN O&O 21 WB 8 5 10/1/98
KFBT Pending (s) 8 10/1/98
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET (C) RANK(D) FCC LICENSE
- ------------------------------- --------- ---------- -------------- --------- ------------- ---------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mobile, Alabama and
Pensacola, Florida ........... 62 WEAR O&O 3 ABC 6 2 2/01/05
WFGX LMA 35 WB 6 2/01/05
Flint/Saginaw/Bay City,
Michigan ..................... 63 WSMH O&O 66 FOX 4 4 10/1/05
Lexington, Kentucky ........... 67 WDKY O&O 56 FOX 5 4 8/1/05
Des Moines, Iowa .............. 69 KDSM O&O 17 FOX 4 4 2/1/06
Syracuse, New York ............ 72 WSYT Pending (n) 68 FOX 5 4 6/1/99
WNYS Pending (o) 43 UPN 5 6/1/99
Rochester, New York ........... 75 WUHF Pending (q) 31 FOX 4 4 6/1/99
Paducah, Kentucky and Cape
Girardeau, Missouri .......... 79 KBSI Pending (n) 23 FOX 5 4 2/1/06
WDKA Pending (o) 49 UPN 5 (t)
Madison, Wisconsin ............ 84 WMSN Pending (q) 47 FOX 4 4 12/1/05
Burlington, Vermont and
Plattsburgh, New York ........ 91 WPTZ O&O (i) 5 NBC 5 2 6/1/99
WNNE O&O (i)(k) 31 NBC 4 4/1/99
WFFF LMA (j) 44 FOX (l) (l)
Tri-Cities, Tennessee/
Virginia ..................... 93 WEMT Pending (n) 39 FOX 5 4 8/1/05
Tyler/Longview, Texas ......... 107 KETK Pending (n) 56 NBC 3 2 8/1/98
KLSB Pending (o) 19 NBC (p) 8/1/98
Peoria/Bloomington,
Illinois ..................... 110 WYZZ O&O 43 FOX 4 4 12/1/05
Charleston, South Carolina..... 117 WMMP Pending (n) 36 UPN 5 5 12/1/04
WTAT Pending (r) 24 FOX 4 12/1/04
Utica, New York ............... 169 WFXV Pending (q) 33 FOX 4 3 6/1/99
WPNY Pending (q) 11 UPN 4 6/1/98 (f)
Tuscaloosa, Alabama ........... 187 WDBB LMA (m) 17 WB 2 2 4/1/05
</TABLE>
- ----------
(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire. See
"-- 1997 Acquisitions."
(c) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet the minimum Nielsen reporting standards (weekly cumulative
audience of at least 2.5%) for the Sunday-Saturday, 6:00 a.m. to 2:00 a.m.
time period.
(d) The rank of each station in its market is based upon the November 1997
Nielsen estimates of the percentage of persons tuned to each station in the
market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.
(e) Non-License Assets acquired from River City Broadcasting, L.P. ("River
City") and option exercised to acquire License Assets. Will become owned
and operated upon FCC approval of transfer of License Assets and closing of
acquisition of License Assets.
(f) License renewal application pending.
(g) WTTK currently simulcasts all of the programming aired on WTTV and the
station rank applies to the combined viewership of these stations.
(h) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, WB or UPN.
(i) The Company has agreed to sell this station to a third party.
(j) The Company has agreed to assign its right to program this station to the
third party to whom the Company has agreed to sell WPTZ and WNNE.
(k) WNNE currently simulcasts the programming broadcast on WPTZ.
(l) This station began broadcast operations in August 1997 pursuant to program
test authority and does not yet have a license. This station has not yet
established a rank.
(m) WDBB simulcasts the programming broadcast on WTTO.
(n) This station will be owned upon the completion of the Max Media
Acquisition.
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(o) The Company will provide programming services to this station upon the
completion of the Max Media Acquisition.
(p) KLSB simulcasts the programming broadcast of KETK.
(q) This station will be owned upon the completion of the Sullivan Acquisition.
(r) The Company anticipates that it will provide programming services to this
station upon the completion of the Sullivan Acquisition.
(s) The Company has entered into an agreement to provide programming to this
station effective upon termination of the HSR Act waiting period. The
Company has also entered into an agreement to acquire this station's
licensee.
(t) This station has begun broadcast operations pursuant to program test
authority and does not yet have a license.
(u) WTTV will become an affiliate of WB effective April 6, 1998.
(v) KSMO will become an affiliate of WB effective March 30, 1998.
Operating Strategy
The Company's television operating strategy includes the following key
elements:
Attracting Viewership
- ---------------------
The Company seeks to attract viewership and expand its audience share
through selective, high-quality programming.
Popular Programming. The Company believes that an important factor in
attracting viewership to its stations is their network affiliations with Fox,
WB, ABC, NBC, CBS and UPN. These affiliations enable the Company to attract
viewers by virtue of the quality first-run original programming provided by
these networks and the networks' promotion of such programming. The Company also
seeks to obtain, at attractive prices, popular syndicated programming that is
complementary to the station's network affiliation. Examples of popular
syndicated programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and independent stations are "Mad About You," "Frasier," "The
Simpsons," "Home Improvement" and "Seinfeld." In addition to network
programming, the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show programming such as "Hard Copy," "Entertainment Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."
Children's Programming. The Company seeks to be a leader in children's
programming in each of its respective DMAs. The Company's nationally recognized
"Kids Club" was the forerunner and model for the Fox network-wide marketing
efforts promoting children's programming. Sinclair carries the Fox Children's
Network ("FCN") and WB and UPN children's programming, all of which include
significant amounts of animated programming throughout the week. In those
markets where the Company owns or programs ABC, NBC or CBS affiliates, the
Company broadcasts those networks' animated programming during weekends. In
addition to this animated programming, the Company broadcasts other forms of
children's programming, which may be produced by the Company or by an affiliated
network or supplied by a syndicated programmer.
Counter-Programming. The Company's programming strategy on its Fox, WB, UPN
and independent stations also includes "counter-programming," which consists of
broadcasting programs that are alternatives to the types of programs being shown
concurrently on competing stations. This strategy is designed to attract
additional audience share in demographic groups not served by concurrent
programming on competing stations. The Company believes that implementation of
this strategy enables its stations to achieve competitive rankings in households
in the 18-34, 18-49 and 25-54 demographics and to offer greater diversity of
programming in each of its DMAs.
Local News. The Company believes that the production and broadcasting of
local news can be an important link to the community and an aid to the station's
efforts to expand its viewership. In addition, local news programming can
provide access to advertising sources targeted specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in introducing, developing and producing local news programming. The Company
currently provides local news programming at WBFF and WNUV in Baltimore, WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville and Greenville/Spartanburg/Anderson. The
Company also
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broadcasts news programs on WDKY in Lexington, which are produced in part by the
Company and in part through the purchase of production services from an
independent third party, and on WTTV in Indianapolis, which are produced by a
third party in exchange for a limited number of advertising spots. River City
provides the Company certain services with respect to the production of news
programming and on air talent on WTTE in Columbus. Pursuant to an agreement,
River City provides these services to the Company in return for a fee equal to
approximately $416,000 per year. The possible introduction of local news at the
other Company stations is reviewed periodically. The Company's policy is to
institute local news programming at a specific station only if the expected
benefits of local news programming at the station are believed to exceed the
associated costs after an appropriate start-up period.
Popular Sporting Events. The Company attempts to capture a portion of
advertising dollars designated to sports programming in selected DMAs. The
Company's WB, UPN and independent stations generally face fewer restrictions on
broadcasting live local sporting events than do their competitors that are
affiliates of the major networks and Fox since affiliates of the major networks
and Fox are subject to prohibitions against preemptions of network programming.
The Company has been able to acquire the local television broadcast rights for
certain sporting events, including NBA basketball, Major League Baseball, NFL
football, NHL hockey, ACC basketball, Big Ten football and basketball, and SEC
football. The Company seeks to expand its sports broadcasting in DMAs as
profitable opportunities arise. In addition, the Company's stations that are
affiliated with Fox, NBC, ABC and CBS broadcast certain Major League Baseball
games, NFL football games and NHL hockey games as well as the Olympics and other
popular sporting events.
Innovative Local Sales and Marketing
- ------------------------------------
The Company believes that it is able to attract new advertisers to its
stations and increase its share of existing customers' advertising budgets by
creating a sense of partnership with those advertisers. The Company develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to advertisers. These campaigns often involve the sponsorship by
advertisers of local promotional events that capitalize on the station's local
identity and programming franchises. For example, several of the Company's
stations stage local "Kids Fairs" which allow station advertisers to reinforce
their on-air advertising with their target audience. Through its strong local
sales and marketing focus, the Company seeks to capture an increasing share of
its revenues from local sources, which are generally more stable than national
advertising.
Control of Operating and Programming Costs
- ------------------------------------------
By employing a disciplined approach to managing programming acquisition and
other costs, the Company has been able to achieve operating margins that the
Company believes are among the highest in the television broadcast industry. The
Company has sought and will continue to seek to acquire quality programming for
prices at or below prices paid in the past. As an owner or provider of
programming services to a substantial number of television stations throughout
the country, the Company believes that it is able to negotiate favorable terms
for the acquisition of programming. Moreover, the Company emphasizes control of
each of its stations' programming and operating costs through program-specific
profit analysis, detailed budgeting, tight control over staffing levels and
detailed long-term planning models.
Attract and Retain High Quality Management
- ------------------------------------------
The Company believes that much of its success is due to its ability to
attract and retain highly skilled and motivated managers, both at the corporate
and local station levels. A portion of the compensation provided to regional
managers, general managers, sales managers and other station managers is based
on their achieving certain operating results. The Company also provides its
corporate and station managers with deferred compensation plans offering options
to acquire Class A Common Stock.
Community Involvement
- ---------------------
Each of the Company's stations actively participates in various community
activities and offers many community services. The Company's activities include
broadcasting programming of local interest and sponsorship of community and
charitable events. The Company also encourages its station employ-
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ees to become active members of their communities and to promote involvement in
community and charitable affairs. The Company believes that active community
involvement by its stations provides its stations with increased exposure in
their respective DMAs and ultimately increases viewership and advertising
support.
Establish LMAs
- --------------
The Company believes that it can attain significant growth in operating
cash flow through the utilization of LMAs. By expanding its presence in a market
in which it owns a station, the Company can improve its competitive position
with respect to a demographic sector. In addition, by providing programming
services to an additional station in a market, the Company is able to realize
significant economies of scale in marketing, programming, overhead and capital
expenditures. After giving effect to all pending acquisitions and dispositions,
the Company will provide programming services pursuant to an LMA to an
additional station in 18 of the 37 television markets in which the Company will
own or program a station.
Programming and Affiliations
The Company continually reviews its existing programming inventory and
seeks to purchase the most profitable and cost-effective syndicated programs
available for each time period. In developing its selection of syndicated
programming, the Company balances the cost of available syndicated programs with
their potential to increase advertising revenue and the risk of their reduced
popularity during the term of the program contract. The Company seeks to
purchase only those programs with contractual periods that permit programming
flexibility and which complement a station's overall programming strategy.
Programs that can perform successfully in more than one time period are more
attractive due to the long lead time and multi-year commitments inherent in
program purchasing.
Of the 35 stations owned or provided programming services by the Company,
11 stations are Fox affiliates, 10 stations are WB affiliates, four stations are
ABC affiliates, two stations are NBC affiliates, two stations are UPN
affiliates, and one station is a CBS affiliate. The networks produce and
distribute programming in exchange for each station's commitment to air the
programming at specified times and for commercial announcement time during the
programming. In addition, networks other than Fox and UPN pay each affiliated
station a fee for each network-sponsored program broadcast by the stations.
On August 21, 1996, the Company entered into an agreement with Fox (the
"Fox Agreement") which, among other things, provides that the affiliation
agreements between Fox and eight stations owned or provided programming services
by the Company (except as noted below) would be amended to have new five-year
terms commencing on the date of the Fox Agreement. Fox has the option to extend
the affiliation agreements for additional five-year terms and must extend all of
the affiliation agreements if it extends any (except that Fox may selectively
renew affiliation agreements if any station has breached its affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to purchase, for fair market value, any station Fox acquires in a market
currently served by a Company-owned Fox affiliate (other than the Norfolk,
Virginia and Raleigh/Durham, North Carolina markets) if Fox determines to
terminate the affiliation agreement with the Company's station in that market
and operate the station acquired by Fox as a Fox affiliate. The Fox Agreement
confirmed that the affiliation agreements for WTVZ-TV (Norfolk) and WLFL-TV
(Raleigh/Durham) will terminate on August 31, 1998. The Fox Agreement also
includes provisions limiting the ability of the Company to preempt Fox
programming except where it has existing programming conflicts or where the
Company preempts to serve a public purpose.
On July 4, 1997, the Company entered into the WB Agreement, pursuant to
which the Company agreed that certain stations affiliated with UPN would
terminate their affiliations with UPN at the end of the current affiliation term
in January 1998, and would enter into affiliation agreements with WB effective
as of that date. With respect to the following stations, the Company did not
renew their affiliation agreements with UPN when their agreements expired on
January 15, 1998: WCWB-TV, Pittsburgh, Pennsylvania, WNUV-TV, Baltimore,
Maryland, WSTR-TV, Cincinnati, Ohio, KRRT-TV, San Antonio, Texas, KOCB-TV,
Oklahoma City, Oklahoma, KSMO-TV, Kansas City, Missouri, KUPN-TV, Las
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Vegas, Nevada, WCGV-TV, Milwaukee, Wisconsin, and WABM-TV, Birmingham, Alabama.
Additionally, the Company cancelled its UPN affiliation agreement with
WTTV-TV/WTTK-TV, Indianapolis, Indiana. These stations (other than WCGV-TV, and
WABM-TV, which will either operate as independents or enter into new affiliation
agreements with WB or another network) entered into ten-year affiliation
agreements with WB which became effective on January 16, 1998 (other than
WTTV-TV/ WTTK-TV, with respect to which the affiliation agreement is expected to
begin April 6, 1998 and KSMO-TV, with respect to which the affiliation agreement
is expected to begin March 30, 1998). Pursuant to the WB Agreement, the WB
affiliation agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV,
Birmingham, Alabama (whose programming is simulcast on WDBB-TV, Tuscaloosa,
Alabama), have been extended to January 16, 2008. In addition, WFBC-TV in the
Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina
market will become affiliated with WB on November 1, 1999 when WB's current
affiliation with another station in that market expires. WTVZ-TV, Norfolk,
Virginia and WLFL-TV, Raleigh/Durham North Carolina, will become affiliated with
WB when their affiliations with Fox expire. These Fox affiliations are scheduled
to expire on August 31, 1998.
Under the terms of the WB Agreement, WB has agreed to pay the Company $64
million in aggregate amount in monthly installments during the first eight years
commencing on January 16, 1998 in consideration for the Company's entering into
affiliation agreements with WB. In addition, WB will be obligated to pay an
additional $10 million aggregate amount in monthly installments in each of the
following two years provided that WB is in the business of supplying programming
as a television network during each of those years.
The affiliation agreements relating to stations that have been acquired by
the Company are terminable by the network upon transfer to the Company of the
License Assets of the station. The Company does not seek consents of the
affected network to the transfer of License Assets in connection with its
acquisitions. As of the date of this Form 10-K, no network has terminated an
affiliation agreement following transfer of License Assets to the Company.
RADIO BROADCASTING
The following table sets forth certain information regarding the radio
stations (i) owned and/or operated by the Company or (ii) which the Company has
an option or has agreed to acquire:
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC
SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE
- ----------------------------- ------------- --------------------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Los Angeles, California ..... 1
KBLA-AM(e) Korean N/A N/A 12/1/05
St. Louis, Missouri ......... 18
KPNT-FM Alternative Rock Adults 18-34 2 2/1/05
WVRV-FM Modern Adult Contemporary Adults 18-34 7 12/1/04
WRTH-AM Adult Standards Adults 25-54 23 2/1/05
WIL-FM Country Adults 25-54 1 2/1/05
KIHT-FM 70s Rock Adults 25-54 9 2/1/05
Portland, Oregon ............ 22
KKSN-AM (h) Adult Standards Adults 25-54 22 2/1/06
KKSN-FM (h)(u) 60s Oldies Adults 25-54 1 2/1/06
KKRH-FM (h)(u) 70s Rock Adults 25-54 9 2/1/06
Kansas City, Missouri ....... 29
KCAZ-AM (e)(t) Childrens N/A N/A 6/1/05
KCFX-FM 70s Rock Adults 25-54 2 2/1/05
KQRC-FM Active Rock Adults 18-34 2 6/1/05
KCIY-FM Smooth Jazz Adults 25-54 9 2/1/05
KXTR-FM Classical Adults 25-54 13 2/1/05
Milwaukee, Wisconsin ........ 32
WEMP-AM 60s Oldies Adults 25-54 24 12/1/04
WMYX-FM Adult Contemporary Adults 25-54 6 12/1/04
WAMG-FM Rhythmic Adults 25-54 11 12/1/04
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC
SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE
- ------------------------------- ------------- -------------------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Nashville, Tennessee .......... 34
WLAC-FM (h) Adult Contemporary Women 25-54 8 8/1/04
WJZC-FM (h) Smooth Jazz Women 25-54 8 8/1/04
WLAC-AM (h) News/Talk/Sports Adults 35-64 8 8/1/04
New Orleans, Louisiana(r) ..... 38
WLMG-FM Adult Contemporary Women 25-54 3 6/1/04
KMEZ-FM Urban Oldies Women 25-54 12 6/1/04
WWL-AM News/Talk/Sports Adults 35-64 2 6/1/04
WSMB-AM Talk/Sports Adults 35-64 17 6/1/04
WBYU-AM (g) Adult Standards Adults 25-54 16 6/1/04
WEZB-FM (g)(i) Adult Contemporary Adults 25-54 9 6/1/04
WRNO-FM (g) 70s Rock Adults 25-54 7 6/1/04
WLTS-FM(p) Adult Contemporary Women 25-54 5 6/1/04
WTKL-FM(p) Oldies Adults 25-54 5 6/1/04
Memphis, Tennessee ............ 40
WRVR-FM Soft Adult Contemporary Women 25-54 1 8/1/04
WJCE-AM Urban Oldies Women 25-54 19 8/1/04
WOGY-FM Country Adults 25-54 9 8/1/04
Norfolk, Virginia(r) .......... 41
WGH-AM Sports Talk Country Adults 25-54 18 10/1/03
WGH-FM Country Adults 25-54 3 10/1/03
WVCL-FM (j) 60s Oldies Adults 25-54 9 10/1/03
WFOG-FM (o) Soft Adult Contemporary Women 25-54 4 10/1/03
WPTE-FM (o) Adult Contemporary Adults 18-34 3 10/1/03
WWDE-FM (o) Adult Contemporary Women 25-54 4 10/1/03
WNVZ-FM (o) Contemporary Hit Radio Women 18-49 2 10/1/03
Buffalo, New York ............. 42
WMJQ-FM Adult Contemporary Women 25-54 3 6/1/98
WKSE-FM Contemporary Hit Radio Women 18-49 2 6/1/98
WBEN-AM News/Talk/Sports Adults 35-64 3 6/1/98
WWKB-AM Country Adults 35-64 18 6/1/98
WGR-AM Sports Adults 25-54 10 6/1/98
WWWS-AM Urban Oldies Adults 25-54 14 6/1/98
Greensboro/Winston
Salem/High Point,
North Carolina ............. 52
WMQX-FM (o) Oldies Adults 25-54 5 12/1/03
WQMG-FM (o) Urban Adult Contemporary Adults 25-54 4 12/1/03
WJMH-FM (o) Urban Adults 18-34 1 12/1/03
WQMG-AM (o) Gospel Adults 35-64 9 12/1/03
Rochester, New York ........... 53
WBBF-AM (h) Adult Standards Adults 25-54 13 6/1/98
WBEE-FM (h) Country Adults 25-54 1 6/1/98
WKLX-FM (h) 60s Oldies Adults 25-54 6 6/1/98
WQRV-FM (h) Classic Hits Adults 25-54 12 6/1/98
Asheville, North Carolina
Greenville/Spartanburg,
South Carolina .............. 60
WFBC-FM(k) Contemporary Hit Radio Women 18-49 2 12/1/03
WORD-AM (k) News/Talk Adults 35-64 8 12/1/03
WYRD-AM (k) News/Talk Adults 35-64 14 12/1/03
WSPA-AM (k) Full Service/Talk Adults 35-64 21 12/1/03
WSPA-FM (k) Soft Adult Contemporary Women 25-54 1 12/1/03
WOLI-FM (k) Oldies Adults 25-54 12 12/1/03
WOLT-FM (k) Oldies Adults 25-54 16 12/1/03
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC
SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE
- ------------------------ ------------- ------------------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Wilkes-Barre/Scranton,
Pennsylvania .......... 68
WKRZ-FM (l) Contemporary Hit Radio Adults 18-49 1 8/1/98
WGGY-FM Country Adults 25-54 3 8/1/98
WGGI-FM(q) Country Adults 25-54 21 8/1/98
WILK-AM (m) News/Talk/Sports Adults 35-64 5 8/1/98
WGBI-AM (m) News/Talk/Sports Adults 35-64 35 8/1/98
WWSH-FM (n) Soft Hits Women 25-54 23 8/1/98
WILP-AM (m) News/Talk/Sports Adults 35-64 40 8/1/98
WWFH-FM (n) Soft Hits Women 25-54 12 8/1/98
WKRF-FM (l) Contemporary Hit Radio Adults 18-49 30 8/1/98
WILT-AM(m)(s) News/Talk/Sports Adults 35-64 40 8/1/98
</TABLE>
- ----------
(a) Actual city of license may differ from the geographic market served.
(b) Ranking of the principal radio market served by the station among all U.S.
radio markets by 1996 aggregate gross radio broadcast revenue according to
Duncan's Radio Market Guide -- 1997 Edition.
(c) Due to variations that may exist within programming formats, the primary
demographic target of stations with the same programming format may be
different.
(d) All information concerning ratings and audience listening information is
derived from the Fall 1997 Arbitron Metro Area Ratings Survey (the "Fall
1997 Arbitron"). Arbitron is the generally accepted industry source for
statistical information concerning audience ratings. Due to the nature of
listener surveys, other radio ratings services may report different
rankings; however, the Company does not believe that any radio ratings
service other than Arbitron is accorded significant weight in the radio
broadcast industry. "Station Rank in Primary Demographic Target" is the
ranking of the station among all radio stations in its market that are
ranked in its target demographic group and is based on the station's
average persons share in the primary demographic target in the applicable
Metro Survey Area. Source: Average Quarter Hour Estimates, Monday through
Sunday, 6:00 a.m. to midnight, Fall 1997 Arbitron.
(e) Programming is provided to this station by a third party pursuant to an
LMA.
(f) License renewal application pending.
(g) The Company has the right to acquire the assets of this station in the
Heritage Acquisition, subject to FCC approval, and has an agreement to sell
such assets to a third party.
(h) The Company has agreed to sell this station to a third party, which
currently programs the station pursuant to an LMA.
(i) An application for review of the grant of this station's license renewal is
pending.
(j) EEO reporting conditions for 1997, 1998 and 1999 were placed on this
station's most recent license renewal.
(k) The Company has exercised its option to acquire Keymarket of South
Carolina, Inc. ("Keymarket" or "KSC"), which owns and operates WYRD-AM,
WORD-AM and WFBC-FM, and provides sales services pursuant to a JSA or LMA
and has an option to acquire WOLI-FM and WOLT-FM. The Company has also
agreed to acquire WSPA-AM and WSPA-FM, which KSC programs pursuant to an
LMA. FCC approval of the Company's acquisition of WYRD-AM, WORD-AM,
WFBC-FM, WSPA-AM, and WSPA-FM is pending.
(l) WKRZ-FM and WKRF-FM simulcast their programming.
(m) WILK-AM, WGBI-AM, WILP-AM and WILT-AM simulcast their programming.
(n) WWSH-FM and WWFH-FM simulcast their programming.
(o) The Company has the right to acquire this radio station in conjunction with
the Max Media Acquisition.
(p) The Company provides sales and programming services to this station
pursuant to an LMA and has an option to acquire substantially all the
assets of this station.
(q) The Company provides sales and programming services to this radio station
pursuant to an LMA and has received FCC approval to acquire substantially
all the assets of this station.
(r) The Company intends to sell two FM stations and one AM station in the New
Orleans market and two FM stations in the Norfolk market in order to comply
with current FCC or DOJ guidelines.
(s) The Company provides sales and programming services to this station
pursuant to an LMA.
9
<PAGE>
(t) A third party has exercised their option to purchase this station, the
closing of which is subject to FCC approval.
(u) A petition to deny the transfer of the licenses of these stations was filed
with the FCC objecting to the acquisition of such licenses by the proposed
assignee.
Radio Operating Strategy
The Company's radio strategy is to operate a cluster of radio stations in
selected geographic markets throughout the country. In each geographic market,
the Company employs broadly diversified programming formats to appeal to a
variety of demographic groups within the market. The Company seeks to strengthen
the identity of each of its stations through its programming and promotional
efforts, and emphasizes that identity to a far greater degree than the identity
of any local radio personality.
The Company believes that its strategy of appealing to diverse demographic
groups in selected geographic markets allows it to reach a larger share of the
overall advertising market while realizing economies of scale and avoiding
dependence on one demographic or geographic market. The Company realizes
economies of scale by combining sales and marketing forces, back office
operations and general management in each geographic market. At the same time,
the geographic diversity of its portfolio of radio stations helps lessen the
potential impact of economic downturns in specific markets and the diversity of
target audiences served helps lessen the impact of changes in listening
preferences. In addition, the geographic and demographic diversity allows the
Company to avoid dependence on any one or any small group of advertisers.
The Company's group of radio stations includes the top billing station
group in four markets and one of the top three billing station groups in each of
its markets other than Los Angeles, Milwaukee, Portland, Rochester and
Nashville. Through ownership or LMAs, the group also includes duopolies in 12 of
its 13 markets.
Depending on the programming format of a particular station, there are a
predetermined number of advertisements broadcast each hour. The Company
determines the optimum number of advertisements available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements available
for sale during a particular time of day, the total number of advertisements
available for sale on a particular station normally does not vary significantly.
Any change in net radio broadcasting revenue, with the exception of those
instances where stations are acquired or sold, is generally the result of
pricing adjustments made to ensure that the station effectively uses advertising
time available for sale, an increase in the number of commercials sold or a
combination of these two factors.
Large, well-trained local sales forces are maintained by the Company in
each of its radio markets. The Company's principal goal is to utilize its sales
efforts to develop long-standing customer relationships through frequent direct
contacts, which the Company believes provide it with a competitive advantage.
Additionally, in some radio markets, duopolies permit the Company to offer
creative advertising packages to local, regional and national advertisers. Each
radio station owned by the Company also engages a national independent sales
representative to assist it in obtaining national advertising revenues. These
representatives obtain advertising through national advertising agencies and
receive a commission from the radio station based on its gross revenue from the
advertising obtained.
BROADCASTING ACQUISITION STRATEGY
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act")
was signed into law. The 1996 Act represents the most sweeping overhaul of the
country's telecommunications laws since the Communications Act of 1934, as
amended (the "Communications Act"). The 1996 Act relaxes the broadcast ownership
rules and simplifies the process for renewal of broadcast station licenses.
The Company believes that the enactment of the 1996 Act has presented a
unique opportunity to build a larger and more diversified broadcasting company.
Additionally, the Company expects that the opportunity to act as one of the
consolidators of the industry will enable the Company to gain additional
influence with program suppliers, television networks, other vendors, and
alternative delivery media.
10
<PAGE>
The additions to the Company's management team as a result of the River City
Acquisition have given it additional resources to take advantage of these
developments.
In implementing its acquisition strategy, the Company seeks to identify and
pursue favorable station or group acquisition opportunities primarily in the
15th to 75th largest DMAs and Metro Service Areas ("MSAs"). In assessing
potential acquisitions, the Company examines opportunities to improve revenue
share, audience share and/or cost control. Additional factors considered by the
Company in a potential acquisition include geographic location, demographic
characteristics and competitive dynamics of the market. The Company also
considers the opportunity for cross-ownership of television and radio stations
and the opportunity it may provide for cross-promotion and cross-selling.
In conjunction with its acquisitions, the Company may determine that
certain of the acquired stations may not be consistent with the Company's
strategic plan. In such an event, the Company reviews opportunities for swapping
such stations with third parties for other stations or selling such stations
outright. The Heritage, Max Media, and Sullivan Acquisitions may provide such
opportunities.
Certain terms of the Company's acquisitions in 1998 and 1997, and other
pending acquisitions, are described below.
1998 ACQUISITIONS
Sullivan Acquisition. In February 1998, the Company entered into merger
agreements by which the Company agreed to acquire all of the issued and
outstanding capital stock of Sullivan Broadcast Holdings, Inc. ("Sullivan
Holdings") and Sullivan Broadcasting Company II, Inc. ("Sullivan II" and,
together with Sullivan Holdings, "Sullivan") for an aggregate purchase price
expected to be approximately $950 million to $1 billion, less the amount of
outstanding indebtedness of Sullivan Holdings assumed by the Company (the
"Sullivan Acquisition"). The Sullivan Acquisition will be accomplished by two
separate merger closings.
At the initial closing, the Company will acquire all of the issued and
outstanding capital stock of Sullivan Holdings, after which the Company will
indirectly own all of the operating assets (excluding the License Assets) of,
and pursuant to LMAs will provide programming services to, 13 additional
television stations (the "Sullivan Stations") in the following markets:
Nashville, Tennessee; Buffalo, New York; Oklahoma City, Oklahoma;
Greensboro/Winston-Salem/High Point, North Carolina; Dayton, Ohio;
Charleston/Huntington, West Virginia; Richmond, Virginia; Las Vegas, Nevada;
Rochester, New York; Madison, Wisconsin; and Utica, New York.
The purchase price to be paid at the initial closing will be based on a
multiple of Sullivan's projected 1998 cash flow calculated as of the time of the
initial closing. As part of the total consideration to be paid at the initial
closing, the Company, at its option, may issue to the Sullivan shareholders up
to $100 million of the Company's Class A Common Stock based on an average
closing price of the Class A Common Stock. The initial closing is subject to
termination of the applicable waiting period under the HSR Act and is expected
to occur during the second quarter of 1998.
At the second closing, the Company will acquire all of the issued and
outstanding capital stock of Sullivan II. The second closing is subject to,
among other things, FCC approval and is expected to close during the third
quarter of 1998. FCC regulations require the Company to obtain waivers from the
FCC of multiple ownership rules prior to the second closing. Although the
Company is confident that it will receive FCC consents for the merger with
Sullivan II, there can be no assurance that such consents will be obtained.
After the second closing, the Company will indirectly own the License Assets of
six of the 13 Sullivan Stations, and will continue to program the remaining
seven Sullivan Stations pursuant to seven LMAs, five with Sullivan Broadcast
Company III, Inc. ("Sullivan III"), which at the time of the second closing will
hold the License Assets for such stations, and two with the existing owners of
the License Assets of such stations.
In connection with the Sullivan Acquisition, Glencairn, Ltd. ("Glencairn")
has entered into a plan of merger with Sullivan III which, if completed, would
result in Glencairn's ownership of all the issued and outstanding capital stock
of Sullivan III. After the merger, the Company intends to enter into an
11
<PAGE>
LMA with Glencairn and continue to provide programming services to the five
stations the License Assets of which are acquired by Glencairn in the merger.
Montecito Acquisition. In February 1998, the Company entered into an
agreement to acquire all of the capital stock of Montecito for approximately $33
million. Montecito owns all of the issued and outstanding stock of Channel 33,
Inc., which owns and operates KFBT-TV in Las Vegas, Nevada. Sinclair cannot
acquire Montecito unless and until FCC rules permit Sinclair to own the
broadcast license for more than one station in the Las Vegas market, or unless
Sinclair no longer owns the broadcast license for KUPN-TV in Las Vegas. The
Company will operate KFBT-TV through an LMA, upon expiration of the applicable
HSR Act waiting period. The Company expects to be able to enter into the LMA in
the second quarter of 1998.
Columbus Purchase Option. In connection with the Company's 1996 acquisition
of the radio and television broadcasting assets of River City Broadcasting, L.P.
("River City"), the Company acquired a three-year option to purchase the assets
of WSYX-TV in Columbus, Ohio (the "Columbus Option"). The exercise price for the
Columbus Option is approximately $100 million plus an amount of indebtedness
relating to the WSYX-TV assets on the date of exercise (such indebtedness not to
exceed $135 million). The exercise price is expected to be financed through
borrowings under the Company's Bank Credit Agreement. Pursuant to the Columbus
Option, the Company is required to make certain quarterly "Option Extension Fee"
payments, as defined in the Columbus Option . These fees began December 31,
1996, and continue until the exercise price on the Columbus Option is paid. The
Option Extension Fees are calculated as 8% per annum of the option exercise
price through the first anniversary of the date of grant, 15% per annum of the
option exercise price through the second anniversary of the date of grant and
25% per annum of the option exercise price thereafter. As of December 31, 1997,
the Company incurred Option Extension Fees and other costs relating to WSYX-TV
totaling $22.9 million. The Company currently intends to pay $100 million of the
option exercise price prior to May 31, 1998 (the date on which the Option
Extension fee of 25% per annum goes into effect) in order to extinguish the
Company's obligations to make continuing Option Extension Fee payments. Due to
the Company's ownership of another television station in the Columbus, Ohio
market, the Antitrust Division of the DOJ is currently reviewing the Company's
acquisition of and the right to operate WSYX-TV pursuant to an LMA. The Company
has entered into an agreement with the DOJ pursuant to which the Company is
required to notify the DOJ 10 business days before it begins programming WSYX-TV
pursuant to on LMA or exercises the Columbus Option or enters into a LMA with
respect to WSYX-TV, which will give the DOJ the opportunity to enjoin the
Company's action, if it chooses to do so.
The Company has agreed to sell the License Assets of WTTE-TV in Columbus,
Ohio to Glencairn and to enter into an LMA with Glencairn to provide programming
services to WTTE-TV. The FCC has approved this transaction, but the Company does
not believe that this transaction will be completed unless the Company acquires
WSYX-TV.
Other Dispositions. The Company has entered into on agreement to sell three
radio stations in the Nashville, Tennessee market for approximately $35 million.
The Company expects the closing to occur in the fourth quarter of 1998.
1997 ACQUISITIONS
Max Media Acquisition. On December 2, 1997, the Company entered into
agreements to acquire, directly or indirectly, all of the equity interests of
Max Media. As a result of this transaction, the Company will acquire, or acquire
the right to program pursuant to LMAs, nine television stations and eight radio
stations in eight markets. The television stations serve the following markets:
Dayton, Ohio; Syracuse, New York; Paducah, Kentucky and Cape Girardeau,
Missouri; Tri-Cities, Tennessee/Virginia; Tyler/Longview, Texas; and Charleston,
South Carolina. The radio stations serve the Norfolk, Virginia and
Greensboro/Winston Salem/High Point, North Carolina markets. The aggregate
purchase price is approximately $255 million payable in cash at closing (less a
deposit of $12.8 million paid at the time of signing the acquisition agreement),
a portion of which will be used to retire existing debt of Max Media at closing.
Max Media's television station WKEF-TV in Dayton, Ohio has an overlapping
service area with the Company's television stations WTTE-TV in Columbus, Ohio
and WSTR-TV in Cincinnati,
12
<PAGE>
Ohio as well as with Company LMA station WTTV-TV in Indianapolis, Indiana. In
addition, Max Media's television station WEMT-TV in Tri-Cities,
Tennessee/Virginia has an overlapping service area with the Company's television
station WLOS-TV in Asheville, North Carolina and Greenville/
Spartanburg/Anderson, South Carolina and Max Media's television station KBSI-TV
in Paducah, Kentucky and Cape Girardeau, Missouri has an overlapping service
area with the Company's television station KDNL-TV in St. Louis, Missouri.
Furthermore, the Company owns a television station and three radio stations in
the Norfolk, Virginia market, where four of Max Media's radio stations are
located. Consequently, the Company has requested various waivers from the FCC to
allow the Company to complete the Max Media Acquisition. There can be no
assurance that such waivers will be granted. As a result of the Max Media
Acquisition and the Heritage Acquisition, the Company intends to dispose of two
of the FM radio stations in the Norfolk, Virginia radio market that it has
agreed to acquire from Heritage and Max Media in order to be in compliance with
the FCC regulations that limit the number of radio stations that can be owned in
a market. The Company has sought FCC approval to assign the licenses of such
radio stations and an additional radio station it presently owns in the Norfolk,
Virginia market to an independent trustee. The Max Media Acquisition is subject
to approval by the FCC and termination of the applicable waiting period under
the HSR Act, and is expected to close in the second quarter of 1998. The
transaction is expected to be financed through borrowings under the Company's
Bank Credit Agreement.
Lakeland Acquisition. On November 14, 1997, the Company entered into a
definitive agreement to acquire 100% of the stock of Lakeland Group Television,
Inc. In the Lakeland Acquisition, the Company will acquire television station
KLGT in Minneapolis/St. Paul, Minnesota. The purchase price is approximately $50
million in cash plus the assumption of certain indebtedness of Lakeland not to
exceed $2.5 million. KLGT-TV, Channel 23, is the WB affiliate in Minneapolis,
the nation's 14th largest market. The Company intends to finance the purchase
price from borrowings under the Bank Credit Agreement. The Lakeland Acquisition
is subject to, among other things, approval by the FCC and termination of the
applicable waiting period under the HSR Act, and is expected to close in the
first or second quarter of 1998.
Heritage Acquisition. On July 16, 1997, the Company entered into the
Heritage Acquisition Agreements with certain subsidiaries of Heritage. The
aggregate purchase price of the Heritage Acquisition is approximately $630
million, less deposits paid of $65.5 million and amounts paid in January 1998
relating to the closing of certain television assets of $215 million. Pursuant
to the Heritage Acquisition Agreements, the Company obtained the right to
acquire the assets of five television stations (the interests in three of which
the Company has agreed to dispose or described herein), programming rights under
LMAs with respect to two additional television stations (one of which the
Company has agreed to dispose as described herein), and the assets of 24 radio
stations (11 of which the Company has agreed to dispose as described herein).
On January 29, 1998, the Company closed on the acquisitions of the Heritage
television stations serving the Charleston/Huntington market, Mobile and
Pensacola market and the Oklahoma City market for an aggregate purchase price of
$215 million. Simultaneously with the closing, the Company disposed of
television station KOKH-TV in Oklahoma City to Sullivan Broadcasting Company,
Inc. for an aggregate sale price of $60 million. Also simultaneously with the
closing, the Company entered into purchase option agreements pursuant to which
the Company has the option to acquire KOKH-TV from Sullivan for an aggregate
purchase price of $60 million and Sullivan has the option to acquire from the
Company television station WCHS-TV in the Charleston/Huntington, West Virginia
market for an aggregate purchase price of $30 million. In consideration for the
execution of the purchase option agreements, the Company made an option grant
payment to Sullivan of $45 million and Sullivan made an option grant payment to
the Company of $15 million. In connection with the Sullivan Acquisition, the
Company will reacquire KOKH-TV. On February 27, 1998 the Company closed on its
acquisition of all of the Heritage radio stations except the three stations in
the New Orleans market. On March 6, 1998, the Company closed on the acquisition
of the Heritage television stations serving the Burlington, Vermont and
Plattsburgh, New York market for an aggregate purchase price of $75 million.
In January 1998, the Company entered into an agreement with Entercom
pursuant to which the Company will sell to Entercom the Portland, Oregon and
Rochester, New York radio stations which the
13
<PAGE>
Company acquired from Heritage for an aggregate sales price of approximately
$126.5 million. Subject to approval by the FCC and termination of the applicable
waiting period under the HSR Act, the Company anticipates it will close on the
sale of the Portland and Rochester radio stations to Entercom during the second
quarter of 1998. Entercom is operating these stations pursuant to an LMA pending
closing of the sale.
In February 1998, the Company entered into an agreement with STC pursuant
to which STC has agreed to acquire the License and Non-License Assets of
Burlington, Vermont and Plattsburgh, New York television stations WPTZ-TV,
WNNE-TV, and the Non-License Assets of WFFF-TV for $75 million. The Company
expects to close the sale to STC during the second quarter of 1998 subject to,
among other conditions, approval by the FCC and termination of the applicable
waiting period under the HSR Act.
Acquisition of the Heritage radio stations in the New Orleans market is
conditioned on, among other things, FCC approval and the expiration of the
applicable waiting period under the HSR Act. The Company has entered into an
agreement to divest certain radio stations it owns or has the right to acquire
in the New Orleans market and expects to receive FCC approval and clearance
under the HSR Act in connection with such disposition. In addition, the Company
intends to dispose of two of the FM radio stations in the Norfolk, Virginia
radio market that it has agreed to acquire from Heritage and Max Media in order
to be in compliance with FCC regulations that limit the number of radio stations
that can be owned in a market. See "-- Max Media Acquisition." A third party has
also exercised its option to acquire from the Company radio station KCAZ in
Kansas City, Missouri.
Las Vegas Acquisition. On January 30, 1997, the Company entered into an
agreement to acquire the assets of KUPN-TV, the UPN affiliate in Las Vegas,
Nevada, for approximately $87.0 million. The Company completed this acquisition
on May 30, 1997.
ONGOING DISCUSSIONS
In furtherance of its acquisition strategy, the Company routinely reviews
and conducts investigations of potential television, radio station and related
businesses acquisitions. When the Company believes a favorable opportunity
exists, the Company seeks to enter into discussions with the owners of such
businesses regarding the possibility of an acquisition, disposition or station
swap. At any given time, the Company may be in discussions with one or more such
business owners. The Company is in serious negotiations with various parties
relating to the disposition and acquisition of television, radio and related
properties which would be disposed of and acquired for aggregate consideration
of approximately $75 million and $60 million, respectively. There can be no
assurance that any of these or other negotiations will lead to definitive
agreement or, if agreements are reached, that any transactions would be
consummated.
LOCAL MARKETING AGREEMENTS
The Company currently has LMA arrangements with television stations in nine
markets in which it owns a television station: Pittsburgh, Pennsylvania (WCWB),
Baltimore, Maryland (WNUV), Raleigh/ Durham, North Carolina (WRDC), Milwaukee,
Wisconsin (WVTV), Birmingham, Alabama (WABM), San Antonio, Texas (KRRT),
Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina
(WFBC), Mobile, Alabama and Pensacola, Florida (WFGX), and Burlington, Vermont
and Plattsburgh, New York (WFFF). The Company will provide programming under an
LMA to a station in a tenth market where it owns a television station (KFBT, Las
Vegas) upon expiration of the applicable HSR Act waiting period. In addition,
the Company has an LMA arrangement with a station in the Tuscaloosa, Alabama
market (WDBB), which is adjacent to Birmingham. In each of these markets other
than Pittsburgh, Tuscaloosa, Mobile and Pensacola, Las Vegas and Burlington and
Plattsburgh, the LMA arrangement is with Glencairn and the Company owns the
Non-License Assets of the stations. The Company also has LMA arrangements with
radio stations in two markets in which it owns radio stations,
Wilkes-Barre/Scranton, Pennsylvania and New Orleans, Louisiana. In addition, the
Company entered into two LMAs with respect to WTTV and WTTK in Indianapolis,
Indiana. At the Company's request, the FCC has withheld action on an application
for the Company's acquisition of WTTV and
14
<PAGE>
WTTK in Indianapolis (and a pending application for the Controlling Stockholders
to divest their attributable interests in WIIB) until the FCC completes its
pending rulemaking proceeding considering the cross-interest policy. In
addition, in connection with the pending acquisitions, the Company will enter
into certain LMAs. See "-- 1998 Acquisitions and "-- 1997 Acquisitions."
The Company believes that it is able to increase its revenues and improve
its margins by providing programming services to stations in selected DMAs and
MSAs where the Company already owns a station. In certain instances, single
station operators and stations operated by smaller ownership groups do not have
the management expertise or the operating efficiencies available to the Company
as a multi-station broadcaster. The Company seeks to identify such stations in
selected markets and to provide such stations with programming services pursuant
to LMAs. In addition to providing the Company with additional revenue
opportunities, the Company believes that these LMA arrangements have assisted
certain stations whose operations may have been marginally profitable to
continue to air popular programming and contribute to diversity of programming
in their respective DMAs and MSAs.
In many cases where the Company enters into LMA arrangements in connection
with a station whose acquisition by the Company is pending FCC approval, the
Company (i) obtains an option to acquire the station assets essential for
broadcasting a television or radio signal in compliance with regulatory
guidelines, generally consisting of the FCC license, transmitter, transmission
lines, technical equipment, call letters and trademarks, and certain furniture,
fixtures and equipment (the "License Assets") and (ii) acquires the remaining
assets (the "Non-License Assets") at the time it enters into the option.
Following acquisition of the Non-License Assets, the License Assets continue to
be owned by the owner-operator and holder of the FCC license, which enters into
an LMA with the Company. After FCC approval for transfer of the License Assets
is obtained, the Company exercises its option to acquire the License Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.
USE OF DIGITAL TELEVISION TECHNOLOGY
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of digital
broadcasting service technology. This technology has the potential to permit the
Company to provide viewers multiple channels of digital television over each of
its existing standard channels, to provide certain programming in a high
definition television format and to deliver various forms of data, including
data on the Internet, to home and business computers. These additional
capabilities may provide the Company with additional sources of revenue,
although the Company may be required to incur significant additional costs in
connection therewith. The Company is currently considering plans to provide high
definition television ("HDTV"), to provide multiple channels of television
including the provision of additional broadcast programming and transmitted data
on a subscription basis, and to continue its current TV program channels on its
allocated digital television ("DTV") channels. The FCC has granted authority for
the Company to conduct experimental DTV multicasting operations in Baltimore,
Maryland. The 1996 Act allows the FCC to charge a spectrum fee to broadcasters
who use the digital spectrum to offer subscription-based services, and the FCC
has opened a rulemaking to consider the spectrum fees to be charged to
broadcasters for such use. In addition, Congress has held hearings on
broadcasters' plans for the use of their digital spectrum. The Company cannot
predict what future actions the FCC or Congress might take with respect to DTV,
nor can it predict the effect of the FCC's present DTV implementation plan or
such future actions on the Company's business. DTV technology is not currently
available to the viewing public and a successful transition from the current
analog broadcast format to a digital format may take many years. There can be no
assurance that the Company's efforts to take advantage of the new technology
will be commercially successful.
FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING
The ownership, operation and sale of television and radio stations are
subject to the jurisdiction of the FCC, which acts under authority granted by
the Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership,
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operation and employment practices of stations; and has the power to impose
penalties for violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the 1996 Act and specific FCC regulations and policies.
Reference should be made to the Communications Act, the 1996 Act, FCC rules and
the public notices and rulings of the FCC for further information concerning the
nature and extent of federal regulation of broadcast stations.
License Grant and Renewal. Television and radio stations operate pursuant
to broadcasting licenses that are granted by the FCC for maximum terms of eight
years.
Television and radio station licenses are subject to renewal upon
application to the FCC. During certain periods when renewal applications are
pending, competing applicants may file for the radio or television frequency
being used by the renewal applicant. During the same periods, petitions to deny
license renewal applications may be filed by interested parties, including
members of the public. The FCC is required to hold hearings on renewal
applications if it is unable to determine that renewal of a license would serve
the public interest, convenience and necessity, or if a petition to deny raises
a "substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. However, the FCC is prohibited from considering
competing applications for a renewal applicant's frequency, and is required to
grant the renewal application, if the FCC finds: (i) that the station has served
the public interest, convenience and necessity; (ii) that there have been no
serious violations by the licensee of the Communications Act or the rules and
regulations of the FCC; and (iii) that there have been no other violations by
the licensee of the Communications Act or the rules and regulations of the FCC
that, when taken together, would constitute a pattern of abuse.
All of the stations that the Company currently owns and operates or
provides programming services to pursuant to LMAs, or intends to acquire or
provide programming services pursuant to LMAs in connection with pending
acquisitions, are presently operating under regular licenses, which expire as to
each station on the dates set forth under "-- Television Broadcasting" and "--
Radio Broadcasting," above. Although renewal of license is granted in the vast
majority of cases even when petitions to deny are filed, there can be no
assurance that the licenses of such stations will be renewed.
Ownership Matters
General
- -------
The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to permit the assignment or transfer of control
of, or the grant or renewal of, a broadcast license, the FCC considers a number
of factors pertaining to the licensee, including compliance with various rules
limiting common ownership of media properties, the "character" of the licensee
and those persons holding "attributable" interests therein, and compliance with
the Communications Act's limitations on alien ownership.
To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, an appropriate application must be filed with
the FCC. If the application involves a "substantial change" in ownership or
control, the application must be placed on public notice for a period of
approximately 30 days during which petitions to deny the application may be
filed by interested parties, including members of the public. If the application
does not involve a "substantial change" in ownership or control, it is a "pro
forma" application. The "pro forma" application is not subject to petitions to
deny or a mandatory waiting period, but is nevertheless subject to having
informal objections filed against it. If the FCC grants an assignment or
transfer application, interested parties have approximately 30 days from public
notice of the grant to seek reconsideration or review of that grant. Generally,
parties that do not file initial petitions to deny or informal objections
against the application face difficulty in seeking reconsideration or review of
the grant. The FCC normally has approximately an additional 10 days to set aside
such grant on its own motion. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.
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The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries controlling, broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. The FCC has pending a rulemaking proceeding
that, among other things, seeks comment on whether the FCC should modify its
attribution rules by (i) raising the attribution stock benchmark from 5% to 10%;
(ii) raising the attribution stock benchmark for passive investors from 10% to
20%; (iii) restricting the availability of the single majority shareholder
exemption; and (iv) attributing certain interests such as non-voting stock, debt
and certain holdings by limited liability corporations in certain circumstances.
More recently, the FCC has solicited comment on proposed rules that would (i)
treat an otherwise nonattributable equity or debt interest in a licensee as an
attributable interest where the interest holder is a program supplier or the
owner of a broadcast station in the same market and the equity and/or debt
holding is greater than a specified benchmark; (ii) treat a licensee of a
television station which, under an LMA, brokers more than 15% of the time on
another television station serving the same market, as having an attributable
interest in the brokered station; and (iii) in certain circumstances, treat the
licensee of a broadcast station that sells advertising time on another station
in the same market pursuant to a JSA as having an attributable interest in the
station whose advertising is being sold.
The Controlling Stockholders hold attributable interests in two entities
owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF
television station in Bloomington, Indiana, and Bay Television, Inc., licensee
of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the
issued and outstanding shares of Channel 63, Inc. are owned by the Controlling
Stockholders. All of the issued and outstanding shares of Bay Television, Inc.
are owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a
former stockholder of the Company. The Controlling Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially restrict its ability to
acquire or program additional broadcast stations.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider significant nonattributable equity or debt
interests in a media outlet combined with an attributable interest in another
media outlet in the same market, joint ventures, and common key employees among
competitors. The cross-interest policy does not necessarily prohibit all of
these interests, but requires that the FCC consider whether, in a particular
market, the "meaningful" relationships between competitors could have a
significant adverse effect upon economic competition and program diversity.
Heretofore, the FCC has not applied its cross-interest policy to LMAs and JSAs
between broadcast stations. In its ongoing rulemaking proceeding concerning the
attribution rules, the FCC has sought comment on, among other things, (i)
whether the cross-interest policy should be applied only in smaller markets, and
(ii) whether non-equity financial relationships such as debt, when combined with
multiple business interrelationships such as LMAs and JSAs, raise concerns under
the cross-interest policy. Moreover, in its most recent proposals in its ongoing
attribution rulemaking proceeding, the FCC has proposed treating television
LMAs, television and radio JSAs, and presently nonattributable debt or equity
interests as attributable interests in certain circumstances without regard to
the cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision to require a finding
that such grant or holding would be in the public interest before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made such a finding only in limited
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circumstances. The FCC has issued interpretations of existing law under which
these restrictions in modified form apply to other forms of business
organizations, including partnerships. As a result of these provisions, the
licenses granted to Subsidiaries of the Company by the FCC could be revoked if,
among other restrictions imposed by the FCC, more than 25% of the Company's
stock were directly or indirectly owned or voted by Aliens. The Company and the
Subsidiaries are domestic corporations, and the Controlling Stockholders are all
United States citizens. The Amended and Restated Articles of Incorporation of
the Company (the "Amended Certificate") contain limitations on Alien ownership
and control that are substantially similar to those contained in the
Communications Act. Pursuant to the Amended Certificate, the Company has the
right to repurchase Alien-owned shares at their fair market value to the extent
necessary, in the judgment of the Board of Directors, to comply with the Alien
ownership restrictions.
Television
- ----------
National Ownership Rule. Prior to the 1996 Act, FCC rules generally
prohibited an individual or entity from having an attributable interest in more
than 12 television stations nationwide, or in television stations reaching more
than 25% of the national television viewing audience. Pursuant to the 1996 Act,
the FCC has modified its rules to eliminate any limitation on the number of
television stations an individual or entity may own nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching more than 35% of the national television viewing
audience. Historically, VHF stations have shared a larger portion of the market
than UHF stations. Therefore, only half of the households in the market area of
any UHF station are included when calculating whether an entity or individual
owns television stations reaching more than 35% of the national television
viewing audience. All but six of the stations owned and operated by the Company,
or to which the Company provides programming services, are UHF. Upon completion
of all pending acquisitions and dispositions, the Company will reach
approximately 14% of U.S. television households using the FCC's method of
calculation.
Duopoly Rule. On a local level, the television "duopoly" rule generally
prohibits a single individual or entity from having an attributable interest in
two or more television stations with overlapping Grade B service areas. While
the 1996 Act did not eliminate the television duopoly rule, it did direct the
FCC to initiate a rulemaking proceeding to determine whether to retain, modify,
or eliminate the rule. The FCC has pending a rulemaking proceeding in which it
has proposed, among other options, to modify the television duopoly rule to
permit the common ownership of television stations in different DMAs, so long as
the Grade A signal contours of the stations do not overlap. Pending resolution
of its rulemaking proceeding, the FCC has adopted an interim waiver policy that
permits the common ownership of television stations in different DMAs with no
overlapping Grade A signal contours, conditioned on the final outcome of the
rulemaking proceeding. The FCC has also sought comment on whether common
ownership of two television stations in a market should be permitted (i) where
one or more of the commonly owned stations is UHF, (ii) where one of the
stations is in bankruptcy or has been off the air for a substantial period of
time and (iii) where the commonly owned stations have very small audience or
advertising shares, are located in a very large market, and/or a specified
number of independently owned media voices would remain after the acquisition.
Local Marketing Agreements. A number of television stations, including
certain of the Company's stations, have entered into what have commonly been
referred to as local marketing agreements, or LMAs. While these agreements may
take varying forms, pursuant to a typical LMA, separately owned and licensed
television stations agree to enter into cooperative arrangements of varying
sorts, subject to compliance with the requirements of antitrust laws and with
the FCC's rules and policies. Under these types of arrangements, separately
owned stations could agree to function cooperatively in terms of programming,
advertising sales, etc., subject to the requirement that the licensee of each
station maintain independent control over the programming and operations of its
own station. One typical type of LMA is a programming agreement between two
separately owned television stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own com-
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mercial advertising announcements during the time periods in question. The staff
of the FCC's Mass Media Bureau has held that LMAs are not contrary to the
Communications Act, provided that the licensee of the station which is being
substantially programmed by another entity maintains complete responsibility for
and control over the programming and operations of its broadcast station and
assures compliance with applicable FCC rules and policies.
At present, FCC rules permit television station LMAs, and the licensee of a
television station brokering time on another television station is not
considered to have an attributable interest in the brokered station. However, in
connection with its ongoing rulemaking proceeding regarding the television
duopoly rule, the FCC has proposed to adopt rules providing that the licensee of
a television station which brokers more than 15% of the time on another
television station serving the same market would be deemed to have an
attributable interest in the brokered station for purposes of the national and
local multiple ownership rules. In connection with this proceeding, the FCC has
solicited detailed information from parties to television LMAs as to the terms
and characteristics of such LMAs.
The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into, renewed, or assigned after November 5, 1996 would
have to be terminated if LMAs are made attributable interests and the LMA in
question resulted in a violation of the television multiple ownership rules. The
Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV
in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham,
North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama,
were in existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television stations WTTV and WTTK in Indianapolis,
Indiana were entered into subsequent to the date of enactment of the 1996 Act
but prior to November 5, 1996. The Company's LMA with television station KRRT in
San Antonio, Texas was in existence on the date of enactment of the 1996 Act,
but was assumed by the Company subsequent to that date but prior to November 5,
1996. The licensee's rights under the Company's LMA with KRRT-TV were assumed by
Glencairn subsequent to November 5, 1996. The Company's LMAs with television
stations WFGX-TV in Mobile, Alabama and Pensacola, Florida and WFFF-TV in
Burlington, Vermont and Plattsburgh, New York were in existence on both the date
of enactment of the 1996 Act and November 5, 1996, but were assumed by the
Company subsequent to November 5, 1996. The Company's LMA with WFBC-TV in
Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina,
was entered into by the Company subsequent to the date of enactment of the 1996
Act but prior to November 5, 1996, and the licensee's rights under that LMA were
assumed by Glencairn subsequent to November 5, 1996. The Company's LMA with KFBT
in Las Vegas, Nevada (which will be effective upon expiration of the HSR waiting
period) was entered into subsequent to November 5, 1996. The Company cannot
predict if any or all of its LMAs will be grandfathered.
The Conference Agreement adopted as part of the Balanced Budget Act of 1997
(the "Balanced Budget Act") clarifies Congress' intent with respect to LMAs and
duopolies. The Conference Agreement states as follows: "The conferees do not
intend that the duopoly and television-newspaper cross-ownership relief provided
herein should have any bearing upon the [FCC's] current proceedings, which
concerns more immediate relief. The conferees expect that the [FCC] will proceed
with its own independent examination in these matters. Specifically, the
conferees expect that the [FCC] will provide additional relief (e.g., VHF/UHF
combinations) that it finds to be in the public interest, and will implement the
permanent grandfather requirement for local marketing agreements as provided in
the Telecommunications Act of 1996."
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The TV duopoly rule currently prevents the Company from acquiring the
licenses of television stations with which it has LMAs in those markets where
the Company owns a television station. As a result, if the FCC were to decide
that the provider of programming services under a television LMA should be
treated as having an attributable interest in the brokered station, and if it
did not relax its television duopoly rule, the Company could be required to
modify or terminate those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial term of the LMA or upon assignment of the LMA. In such an event, the
Company could be required to pay termination penalties under certain of such
LMAs. Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station and/or the Company could be fined or
set for hearing, the outcome of which could be a monetary forfeiture or, under
certain circumstances, loss of the applicable FCC license. The Company is unable
to predict the ultimate outcome of possible changes to these FCC rules and the
impact such changes may have on its broadcasting operations.
On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public
Notice concerning the processing of television assignment and transfer of
control applications proposing LMAs. Due to the pendency of the ongoing
rulemaking proceeding concerning attribution of ownership, the Mass Media Bureau
has placed certain restrictions on the types of television assignment and
transfer of control applications involving LMAs that it will approve during the
pendency of the rulemaking. Specifically, the Mass Media Bureau has stated that
it will not approve arrangements where a time broker seeks to finance a station
acquisition and hold an option to purchase the station in the future. The
Company believes that none of the Company's LMAs fall within the ambit of this
Public Notice.
Radio
- -----
National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable interests in more than 20 AM and
20 FM radio stations nationwide. Pursuant to the 1996 Act, the FCC has modified
its rules to eliminate any limitation on the number of radio stations a single
individual or entity may own nationwide.
Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)), and then only if the aggregate audience share of the
commonly owned stations did not exceed 25%. In markets with fewer than 15
commercial radio stations, an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned stations did not exceed 50% of the total number of commercial radio
stations in the market.
Pursuant to the 1996 Act, the limits on the number of radio stations one
entity may own locally have been increased as follows: (i) in a market with 45
or more commercial radio stations, an entity may own up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio stations,
an entity may own up to seven commercial radio stations, not more than four of
which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. These numerical limits apply regardless of the aggregate audience share
of the stations sought to be commonly owned. FCC ownership rules continue to
permit an entity to own one FM and one AM station in a local market regardless
of market size. Irrespective of FCC rules governing radio ownership, however,
the DOJ and the Federal Trade Commission have the authority to determine, and in
certain radio transactions have determined, that a particular transaction
presents antitrust con-
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cerns. Moreover, in certain recent cases the FCC has signaled a willingness to
independently examine issues of market concentration notwithstanding a
transaction's compliance with the numerical station limits. The FCC has also
indicated that it may propose further revisions to its radio multiple ownership
rules.
Local Marketing Agreements. As in television, a number of radio stations
have entered into LMAs. The FCC's multiple ownership rules specifically permit
radio station LMAs to be entered into and implemented, so long as the licensee
of the station which is being programmed under the LMA maintains complete
responsibility for and control over programming and operations of its broadcast
station and assures compliance with applicable FCC rules and policies. For the
purposes of the multiple ownership rules, in general, a radio station being
programmed pursuant to an LMA by an entity is not considered an attributable
ownership interest of that entity unless that entity already owns a radio
station in the same market. However, a licensee that owns a radio station in a
market, and brokers more than 15% of the time on another station serving the
same market (i.e., a station whose principal community contour overlaps that of
the owned station), is considered to have an attributable ownership interest in
the brokered station for purposes of the FCC's multiple ownership rules. As a
result, in a market in which the Company owns a radio station, the Company would
not be permitted to enter into an LMA with another local radio station which it
could not own under the local ownership rules, unless the Company's programming
constituted 15% or less of the other local station's programming time on a
weekly basis. The FCC's rules also prohibit a broadcast licensee from
simulcasting more than 25% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM-FM) through a time brokerage or LMA
arrangement where the brokered and brokering stations serve substantially the
same area.
Joint Sales Agreements. A number of radio (and television) stations have
entered into cooperative arrangements commonly known as joint sales agreements,
or JSAs. While these agreements may take varying forms, under the typical JSA, a
station licensee obtains, for a fee, the right to sell substantially all of the
commercial advertising on a separately-owned and licensed station in the same
market. The typical JSA also customarily involves the provision by the selling
licensee of certain sales, accounting, and "back office" services to the station
whose advertising is being sold. The typical JSA is distinct from an LMA in that
a JSA (unlike an LMA) normally does not involve programming.
The FCC has determined that issues of joint advertising sales should be
left to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which a
licensee sells time under a JSA are not deemed by the FCC to be attributable
interests of that licensee. However, in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be considered attributable interests or within the scope of the FCC's
cross-interest policy, particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable interests as a result of changes in the FCC rules, the
Company may be required to terminate any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.
Other Ownership Matters
- -----------------------
There remain in place after the 1996 Act a number of additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an attributable interest in both a television
station and a radio station, a daily newspaper, or a cable television system
that is located in or serves the same market area.
Antitrust Regulation. The DOJ and the Federal Trade Commission have
increased their scrutiny of the television and radio industry since the adoption
of the 1996 Act, and have indicated their intention to review matters related to
the concentration of ownership within markets (including LMAs and JSAs) even
when the ownership or LMA or JSA in question is permitted under the laws
administered by the FCC or by FCC rules and regulations. For instance, the DOJ
has for some time taken the position that an LMA entered into in anticipation of
a station's acquisition with the proposed buyer of the station constitutes a
change in beneficial ownership of the station which, if subject to filing under
the HSR Act, cannot be implemented until the waiting period required by that
statute has ended or been terminated.
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Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there remain at least
30 separately owned television and radio stations in the particular market after
the acquisition in question, the FCC has traditionally employed a policy that
presumptively allows waivers of the one to a market rule to permit the common
ownership of one AM, one FM and one TV station in the market. The 1996 Act
directs the FCC to extend this policy to each of the top 50 markets. Moreover,
the FCC has pending a rulemaking proceeding in which it has solicited comment on
whether the one to a market rule should be eliminated altogether. The Company
has pending several requests for waivers of the one to a market rule in
connection with its applications to acquire radio stations in the Max Media
Acquisition and from Keymarket of South Carolina, Inc. and Spartan Radiocasting,
Inc., in markets where the Company owns or proposes to own a television station.
However, the FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station, and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider waivers of the rule in such instances on a case-by-case
basis, considering (i) the public service benefits that will arise from the
joint operation of the facilities such as economies of scale, cost savings and
programming and service benefits; (ii) the types of facilities involved; (iii)
the number of media outlets owned by the applicant in the relevant market; (iv)
the financial difficulties of the stations involved; and (v) the nature of the
relevant market in light of the level of competition and diversity after joint
operation is implemented. Generally, any such waivers that are granted, and
which allow common ownership of a television station and more than two
same-service radio stations in the same market, are temporary and conditioned on
the outcome of the rulemaking proceeding. The Company obtained such temporary,
conditional waivers of the one to a market rule in connection with its
acquisition of the Heritage radio stations in the Kansas City and St. Louis
markets.
In its ongoing rulemaking proceeding to reexamine the one to a market rule,
the FCC has proposed the following options for modifying the rule in the event
it is not eliminated: (i) extending the presumptive waiver policy to any
television market in which a specified number of independently owned media
"voices" would remain after common ownership of a television station and one or
more radio stations is effectuated; (ii) extending the presumptive waiver policy
to entities that seek to own more than one FM and/or one AM radio station; (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated; and (iv) modifying the five-factor case-by-case
test for waivers.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates
a previous statutory prohibition against the common ownership of a television
broadcast station and a cable system that serve the same local market, the 1996
Act leaves the current FCC rule in place. The legislative history of the Act
indicates that the repeal of the statutory ban should not prejudge the outcome
of any FCC review of the rule.
Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC
to eliminate its rules which formerly prohibited the common ownership of a
broadcast network and a cable system, subject to the provision that the FCC
revise its rules as necessary to ensure carriage, channel positioning, and
non-discriminatory treatment of non-affiliated broadcast stations by cable
systems affiliated with a broadcast network. In March 1996, the FCC issued an
order implementing this legislative change.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit
the common ownership of a radio or television broadcast station and a daily
newspaper in the same market. The 1996 Act does not eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to determine whether it should liberalize its waiver policy with respect to
cross-ownership of a daily newspaper and one or more radio stations in the same
market.
Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which
formerly prohibited an entity from operating more than one television network.
In March 1996, the FCC issued an order implementing this legislative change.
Under the modified rule, a network entity is permitted to operate
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<PAGE>
more than one television network, provided, however, that ABC, CBS, NBC, and/or
Fox are prohibited from merging with each other or with another network
television entity such as WB or UPN.
The 1996 Act requires the FCC to review its broadcast ownership rules every
two years to "determine whether any of such rules are necessary in the public
interest as the result of competition," and to repeal or modify any rules that
are determined to be no longer in the public interest. In March 1998, the FCC
initiated a rulemaking proceeding to review certain of its broadcast ownership
rules pursuant to the statutory mandate, including: (i) the rule limiting
ownership of television stations nationally to stations reaching 35% of the
national television audience; (ii) the rule attributing only 50% of television
households in a market to the audience reach of a UHF television station for
purposes of the 35% national audience reach limit; (iii) the rule prohibiting
common ownership of a broadcast station and a daily newspaper in the same
market; (iv) the rule prohibiting common ownership of a broadcast television
station and a cable system in the same market; (v) the local radio multiple
ownership rules; and (vi) the dual network rule. Additionally, the FCC stated
that its already-pending proceedings to review the television duopoly and "one
to a market" rules satisfy the 1996 Act's biennial review requirements.
Expansion of the Company's broadcast operations on both a local and
national level will continue to be subject to the FCC's ownership rules and any
changes the FCC or Congress may adopt. Concomitantly, any further relaxation of
the FCC's ownership rules may increase the level of competition in one or more
of the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Must-Carry/Retransmission Consent
Pursuant to the Cable Act of 1992, television broadcasters are required to
make triennial elections to exercise either certain "must-carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence, in general as defined by the Arbitron 1991-92
Television Market Guide. These must-carry rights are not absolute, and their
exercise is dependent on variables such as (i) the number of activated channels
on a cable system; (ii) the location and size of a cable system; and (iii) the
amount of programming on a broadcast station that duplicates the programming of
another broadcast station carried by the cable system. Therefore, under certain
circumstances, a cable system may decline to carry a given station.
Alternatively, if a broadcaster chooses to exercise retransmission consent
rights, it can prohibit cable systems from carrying its signal or grant the
appropriate cable system the authority to retransmit the broadcast signal for a
fee or other consideration. In October 1996, the Company elected must-carry or
retransmission consent with respect to each of its markets based on its
evaluation of the respective markets and the position of the Company's owned or
programmed station(s) within the market. The Company's stations continue to be
carried on all pertinent cable systems, and the Company does not believe that
its elections have resulted in the shifting of its stations to less desirable
cable channel locations. Certain of the Company's stations affiliated with Fox
are required to elect retransmission consent because Fox's retransmission
consent negotiations on behalf of the Company resulted in agreements which
extend into 1998. Therefore, the Company will need to negotiate retransmission
consent agreements for these Fox-affiliated stations to attain carriage on the
relevant cable systems for the balance of this triennial period (i.e., through
December 31, 1999). For subsequent elections beginning with the election to be
made by October 1, 1999, the must-carry market will be the station's DMA, in
general as defined by the Nielsen DMA Market and Demographic Rank Report of the
prior year.
Syndicated Exclusivity/Territorial Exclusivity
The FCC has imposed syndicated exclusivity rules and expanded existing
network nonduplication rules. The syndicated exclusivity rules allow local
broadcast television stations to demand that cable operators black out
syndicated non-network programming carried on "distant signals" (i.e., signals
of broadcast stations, including so-called "superstations," which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network television affiliates to
require that cable operators black out duplicative network programming carried
on
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<PAGE>
distant signals. However, in a number of markets in which the Company owns or
programs stations affiliated with a network, a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market. This is not in violation of the FCC's network nonduplication rules.
However, the carriage of two network stations on the same cable system could
result in a decline of viewership adversely affecting the revenues of the
Company owned or programmed station.
Restrictions on Broadcast Advertising
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have examined legislation
proposals which would eliminate or severely restrict the advertising of beer and
wine. Although no prediction can be made as to whether any or all of such
proposals will be enacted into law, the elimination of all beer and wine
advertising would have an adverse effect upon the revenues of the Company's
stations, as well as the revenues of other stations which carry beer and wine
advertising.
The FCC has imposed commercial time limitations in children's television
programming pursuant to legislation. In television programs designed for viewing
by children of 12 years of age and under, commercial matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting
renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations. The Company
has appealed this fine and the appeal is pending. In granting renewal of the
license for WTTV-TV and WTTK-TV, stations that the Company programs pursuant to
an LMA, the FCC imposed a fine of $15,000 on WTTV-TV and WTTK-TV's licensee
alleging that the stations had exceeded these limitations. In granting renewal
of the license for WTTE-TV, the FCC imposed a fine of $10,000 on the Company
alleging that the station had exceeded these limitations. The Company has
appealed this fine and the appeal is pending.
The Communications Act and FCC rules also impose regulations regarding the
broadcasting of advertisements by legally qualified candidates for elective
office. Among other things, (i) stations must provide "reasonable access" for
the purchase of time by legally qualified candidates for federal office; (ii)
stations must provide "equal opportunities" for the purchase of equivalent
amounts of comparable broadcast time by opposing candidates for the same
elective office; and (iii) during the 45 days preceding a primary or primary
run-off election and during the 60 days preceding a general or special election,
legally qualified candidates for elective office may be charged no more than the
station's "lowest unit charge" for the same class of advertisement, length of
advertisement, and daypart. Recently, both the President of the United States
and the Chairman of the FCC have called for rules that would require broadcast
stations to provide free airtime to political candidates. The Company cannot
predict the effect of such a requirement on its advertising revenues.
Programming and Operation
General. The Communications Act requires broadcasters to serve the "public
interest." The FCC has relaxed or eliminated many of the more formalized
procedures it had developed in the past to promote the broadcast of certain
types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to their communities' issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming may be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be filed at any time
and generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees, and follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radio frequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, the grant of a renewal for a "short" (i.e., less
than the full) license term, or, for particularly egregious violations, the
denial of a license renewal application or the revocation of a license.
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<PAGE>
Children's Television Programming. Pursuant to rules adopted in 1996,
television stations are required to broadcast a minimum of three hours per week
of "core" children's educational programming, which the FCC defines as
programming that (i) has serving the educational and informational needs of
children 16 years of age and under as a significant purpose; (ii) is regularly
scheduled, weekly and at least 30 minutes in duration; and (iii) is aired
between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, "core" children's
educational programs, in order to qualify as such, are required to be identified
as educational and informational programs over the air at the time they are
broadcast, and are required to be identified in the children's programming
reports required to be placed in stations' public inspection files.
Additionally, television stations are required to identify and provide
information concerning "core" children's programming to publishers of program
guides and listings.
Television Violence. The 1996 Act contains a number of provisions relating
to television violence. First, pursuant to the 1996 Act, the television industry
has developed a ratings system which the FCC has approved. Furthermore, also
pursuant to the 1996 Act the FCC has adopted rules requiring certain television
sets to include the so-called "V-chip," a computer chip that allows blocking of
rated programming. Under these rules, half of television receiver models with
picture screens 13 inches or greater will be required to have the "V-chip" by
July 1, 1999, and all such models will be required to have the "V-chip" by
January 1, 2000. In addition, the 1996 Act requires that all television license
renewal applications filed after May 1, 1995 contain summaries of written
comments and suggestions received by the station from the public regarding
violent programming.
Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring
closed captioning of all broadcast television programming, except where
captioning would be "economically burdensome." The FCC has recently adopted such
rules. The rules require generally that (i) 95% of all new programming first
published or exhibited on or after January 1, 1998 must be closed captioned
within eight years, and (ii) 75% of "old" programming which first aired prior to
January 1, 1998 must be closed captioned within 10 years, subject to certain
exemptions.
Digital Television
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, adopted decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV table of allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal. In
February 1998, the FCC made slight revisions to the DTV rules and table of
allotments in acting upon a number of appeals in the DTV proceeding. The FCC has
attempted to provide DTV coverage areas that are comparable to stations'
existing service areas. The FCC has ruled that television broadcast licensees
may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
DTV channels will generally be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top 10 television markets begin digital broadcasting by May
1, 1999 (many stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting by November 1998), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that television broadcasters will
cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered for other uses. Under the
Balanced Budget Act, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given case: (i) one or more television stations affiliated with ABC, CBS,
NBC or Fox in a market is not broadcasting digitally, and the FCC determines
that such stations have "exercised due diligence" in attempting to convert to
digital broadcasting; or (ii) less than 85% of the television households in the
station's market subscribe to a multichannel video service (cable, wireless
cable or DBS) that carries at least one digital channel from each of the local
stations in that market, and less than 85% of the television households in the
market can receive digital signals off the air using
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<PAGE>
either a set-top converter box for an analog television set or a new DTV
television set. The Balanced Budget Act also directs the FCC to auction the
non-digital channels by September 30, 2002 even though they are not to be
reclaimed by the government until at least December 31, 2006. The Balanced
Budget Act also permits broadcasters to bid on the non-digital channels in
cities with populations greater than 400,000, provided the channels are used for
DTV. Thus, it is possible a broadcaster could own two channels in a market. The
FCC has concluded a separate proceeding in which it reallocated television
channels 60 through 69 to other services while protecting existing television
stations on those channels from interference during the DTV transition period.
Additionally, the FCC will open a separate proceeding to consider to what extent
the cable must-carry requirements will apply to DTV signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in some increased interference. The FCC's DTV allotment plan allows
present UHF stations that move to DTV channels considerably less signal power
than present VHF stations that move to UHF DTV channels. Additionally, the DTV
transmission standard adopted by the FCC may not allow certain stations to
provide a DTV signal of adequate strength to be reliably received by certain
viewers using inside television set antennas. Implementation of digital
television will also impose substantial additional costs on television stations
because of the need to replace equipment and because some stations will need to
operate at higher utility costs and there can be no assurance that the Company's
television stations will be able to increase revenue to offset such costs. The
FCC is also considering imposing new public interest requirements on television
licensees in exchange for their receipt of DTV channels. The Company is
currently considering plans to provide HDTV, to provide multiple channels of
television, including the provision of additional broadcast programming and
transmitted data on a subscription basis, and to continue its current TV program
channels on its allocated DTV channels. The 1996 Act allows the FCC to charge a
spectrum fee to broadcasters who use the digital spectrum to offer
subscription-based services. The FCC has opened a rulemaking to consider the
spectrum fees to be charged to broadcasters for such use. In addition, Congress
has held hearings on broadcasters' plans for the use of their digital spectrum.
The Company cannot predict what future actions the FCC might take with respect
to DTV, nor can it predict the effect of the FCC's present DTV implementation
plan or such future actions on the Company's business.
Proposed Changes
The Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast stations, result in the loss of
audience share and advertising revenues for the Company's broadcast stations,
and affect the ability of the Company to acquire additional broadcast stations
or finance such acquisitions. In addition to the changes and proposed changes
noted above, such matters may include, for example, the license renewal process,
spectrum use fees, political advertising rates, potential restrictions on the
advertising of certain products (beer, wine and hard liquor, for example), and
the rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct radio
and television broadcast satellite service, the continued establishment of
wireless cable systems and low power television stations, digital television and
radio technologies, and the advent of telephone company participation in the
provision of video programming service.
Other Considerations
The foregoing summary does not purport to be a complete discussion of all
provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal employment opportunity,
and other matters affecting the Company's business and operations.
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<PAGE>
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities, substances
or waste that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and has not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
COMPETITION
The Company's television and radio stations compete for audience share and
advertising revenue with other television and radio stations in their respective
DMAs or MSA's, as well as with other advertising media, such as newspapers,
magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail and local cable and wireless cable systems. Some competitors are
part of larger organizations with substantially greater financial, technical and
other resources than the Company.
Television Competition. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcasting
station in one DMA does not compete with stations in other DMAs. The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both over-the-air and cable carriage of
stations in adjacent DMAs, which tends to spread viewership and advertising
expenditures over a larger number of television stations.
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations, radio stations and cable system
operators serving the same market. ABC, CBS and NBC programming generally
achieves higher household audience levels than Fox, WB and UPN programming and
syndicated programming aired by independent stations. This can be attributed to
a combination of factors, including the efforts of ABC, CBS and NBC to reach a
broader audience, generally better signal carriage available when broadcasting
over VHF channels 2 through 13 versus broadcasting over UHF channels 14 through
69 and the higher number of hours of ABC, CBS and NBC programming being
broadcast weekly. However, greater amounts of advertising time are available for
sale during Fox, UPN and WB programming and non-network syndicated programming,
and as a result the Company believes that the Company's programming typically
achieves a share of television market advertising revenues greater than its
share of a market's audience.
Television stations compete for audience share primarily on the basis of
program popularity, which has a direct effect on advertising rates. A large
amount of the Company's prime time programming is supplied by Fox and WB, and to
a lesser extent UPN, ABC, CBS and NBC. In those periods, the Company's
affiliated stations are totally dependent upon the performance of the networks'
programs in attracting viewers. Non-network time periods are programmed by the
station primarily with syndicated programs purchased for cash, cash and barter,
or barter-only, and also through self-produced news, public affairs and other
entertainment programming.
Television advertising rates are based upon factors which include the size
of the DMA in which the station operates, a program's popularity among the
viewers that an advertiser wishes to attract, the number of advertisers
competing for the available time, the demographic makeup of the DMA served by
the station, the availability of alternative advertising media in the DMA
(including radio and cable), the aggressiveness and knowledge of sales forces in
the DMA and development of projects, features and programs that tie advertiser
messages to programming. The Company believes that its sales and programming
strategies allow it to compete effectively for advertising within its DMAs.
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Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. Historically, the
Company's UHF broadcast stations have suffered a competitive disadvantage in
comparison to stations with VHF broadcast frequencies. This historic
disadvantage has gradually declined through (i) carriage on cable systems, (ii)
improvement in television receivers, (iii) improvement in television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of programming, and (vi) the development of new networks such as Fox, WB and
UPN.
The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcast
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The 1996 Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. The Company is unable to predict the effect that
technological and regulatory changes will have on the broadcast television
industry and on the future profitability and value of a particular broadcast
television station.
The FCC authorizes DBS services throughout the United States. Currently,
two FCC permitees, DirecTV and United States Satellite Broadcasting, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
The Company cannot predict what other video technologies might be
considered or implemented in the future, nor can it judge in advance what
impact, if any, the implementation of any of these proposals or changes might
have on its business.
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of DTV technology.
This technology has the potential to permit the Company to provide viewers
multiple channels of digital television over each of its existing standard
channels, to provide certain programming in a high definition television format
and to deliver various forms of data, including data on the Internet, to home
and business computers. These additional capabilities may provide the Company
with additional sources of revenue. The Company is currently considering plans
to provide HDTV, to provide multiple channels of television including the
provision of additional broadcast programming and transmitted data on a
subscription basis, and to continue its current TV program channels on its
allocated DTV channels. The Company has obtained FCC authority to conduct
experimental DTV multicasting operations in Baltimore, Maryland. The 1996 Act
allows the FCC to charge a spectrum fee to broadcasters who use the digital
spectrum to offer subscription-based services. The FCC has opened a rulemaking
to consider the spectrum fees to be charged to broadcasters for such use. In
addition, Congress has held hearings on broadcasters' plans for the use of their
digital spectrum. The Company cannot predict what future actions the FCC or
Congress might take with respect to DTV, nor can it predict the effect of the
FCC's present DTV implementation plan or such future actions on the Company's
business. DTV technology is not currently available to the viewing public and a
successful transition from the current analog television format to a digital
format may take many years. There can be no assurance that the Company's efforts
to take advantage of the new technology will be commercially successful.
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The Company also competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Company's stations compete for exclusive access to
those programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations. Public broadcasting stations generally compete with commercial
broadcasters for viewers but not for advertising dollars.
Historically, the cost of programming has increased because of an increase
in the number of new independent stations and a shortage of quality programming.
However, the Company believes that over the past five years program prices
generally have stabilized.
The Company believes it competes favorably against other television
stations because of its management skill and experience, the ability of the
Company historically to generate revenue share greater than its audience share,
its network affiliations and its local program acceptance. In addition, the
Company believes that it benefits from the operation of multiple broadcast
properties, affording it certain nonquantifiable economies of scale and
competitive advantages in the purchase of programming.
Radio Competition. Radio broadcasting is a highly competitive business, and
each of the radio stations operated by the Company competes for audience share
and advertising revenue directly with other radio stations in its geographic
market, as well as with other media, including television, cable television,
newspapers, magazines, direct mail and billboard advertising. The audience
ratings and advertising revenue of each of such stations are subject to change,
and any adverse change in a particular market could have a material adverse
effect on the revenue of such radio stations located in that market. There can
be no assurance that any one of the Company's radio stations will be able to
maintain or increase its current audience ratings and radio advertising revenue
market share.
The Company attempts to improve each radio station's competitive position
with promotional campaigns designed to enhance and reinforce its identities with
the listening public. Extensive market research is conducted in order to
identify specific demographic groups and design a programming format for those
groups. The Company seeks to build a strong listener base composed of specific
demographic groups in each market, and thereby attract advertisers seeking to
reach these listeners. Aside from building its stations' identities and
targeting its programming to specific demographic groups, management believes
that the Company also obtains a competitive advantage by operating duopolies or
multiple stations in the nation's larger mid-size markets.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems and by digital audio
broadcasting ("DAB"). DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences. The FCC has issued licenses for two satellite DAB systems.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry.
EMPLOYEES
As of December 31, 1997, the Company had approximately 2,262 employees.
With the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and
WWL-AM, none of the employees is represented by labor unions under any
collective bargaining agreement. No significant labor problems have been
experienced by the Company, and the Company considers its overall labor
relations to be good.
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ITEM 2. PROPERTIES
Generally, each of the Company's stations has facilities consisting of
offices, studios and tower sites. Transmitter and tower sites are located to
provide maximum signal coverage of the stations' markets. The following table
generally describes the Company's principal owned and leased real property in
each of its markets of operation:
<TABLE>
<CAPTION>
TELEVISION PROPERTIES TYPE OF FACILITY AND USE
- ------------------------------- ------------------------------------------------
<S> <C>
Pittsburgh Market Station Site for WPGH
Space on WPGH Tower Site
Baltimore Market WBFF Studio and Company Offices
WBFF Parking Lot
Space on Main WBFF Tower for Antenna
Space on Main WBFF Tower for Transmission Disks
Space on Main WBFF Tower for Receivers
Milwaukee Market WVTV Studio Site
WVTV Transmitter Site land
WVTV Transmitter Site Building
WCGV Studio Site
WCGV Studio/Transmitter Site
Raleigh/Durham Mkt WLFL / WRDC Studio Site
WLFL Tower Site Land
Columbus Market WTTE Studio Site
WTTE Office Space
WTTE Tower Site
Norfolk Market WTVZ Studio Site
Birmingham Market WTTO Tower and Old WTTO Studio
WTTO Studio Site
WABM Studio Site
Flint/Saginaw/Bay City Market WSMH Studio & Office Site
WSMH Transmitter Site
Tuscaloosa Market WDBB Transmitter Site
Kansas City Market KSMO Studio & Office Site
KSMO Transmitter bldg.
Cincinnati Market WSTR Studio & Office Site
WSTR Transmitter Site
W66AQ Translator
Peoria Market WYZZ Studio & Office Site WYZZ
Transmitter Site -- real property only WYZZ
Transmitter Site -- tower, transmitter,
building, and equipment
Oklahoma City Market KOCB Studio & Office Site
KOCB Transmitter Site
Lexington Market WDKY Studio & Office Site
WDKY Transmitter Site
<CAPTION>
APPROXIMATE
TELEVISION PROPERTIES OWNED OR LEASED(A) SIZE (SQ. FEET)
- ------------------------------- ----------------------------- -------------------
<S> <C> <C>
Pittsburgh Market Leased (expires 10/01/2028) 25,500
Leased (expires 02/23/2039) On site of station
Baltimore Market Leased (expires 12/31/2010) 39,000
Leased (month to month) N/A
Leased (expires 06/01/2007) N/A
Leased (expires 04/01/2011) N/A
Leased (expires 08/01/2012) N/A
Milwaukee Market Owned 37,800
Leased (expires 01/30/2030) N/A
Owned 6,200
Owned 22,296
Leased (expires 12/31/2029) N/A
Raleigh/Durham Mkt Leased (expires 07/29/2021) 26,600
Leased (expires 12/31/2018) 1,800
Columbus Market Leased (expires 12/31/2002) 14,400
Leased (expires 06/01/2003) 4,500
Leased (month to month) 1,000
Norfolk Market Leased (expires 07/31/2009) 15,000
Birmingham Market Owned 9,500
Leased (expires 1/31/2016) 9,750
Leased (expires 1/31/2016) 9,750
Flint/Saginaw/Bay City Market Owned 13,800
Leased (expires 11/13/2004) N/A
Tuscaloosa Market Leased (month to month) 678
Kansas City Market Leased (expires 02/28/2001) 11,055
Leased (expires 12/10/2010) 1,200
Cincinnati Market Owned 14,800
Owned 6,600
Owned N/A
Peoria Market Owned 6,000
Leased (expires 12/01/2001) 1,100
Owned N/A
Oklahoma City Market Owned 12,000
Owned Included above
Lexington Market Leased (expires 12/31/2010) 12,000
Owned 2,900
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
TELEVISION PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) SIZE (SQ. FEET)
- ------------------------------- --------------------------------------- ----------------------------- ---------------------
<S> <C> <C> <C>
Indianapolis Market WTTV/WTTK Studio & Office Site (bldg) Owned 19,900
WTTV/WTTK Studio & Office Site (lot) Owned 18.5 acres
WTTV Transmitter Site/lot Owned 2,730/41.25 acres
WTTK Transmitter Site/lot Owned 800/30 acres
Bloomington microwave site (bldg.) Owned 216
Bloomington microwave site (land) Leased (expires 07/05/2077) 216
Sacramento Market KOVR Studio & Office Site Owned 42,600
KOVR Stockton Office Site Leased (expires 03/31/1999) 1,000
KOVR Transmitter Site 50% Ownership N/A
KOVR Back-up Transmitter Site 1/3 Ownership N/A
Mt. Oso Microwave Site Leased (expires 02/28/2001) N/A
Volmer Peak Microwave Site Leased (expires 06/30/2000) N/A
Downtown Sacramento Microwave Site Leased (expires 05/31/1999) N/A
Elverta Microwave Site Leased (expires 07/31/1999) N/A
San Antonio Market KABB/KRRT Studio & Office Site Owned by KABB 22,460
1200/1200/
KABB Transmitter bldg/tower/land Owned by KABB 35.562 acres
KRRT Transmitter land Leased (expires 06/30/2007) 103.854 acres
Asheville/Spartanburg WFBC/WLOS Studio & Office Site Owned by WLOS 28,000
Market WLOS Transmitter tower, bldg, land Leased (expires 12/31/2001)
WFBC Transmitter Site Owned by WFBC 45.6 acres
WFBC/WAXA studio Owned 6,000
St. Louis Market KDNL Studio & Office (Lot) Owned 53,550
KDNL Studio & Office (building) Owned 41,372 (TV)
KDNL Transmitter Site (2 buildings) Owned 1,600 & 1,330
Des Moines Market KDSM Studio & Office Site Owned 13,000
KDSM Transmitter bldg/tower Owned 2,000
KDSM Transmitter land Leased (expires 11/08/2034) 40 Acres
KDSM Translator tower/shed Leased (expires 12/31/98) 48
Las Vegas Market KUPN Studio & Office Site Leased (expires 6/26/99) 14,000
KUPN Transmitter Site/bldg. Owned .04 acres
KUPN Microwave Transmitter Site Owned N/A
KUPN Microwave Relay Site Owned N/A
Plattsburgh/Burlington Market WPTZ Station Site Owned 12,400
WPTZ Studio & Office site Leased (expires 6/30/1998) 3,919
WPTZ Transmitter site Owned N/A
WPTZ Tower and building site Leased (expires 10/31/2000) N/A
WPTZ Tower and building site Leased (expires 5/30/2000) N/A
WPTZ Tower and building site Leased (expires 10/31/2000) N/A
WNNE Studio & Office site Leased (expires 1/31/2001) 8,500
WNNE Tower site Leased (expires 5/31/2003) N/A
WNNE Transmitter building Owned 1,150
Pensacola/Mobile Market WEAR Studio & Office site Owned 22,400
WEAR Transmitter site Owned N/A
WEAR Mobile Sales Office Site Leased (expires 6/30/1998) 1.164
WFGX Studio & Transmitter site Leased (expires 4/30/2000) 5,000
Charleston Market WCHS Studio & Office site Owned 15,776
WCHS Transmitter site Owned 3,712
</TABLE>
<TABLE>
<CAPTION>
APPROXIMATE
RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET)
- ------------------ -------------------------------- ----------------------------- ----------------
<S> <C> <C> <C>
Buffalo Market WWKB/WKSE Studio & Office Site Leased (expires 09/30/1998) 5,000
WWKB/WKSE Office Site Leased (expires 09/30/1998) 5,200
WBEN/WMJQ Studio & Office Site Leased (expires 12/31/1998) 7,750
WBEN Transmitter Site Owned 1,024
WWKB Transmitter Site Owned 2,600
WMJQ Transmitter Site Leased (expires 12/31/1998) 825
WKSE Transmitter Site Owned 6,722
WWWS Transmitter Site/bldg. Leased (expires 5/24/2001 1,000/225
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET)
- ------------------------------ --------------------------------------------- ----------------------------- ----------------
<S> <C> <C> <C>
Memphis Market WJCE/WRVR/WOGY Studio & Office Site Leased (expires 12/02/98) 10,000
WJCE Transmitter Site Leased (expires 03/27/2035) 2,262
WRVR Transmitter Site Leased (expires 12/31/2003) 169
WOGY Transmitter Site (on 4.5 acres) Owned 340
New Orleans Market WWL/WSMB/WLMG/KMEZ Studio & Office Site Leased (expires 08/31/2002) 11,553
WWL Transmitter Site (on 64.62 acres) Owned 2,300
WSMB Transmitter Site (on 3,600 sq. ft) Owned 3,600
WLMG Transmitter Site Leased (expires 10/27/2014) N/A
KMEZ Transmitter Site Leased (expires 03/14/2001) N/A
WLAC-AM / WLAC-FM / WJZC / Road Gang /IRN
Nashville/Russellville Studio & Office Site Leased (expires 06/30/1999) 18,800
Market Gang/IRN Studio & Office Site
WLAC-AM Transmitter Site (+ 27.69 acres) Owned 5,800
WLAC-FM Transmitter Site (+18.12 acres) 1/3 Owned (3-way ownership) 2,700
WJZC Transmitter Site (land) Leased (expires 09/27/2019) 400
WJZC Transmitter Site (tower & building) Owned 1,324
Wilkes Barre/Scranton Market WILK/WGBI/WGGY/WKRZ Studio & Office Site Leased (expires 12/31/1998) 14,000
WILK Transmitter Site Leased (expires 08/31/1999) 1,000
WGBI Transmitter Site Leased (expires 02/28/2000) 1,000
WGGY Transmitter Site Leased (expires 02/28/2000) 300
WKRZ Transmitter Site Owned 4,052 (bldg)
WKRF Office Site Leased (month to month) 100
WKRF Transmitter Site Leased (month to month) 1 acre
WWSH Transmitter Site/bldg. Owned 1 acre/120
WWFH Transmitter Site and office/land Owned 2,320/1 acre
WILP Transmitter Site/bldg. Owned 1 acre/750
St. Louis Market KPNT/WVRV Studio & Office Site Owned 1,753 (radio)
KPNT Transmitter Site Owned 7450
WVRV Transmitter Site Owned 7,278
WVRV back up building Owned 240
Los Angeles Market KBLA Studio & Office Site- building Owned 6,000
KBLA Transmitter Site -- land Owned 3 acres
Milwaukee Market WEMP, WAMG and WMYX Studio and Office Site Owned 9.200
WEMP/WMYX Transmitter site Owned 3,200
WAMG Transmitter site Owned N/A
Kansas City Market KCFX, KCIY, and KXTR Studio and Office Site Leased (expires 2/28/2018) 20,914
KQRC Studio and Office Site Leased (expires 5/31/1999) 3,500
KCAZ Studio, Office and Transmitter site Owned 5,000
KCFX Transmitter site Leased (expires 6/25/2000 N/A
KXTR Transmitter site Leased (expires 3/20/2002) N/A
KCIY Transmitter site Leased (expires 7/25/2007) N/A
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET)
- ------------------ ---------------------------------------------- ---------------------------- ----------------
<S> <C> <C> <C>
WGH/(AM), WGH/(FM) and WVCL Studio and Office
Norfolk Market Site Leased (expires 8/30.2007) 15,737
WGH-AM/FM Transmitter site Owned 1,000
WGH Nighttime Transmitter site Owned 1,800
WVCL Transmitter site Leased (expires N/A) N/A
St. Louis Market WRTH, WIL and KIHT Studio and Office Site Leased (expires 3/15/2004) 12,000
WRTH Transmitter site Owned N/A
WIL Transmitter site Leased (expires 5/31/1998) N/A
KIHT Main FM Transmitter site Leased (expries 4/28/2000) N/A
KIHT Auxilliary FM Transmitter site Leased (expires 3/15/2004 N/A
</TABLE>
- ----------
(a) Lease expiration dates assume exercise of all renewal options of the
lessee.
The Company believes that all of its properties, both owned and leased, are
generally in good operating condition, subject to normal wear and tear, and are
suitable and adequate for the Company's current business operations.
ITEM 3. LEGAL PROCEEDINGS
On July 14, 1997, Sinclair publicly announced that it had reached an
agreement for certain of its owned and/or programmed television stations which
were affiliated with UPN to become affiliated with WB beginning January 16,
1998. On August 1, 1997, UPN informed Sinclair that it did not believe Sinclair
or its affiliates had provided proper notice of its intention not to extend the
UPN affiliation agreements beyond January 15, 1998, and, accordingly, that these
agreements had been automatically renewed through January 15, 2001.
In August 1997, UPN filed an action (the "California Action") in Los
Angeles Superior Court against the Company, seeking declaratory relief and
specific performance or, in the alternative, unspecified damages and alleging
that neither the Company nor its affiliates provided proper notice of their
intention not to extend the current UPN affiliations beyond January 15, 1998.
Certain subsidiaries of the Company filed an action (the "Baltimore Action") in
the Circuit Court for Baltimore City seeking declaratory relief that their
notice was effective to terminate the affiliations on January 15, 1998. On
December 9, 1997, the court in the Baltimore Action ruled that Sinclair gave
timely and proper notice to effectively terminate the affiliations as of January
15, 1998 and granted Sinclair's motion for summary judgment. Based on the
decision in the Baltimore Action, the court in the Los Angeles Superior Court
has stayed all proceedings in the California Action. Following an appeal by UPN,
the court of Special Appeals of Maryland upheld the ruling in the Baltimore
Action and UPN is seeking further appellate review by the Maryland Court of
Appeals. Although the Company believes that proper notice of intention not to
extend was provided to UPN, there can be no assurance that the Company and its
subsidiaries will prevail in these proceedings or that the outcome of these
proceedings, if adverse to the Company and its subsidiaries, will not have a
material adverse effect on the Company.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. Except as described above, the
Company is not a party to any lawsuit or proceeding that in the opinion of the
Company will have a material adverse effect.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 1997.
33
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock
Effective June 13, 1995, the common stock of the Company was listed for
trading on the Nasdaq stock market under the symbol SBGI. The following table
sets forth for the periods indicated the high and low sales prices on the Nasdaq
stock market.
1995 HIGH LOW
---- ----------- -----------
Second Quarter (from June 13) .......... $ 29.00 $ 23.25
Third Quarter .......................... 31.00 27.75
Fourth Quarter ......................... 22.50 16.25
1996 HIGH LOW
---- ----------- ------------
First Quarter ........... $ 26.50 $ 16.875
Second Quarter .......... 43.50 25.50
Third Quarter ........... 46.50 36.125
Fourth Quarter .......... 43.75 23.00
1997 HIGH LOW
---- ----------- -----------
First Quarter ........... $ 31.00 $ 23.00
Second Quarter .......... 30.875 23.00
Third Quarter ........... 40.375 24.25
Fourth Quarter .......... 46.625 33.625
As of March 16, 1998, there were approximately 77 stockholders of record of
the common stock of the Company. This number does not include beneficial owners
holding shares through nominee names. Based on information available to it, the
Company believes it has more than 1,500 beneficial owners of its Class A Common
Stock.
The Company generally has not paid a dividend on its common stock and does
not expect to pay dividends on its common stock in the foreseeable future. The
1997 Bank Credit Agreement and certain subordinated debt of the Company
generally prohibit the Company from paying dividends on its common stock. Under
the indentures governing the Company's 10% Senior Subordinated Notes due 2003,
10% Senior Subordinated Notes due 2005, 9% Senior Subordinated Notes due 2007
and 8 3/4% Senior Subordinated Notes due 2007, the Company is not permitted to
pay dividends on its common stock unless certain specified conditions are
satisfied, including that (i) no event of default then exists under the
Indenture or certain other specified agreements relating to indebtedness of the
Company and (ii) the Company, after taking account of the dividend, is in
compliance with certain net cash flow requirements contained in the Indenture.
In addition, under certain senior unsecured debt of the Company, the payment of
dividends is not permissible during a default thereunder.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31,
1993, 1994, 1995, 1996, and 1997 have been derived from the Company's audited
Consolidated Financial Statements. The Consolidated Financial Statements for the
years ended December 31, 1995, 1996 and 1997 are included elsewhere in this Form
10-K.
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere in this Form 10-K.
34
<PAGE>
STATEMENT OF OPERATIONS DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1994(A) 1995(A) 1996(A) 1997(A)
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcast revenues(b) ......................... $69,532 $118,611 $187,934 $ 346,459 $471,228
Barter revenues ................................... 6,892 10,743 18,200 32,029 45,207
------- -------- -------- --------- --------
Total revenues ................................... 76,424 129,354 206,134 378,488 516,435
------- -------- -------- --------- --------
Operating expenses, excluding depreciation
and amortization, deferred compensation
and special bonuses paid to executive of-
ficers ........................................... 32,295 50,545 80,446 167,765 236,376
Depreciation and amortization(c) .................. 22,486 55,587 80,410 121,081 152,170
Amortization of deferred compensation ............. -- -- -- 739 1,636
Special bonuses paid to executive officers ........ 10,000 3,638 -- -- --
------- -------- -------- --------- --------
Broadcast operating income ........................ 11,643 19,584 45,278 88,903 126,253
------- -------- -------- --------- --------
Interest and amortization of debt discount
expense .......................................... 12,852 25,418 39,253 84,314 98,393
Interest and other income ......................... 2,131 2,447 4,163 3,478 2,228
Subsidiary trust minority interest expense(d) -- -- -- -- 18,600
------- -------- -------- --------- --------
Income (loss) before (provision) benefit for
income taxes and extraordinary item .............. $ 922 $(3,387) $ 10,188 $ 8,067 $ 11,488
======= ======== ======== ========= ========
Net income (loss) available to common
shareholders ..................................... $(7,945) $(2,740) $ 76 $ 1,131 $(13,329)
======= ======== ======== ========= ========
Basic Earnings per share:
Net income (loss) before extraordinary
item ............................................ $ -- $ (0.09) $ 0.15 $ 0.03 $ (0.13)
======= ======== ======== ========= ========
Extraordinary item ............................... $ (0.27) $ -- $ (0.15) $ -- $ (0.17)
======= ======== ======== ========= ========
Net income (loss) ................................ $ (0.27) $ (0.09) $ -- $ 0.03 $ (0.37)
======= ======== ======== ========= ========
Weighted average shares outstanding (in
thousands) ...................................... 29,000 29,000 32,205 37,381 35,951
======= ======== ======== ========= ========
OTHER DATA:
Broadcast cash flow(e) ............................ $37,498 $67,519 $111,124 $ 189,216 $243,406
Broadcast cash flow margin(f) ..................... 53.9 % 56.9 % 59.1 % 54.6 % 51.7 %
Adjusted EBITDA(g) ................................ $35,406 $64,547 $105,750 $180,272 $229,000
Adjusted EBITDA margin(f) ......................... 50.9 % 54.4 % 56.3 % 52.0 % 48.6 %
After tax cash flow(h) ............................ $20,850 $24,948 $ 54,645 $ 77,484 $104,884
Program contract payments ......................... 8,723 14,262 19,938 30,451 51,059
Capital expenditures .............................. 528 2,352 1,702 12,609 19,425
Corporate overhead expense ........................ 2,092 2,972 5,374 8,944 14,406
</TABLE>
(Continued on following page)
35
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------
1993 1994(A) 1995(A) 1996(A) 1997(A)
------------ ------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET AND CASH
FLOW DATA:
Cash and cash equivalents ....................... $ 18,036 $ 2,446 $ 112,450 $ 2,341 $ 139,327
Total assets .................................... 242,917 399,328 605,272 1,707,297 2,034,234
Total debt(i) ................................... 224,646 346,270 418,171 1,288,103 1,080,722
Company Obligated Mandatorily Redeem-
able Security of Subsidiary
Trust Holding Solely KDSM Senior Deben-
tures(j) ....................................... -- -- -- -- 200,000
Total stockholders' equity (deficit) ............ (11,024) (13,723) 96,374 237,253 543,288
Cash flows from operating activities(k) ......... 11,230 20,781 55,986 69,298 96,625
Cash flows from investing activities(k) ......... 1,521 (249,781) (119,320) (1,012,225) (218,990)
Cash flows from financing activities(k) ......... 3,462 213,410 173,338 832,818 259,351
</TABLE>
- ----------
(a) The Company made acquisitions in 1994, 1995, 1996 and 1997 as described in
the footnotes to the Consolidated Financial Statements incorporated herein
by reference. The statement of operations data and other data presented for
periods preceding the dates of acquisitions do not include amounts for
these acquisitions and therefore are not comparable to subsequent periods.
Additionally, the years in which the specific acquisitions occurred may not
be comparable to subsequent periods depending on when during the year the
acquisition occurred.
(b) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(c) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment, and amortization of acquired intangible
broadcasting assets and other assets including amortization of deferred
financing costs and costs related to excess syndicated programming.
(d) Subsidiary trust minority interest expense represents the distributions on
the HYTOPS.
(e) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, special bonuses paid to executive officers,
depreciation and amortization (including film amortization and amortization
of deferred compensation, and excess syndicated programming), less cash
payments for program contract rights. Cash program payments represent cash
payments made for current program payables and do not necessarily
correspond to program usage. Special bonuses paid to executive officers are
considered unusual and non-recurring. The Company has presented broadcast
cash flow data, which the Company believes are comparable to the data
provided by other companies in the industry, because such data are commonly
used as a measure of performance for broadcast companies. However,
broadcast cash flow does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements
of cash flows, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(f) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Adjusted EBITDA margin" is defined as Adjusted
EBITDA divided by net broadcast revenues. "After tax cash flow margin" is
defined as after tax cash flow divided by net broadcast revenues.
(g) "Adjusted EBITDA" is defined as broadcast cash flow less corporate overhead
expense and is a commonly used measure of performance for broadcast
companies. Adjusted EBITDA does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements
of cash flows, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(h) "After tax cash flow" is defined as net income (loss) available to common
shareholders plus extraordinary losses, minus extraordinary gains (before
the effects of related tax benefits) plus depreciation and amortization of
intangibles, (excluding film amortization), amortization of deferred
compensation, amortization of excess syndicated programming, special
bonuses paid to executive officers, and the deferred tax provision (or
minus the deferred tax benefit). After tax cash flow is presented here not
as a measure of operating results and does not purport to represent cash
provided by operating activities. After tax cash flow should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(notes continued on following page).
36
<PAGE>
(i) "Total debt" is defined as long-term debt, net of unamortized discount, and
capital lease obligations, including current portion thereof. In 1992 total
debt included warrants outstanding which were redeemable outside the
control of the Company. The warrants were purchased by the Company for
$10,400 in 1993. Total debt as of December 31, 1993 included $100,000 in
principal amount of the 1993 Notes (as defined herein), the proceeds of
which were held in escrow to provide a source of financing for acquisitions
that were subsequently consummated in 1994 utilizing borrowings under the
Bank Credit Agreement. $100,000 of the 1993 Notes was redeemed from the
escrow in the first quarter of 1994. Total debt does not include the HYTOPS
or the Company's preferred stock.
(j) Company Obligated Mandatorily Redeemable Security of Subsidiary Trust
Holding Solely KDSM Senior Debentures represents $200,000 aggregate
liquidation value of the HYTOPS.
(k) These items are financial statement disclosures in accordance with
generally accepted accounting principles and are also presented in the
Company's consolidated financial statements incorporated by reference
herein.
37
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The Company is a diversified broadcasting company that currently owns or
programs pursuant to Local Marketing Agreements ("LMAs") 35 television stations
and, upon consummation of all pending acquisitions and dispositions, will own or
program pursuant to LMAs 56 television stations. The Company owns or programs
pursuant to LMAs 52 radio stations and upon consummation of all pending
acquisitions and dispositions, the Company will own or program pursuant to LMAs
51 radio stations. The Company also has options to acquire two additional radio
stations
The operating revenues of the Company are derived from local and national
advertisers and, to a much lesser extent, from television network compensation.
The Company's primary operating expenses involved in owning, operating or
programming the television and radio stations are syndicated program rights
fees, commissions on revenues, employee salaries, news-gathering and promotion.
Amortization and depreciation of costs associated with the acquisition of the
stations and interest carrying charges are significant factors in determining
the Company's overall profitability.
Set forth below are the principal types of broadcast revenue received by
the Company's stations for the periods indicated and the percentage contribution
of each type to the Company's total gross broadcast revenue:
BROADCAST REVENUE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1995 1996 1997
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Local/regional advertising..... $ 104,299 47.5% $ 199,029 49.4% $ 287,860 52.7%
National advertising .......... 113,678 51.7 191,449 47.6 250,445 45.9
Network compensation .......... 442 0.2 3,907 1.0 5,479 1.0
Political advertising ......... 197 0.1 6,972 1.7 1,189 0.2
Production .................... 1,115 0.5 1,142 0.3 1,239 0.2
--------- ----- --------- ----- --------- -----
Broadcast revenue ............. 219,731 100.0% 402,499 100.0% 546,212 100.0%
===== ===== =====
Less: agency commissions....... (31,797) (56,040) (74,984)
--------- --------- ---------
Broadcast revenue, net ........ 187,934 346,459 471,228
Barter revenue ................ 18,200 32,029 45,207
--------- --------- ---------
Total revenue ................. $ 206,134 $ 378,488 $ 516,435
========= ========= =========
</TABLE>
The Company's primary types of programming and their approximate
percentages of 1997 net broadcast revenue were network programming (14.9%),
children's programming (5.3%) and other syndicated programming (79.8%). The
Company's four largest categories of advertising and their approximate
percentages of 1997 net broadcast revenue were automotive (20.0%), movies
(6.7%), fast food advertising (6.4%) and retail/department stores (6.2%). No
other advertising category accounted for more than 6% of the Company's net
broadcast revenue in 1997. No individual advertiser accounted for more than 5%
of any individual Company station's net broadcast revenue in 1997.
38
<PAGE>
The following table sets forth certain operating data of the Company for
the years ended December 31, 1995, 1996 and 1997. Capitalized terms used in this
section and not defined elsewhere in this Form 10-K are defined in Notes to the
Consolidated Financial Statements of the Company included elsewhere in this Form
10-K.
OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net broadcast revenue ..................... $ 187,934 $ 346,459 $ 471,228
Barter revenue ............................ 18,200 32,029 45,207
--------- --------- ---------
Total revenue ............................. 206,134 378,488 516,435
--------- --------- ---------
Operating costs ........................... 64,326 142,576 198,262
Expenses from barter arrangements ......... 16,120 25,189 38,114
Depreciation and amortization ............. 80,410 121,081 152,170
Stock-based compensation .................. -- 739 1,636
--------- --------- ---------
Broadcast operating income ................ $ 45,278 $ 88,903 $ 126,253
========= ========= =========
BROADCAST CASH FLOW (BCF) DATA:
Television BCF ............................ $ 111,124 $ 175,212 $ 221,631
Radio BCF ................................. -- 14,004 21,775
--------- --------- ---------
Consolidated BCF .......................... $ 111,124 $ 189,216 $ 243,406
========= ========= =========
Television BCF margin ..................... 59.1% 57.1% 54.8%
Radio BCF margin .......................... -- 35.0% 32.7%
Consolidated BCF margin ................... 59.1% 54.6% 51.7%
OTHER DATA:
Adjusted EBITDA ........................... $ 105,750 $ 180,272 $ 229,000
Adjusted EBITDA margin .................... 56.3% 52.0% 48.6%
After tax cash flow ....................... $ 54,645 $ 77,484 $ 104,884
Program contract payments ................. 19,938 30,451 51,059
Corporate expense ......................... 5,374 8,944 14,406
Capital expenditures ...................... 1,702 12,609 19,425
</TABLE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997
Net broadcast revenue increased $124.7 million, or 36.0%, to $471.2 million
for the year ended December 31, 1997 from $346.5 million for the year ended
December 31, 1996. The increase in net broadcast revenue for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 was comprised
of $114.5 million related to television and radio station acquisitions and LMA
transactions consummated during 1996 and 1997 (the "Acquisitions") and $10.2
million that resulted from an increase in net broadcast revenue on a same
station basis. Also on a same station basis, revenue from local and national
advertisers grew 7.7% and 4.9%, respectively, for a combined growth rate of
6.1%.
Total operating costs increased $55.7 million, or 39.1%, to $198.3 million
for the year ended December 31, 1997 from $142.6 million for the year ended
December 31, 1996. The increase in operating costs for the year ended December
31, 1997 as compared to the year ended December 31, 1996 com-
39
<PAGE>
prised $49.0 million related to the Acquisitions, $5.4 million from an increase
in corporate overhead expenses, and $1.3 million from an increase in operating
costs on a same station basis. On a same station basis, operating costs
increased 1.8%.
Broadcast operating income increased to $126.3 million for the year ended
December 31, 1997, from $88.9 million for the year ended December 31, 1996, or
42.1%. The increase in broadcast operating income for the year ended December
31, 1997 as compared to the year ended December 31, 1996 was primarily
attributable to the Acquisitions.
Interest expense increased to $98.4 million for the year ended December 31,
1997 from $84.3 million for the year ended December 31, 1996, or 16.7%. The
increase in interest expense for the year ended December 31, 1997 primarily
related to indebtedness incurred by the Company to finance the Acquisitions.
Subsidiary trust minority interest expense of $18.6 million for the year ended
December 31, 1997 is related to the issuance of the HYTOPS which was completed
March 12, 1997. Subsidiary trust minority interest expense was partially offset
by reductions in interest expense because a portion of the proceeds of the sale
of the HYTOPS was used to reduce indebtedness under the Company's Bank Credit
Agreement.
Interest and other income decreased to $2.2 million for the year ended
December 31, 1997 from $3.5 million for the year ended December 31, 1996. This
decrease was primarily due to lower average cash balances during these periods.
For the reasons described above, net loss for the year ended December 31,
1997 was $10.6 million or $.37 per share compared to net income of $1.1 million
or $.03 per share for the year ended December 31, 1996.
Broadcast Cash Flow increased $54.2 million to $243.4 million for the year
ended December 31, 1997 from $189.2 million for the year ended December 31,
1996, or 28.6%. The increase in Broadcast Cash Flow was comprised of $45.0
million relating to the Acquisitions and $9.2 million that resulted from
Broadcast Cash Flow growth on a same station basis, which had Broadcast Cash
Flow growth of 8.2%. The Company's Broadcast Cash Flow Margin decreased to 51.7%
for the year ended December 31, 1997 from 54.6% for the year ended December 31,
1996. The decrease in Broadcast Cash Flow Margin for the year ended December 31,
1997 as compared to the year ended December 31, 1996 primarily resulted from the
lower margins related to the 1996 Acquisitions. In addition, 1996 Broadcast Cash
Flow Margin benefited from a non-recurring $4.7 million timing lag of program
contract payments relating to the River City Acquisition and certain other
acquisitions. On a same station basis, Broadcast Cash Flow Margin improved from
57.3% for the year ended December 31, 1996 to 58.9% for the year ended December
31, 1997.
Adjusted EBITDA represents broadcast cash flow less corporate expenses.
Adjusted EBITDA increased to $229.0 million for the year ended December 31, 1997
from $180.3 million for the year ended December 31, 1996, or 27.0%. These
increases in Adjusted EBITDA for the year ended December 31, 1997 as compared to
the year ended December 31, 1996 resulted from the Acquisitions and to a lesser
extent, increases in net broadcast revenues on a same station basis. The
Company's Adjusted EBITDA margin decreased to 48.6% for the year ended December
31, 1997 from 52.0% for the year ended December 31, 1996. This decrease in
Adjusted EBITDA margin resulted primarily from the circumstances affecting
broadcast cash flow margins as noted above combined with an increase in
corporate expenses. Corporate overhead expenses increased to $14.4 million for
the year ended December 31, 1997 from $8.9 million for the year ended December
31, 1996, or 61.8%. These increases in corporate expenses primarily resulted
from costs associated with managing a larger base of operations. During 1996,
the Company increased the size of its corporate staff as a result of the
addition of a radio business segment and a significant increase in the number of
television stations owned, operated or programmed. The costs associated with
this increase in staff were only incurred during a partial period of the year
ended December 31, 1996.
After Tax Cash Flow increased to $104.9 million for the year ended December
31, 1997 from $77.5 million for the year ended December 31, 1996, or 35.4%. The
increase in After Tax Cash Flow for the year ended December 31, 1997 as compared
to the year ended December 31, 1996 primarily resulted
40
<PAGE>
from the Acquisitions, an increase in revenue on a same station basis, a Federal
income tax receivable of $10.6 million resulting from 1997 NOL carry-backs,
offset by interest expense on the debt incurred to consummate the Acquisitions
and subsidiary trust minority interest expense related to the private placement
of the HYTOPS issued during March 1997.
YEARS ENDED DECEMBER 31, 1995 AND 1996
Total revenue increased to $378.5 million, or 83.6%, for the year ended
December 31, 1996 from $206.1 million for the year ended December 31, 1995.
Excluding the effects of non-cash barter transactions, net broadcast revenue for
the year ended December 31, 1996 increased by 84.4% over the year ended December
31, 1995. The increase in broadcast revenue was primarily the result of
acquisitions and LMA transactions consummated by the Company in 1995 (the "1995
Acquisitions") and 1996. For stations owned, operated or programmed throughout
1995 and 1996, television broadcast revenue grew 2.1% for the year ended
December 31, 1996 when compared to the year ended December 31, 1995. For
stations owned, operated or programmed throughout 1994 and 1995, television
broadcast revenue grew 12.8% for the year ended December 31, 1995 when compared
to the year ended December 31, 1994. The decrease in 1996 revenue growth as
compared to 1995 revenue growth primarily resulted from the loss in 1996 of the
Fox affiliation at WTTO in the Birmingham market, the loss of the NBC
affiliation at WRDC in the Raleigh/Durham market and decreases in ratings at
WCGV and WNUV in the Milwaukee and Baltimore markets, respectively.
Operating expenses excluding depreciation, amortization of intangible
assets and amortization of deferred compensation and excess syndicated
programming costs increased to $167.8 million, or 108.7%, for the year ended
December 31, 1996 from $80.4 million for the year ended December 31, 1995. The
increase in expenses for the year ended December 31, 1996 as compared to the
year ended December 31, 1995 was largely attributable to operating costs
associated with the 1995 and 1996 Acquisitions, an increase in LMA fees
resulting from LMA transactions and an increase in corporate overhead expenses.
Broadcast operating income increased to $88.9 million for the year ended
December 31, 1996, from $45.3 million for the year ended December 31, 1995, or
96.2%. The increase in broadcast operating income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 was primarily
attributable to the 1995 and 1996 Acquisitions.
Interest expense increased to $84.3 million for the year ended December 31,
1996 from $39.3 million for the year ended December 31, 1995, or 114.5%. The
increase in interest expense for the year ended December 31, 1996 was primarily
related to senior bank indebtedness incurred by the Company to finance the River
City Acquisition and other acquisitions.
Interest and other income decreased to $3.5 million for the year ended
December 31, 1996 from $4.2 million for the year ended December 31, 1995, or
16.7%. The decrease for the year ended December 31, 1996 was primarily due to
lower cash balances and related interest income resulting from cash payments
made in February 1996 when the Company made a $34.4 million payment relating to
the WSMH acquisition and April 1996 when the Company made a $60 million down
payment relating to the River City Acquisition. The decrease in interest income
was offset by an increase in other income resulting from the 1995 and 1996
Acquisitions.
For the reasons described above, net income for the year ended December 31,
1996 was $1.1 million or $0.03 per share compared to net income of $5.0 million
or $0.15 per share for the year ended December 31, 1995 before the extraordinary
loss on early extinguishment of debt.
Broadcast cash flow increased to $189.2 million for the year ended December
31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The
increase in broadcast cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions. For stations owned, operated or programmed throughout 1995 and
1996, broadcast cash flow grew 1.3% for the year ended December 31, 1996 when
compared to the year ended December 31, 1995. For stations owned, operated or
programmed throughout 1994 and 1995, broadcast cash flow grew 23.7% for the year
ended December 31, 1995 when compared to the year ended December 31, 1994. The
decrease in 1996 broadcast cash flow growth as compared to 1995
41
<PAGE>
broadcast cash flow growth primarily resulted from the loss in 1996 of the Fox
affiliation at WTTO in the Birmingham market, the loss of the NBC affiliation at
WRDC in the Raleigh/Durham market and decreases in ratings at WCGV and WNUV in
the Milwaukee and Baltimore markets, respectively. The Company's broadcast cash
flow margin decreased to 54.6% for the year ended December 31, 1996 from 59.1%
for the year ended December 31, 1995. Excluding the effect of radio station
broadcast cash flow, television station broadcast cash flow margin decreased to
56.7% for the year ended December 31, 1996 as compared to 59.1% for the year
ended December 31, 1995. The decrease in broadcast cash flow margins for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily resulted from the lower margins of the acquired radio broadcasting
assets and lower margins of certain of the acquired television stations. For
stations owned, operated or programmed throughout 1996 and 1995, broadcast cash
flow margins were unchanged when comparing the years ended December 31, 1996 and
1995. The Company believes that margins of certain of the acquired stations will
improve as operating and programming synergies are implemented.
Adjusted EBITDA increased to $180.3 million for the year ended December 31,
1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The
increase in Adjusted EBITDA for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 resulted from the 1995 and 1996 Acquisitions.
The Company's Adjusted EBITDA margin decreased to 52.0% for the year ended
December 31, 1996 from 56.3% for the year ended December 31, 1995. The decrease
in Adjusted EBITDA margins for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 primarily resulted from higher operating costs
at certain of the acquired stations.
After-tax cash flow increased to $77.5 million for the year ended December
31, 1996 from $54.6 million for the year ended December 31, 1995, or 41.9%. The
increase in after-tax cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions offset by interest expense on the debt incurred to consummate these
acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had $139.3 million in cash balances
and net working capital of approximately $176.0 million. The Company's primary
sources of liquidity are cash provided by operations and availability under the
1997 Bank Credit Agreement. As of March 10, 1998, the Company's cash balances
decreased to approximately $10.1 million as a result of closing on certain of
the Heritage television stations. Also as of March 10, 1998, approximately
$239.8 million was available for borrowing under the 1997 Bank Credit Agreement.
An additional $89.6 million is available to the Company under its Revolving
Credit Commitment to the extent future acquisitions provide incremental EBITDA.
In addition, the 1997 Bank Credit Agreement provides for a Tranche C term loan
in the amount of up to $400 million which can be utilized upon approval by the
agent bank and upon raising sufficient commitments to fund the additional loans.
Net cash flows from operating activities increased to $96.6 million for the
year ended December 31, 1997 from $69.3 million for the year ended December 31,
1996. The Company made income tax payments of $6.5 million for the year ended
December 31, 1997 as compared to $6.8 million for the year ended December 31,
1996. The Company made interest payments on outstanding indebtedness of $98.5
million during the year ended December 31, 1997 as compared to $82.8 million for
the year ended December 31, 1996. Additional interest payments for the year
ended December 31, 1997 as compared to the year ended December 31, 1996
primarily related to additional interest costs on indebtedness incurred to
finance the 1996 Acquisitions. The Company made subsidiary trust minority
interest expense payments of $17.6 million for the year ended December 31, 1997
related to the issuance of HYTOPS completed in March 1997. Program rights
payments increased to $51.1 million for the year ended December 31, 1997 from
$30.5 million for the year ended December 31, 1996, primarily as a result of the
1996 Acquisitions.
Net cash flows used in investing activities decreased to $219.0 million for
the year ended December 31, 1997 from $1.0 billion for the year ended December
31, 1996. During the year ended December 31, 1997, the Company made cash
payments of $87.5 million to acquire the license and non-license assets of
42
<PAGE>
KUPN-TV in Las Vegas, Nevada, utilizing indebtedness under the 1997 Bank Credit
Agreement and existing cash balances. During the year ended December 31, 1997,
the Company incurred option extension payments and other costs of $16.0 million
relating to WSYX-TV in Columbus, Ohio. The Company made purchase option exercise
payments of $11.1 million during the year ended December 31, 1997 exercising
options to acquire certain FCC licenses related to the River City Acquisition.
The Company made payments for property and equipment of $19.4 million for the
year ended December 31, 1997. During the year ended December 31, 1997, the
Company made deposits and incurred other costs relating to the Heritage
Acquisition, the Max Media Acquisition and other acquisitions of $66.1 million,
$12.8 million and $3.4 million, respectively. The Company anticipates that
future requirements for capital expenditures will include capital expenditures
incurred during the ordinary course of business (which will include costs
associated with the implementation of digital television technology) and the
cost of additional acquisitions of television and radio stations if suitable
acquisitions can be identified on acceptable terms.
Net cash flows provided by financing activities decreased to $259.4 million
for the year ended December 31, 1997 from $832.8 million for the year ended
December 31, 1996. In March 1997, the Company completed issuance of the HYTOPS.
The Company utilized $135 million of the approximately $192.8 million net
proceeds of the issuance of the HYTOPS to repay outstanding debt and retained
the remainder for general corporate purposes, which included the acquisition of
KUPN-TV in Las Vegas, Nevada. The Company made payments totaling $4.6 million to
repurchase 186,000 shares of Class A Common Stock during the year ended December
31, 1997. In May 1997, the Company made payments of $4.7 million related to the
amendment of its 1996 Bank Credit Agreement. In the fourth quarter of 1996, the
Company negotiated the prepayment of syndicated program contract liabilities for
excess syndicated programming assets. In the first quarter of 1997, the Company
made final cash payments of $1.4 million related to these negotiations. In July
1997, the Company issued $200.0 million aggregate principal amount of 9% Senior
Subordinated Notes due 2007 and utilized $162.5 million of the approximately
$195.6 million net proceeds to repay outstanding indebtedness, retaining the
remainder to pay a portion of the $63 million cash down payment relating to the
Heritage Acquisition. In December 1997, the Company completed an issuance of
$250 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due
2007. The Company received net proceeds from the issuance of $244.0 million of
which $106.2 million was used to repurchase $98.1 million aggregate principal
amount of the 10% Senior Subordinated Notes due 2003. The Company retained the
remainder of the net proceeds for general corporate purposes which included
closing the acquisition of the Heritage television stations serving the
Mobile/Pensacola and Charleston/Huntington markets in January 1998.
The Company received net proceeds from the 1997 Preferred Stock Issuance
and the 1997 Common Stock Issuance of approximately $166.9 million and $151.0
million, respectively. The Company used the majority of these funds to repay
existing borrowings under the 1997 Bank Credit Agreement. Contemporaneously with
the 1997 Preferred Stock Issuance and the 1997 Common Stock Issuance, the
Company and the lenders under the 1997 Bank Credit Agreement entered into an
amendment to the 1997 Bank Credit Agreement, the effect of which was to
recharacterize $275 million of indebtedness from the Tranche A term loan under
the 1997 Bank Credit Agreement to amounts owing under the revolving credit
facility under the 1997 Bank Credit Agreement. The Company used $285.7 million
of the net proceeds from the 1997 Common Stock Issuance and the 1997 Preferred
Stock Issuance to repay outstanding borrowings under the revolving credit
facility, $8.9 million to repay outstanding amounts under the Tranche A term
loan and the remaining net proceeds of approximately $23.3 million for general
corporate purposes.
The Company has entered into agreements to acquire additional television
stations and radio stations in the Heritage Acquisition, the Lakeland
Acquisition, the Max Media Acquisition and the Sullivan Acquisition. The Company
also has an option to acquire the assets of WSYX-TV, Columbus, Ohio. The
aggregate cash consideration needed to complete the purchase of the remaining
stations under the Heritage Acquisition and to complete the Lakeland
Acquisition, the Max Media Acquisition and the Sullivan Acquisition and to
exercise the WSYX-TV option is expected to be approximately $1.6 billion (net of
anticipated proceeds from sales of stations involved in these acquisitions).
43
<PAGE>
The Company anticipates that funds from operations, existing cash balances
and availability of the revolving credit facility under the 1997 Bank Credit
Agreement will be sufficient to meet its working capital, capital expenditure
commitments (other than commitments for pending acquisitions described above)
and debt service requirements for the foreseeable future. The Company intends to
finance pending acquisitions through a combination of available cash, the net
proceeds of the Offering, and available borrowings under the 1997 Bank Credit
Agreement. The current terms of the 1997 Bank Credit Agreement do not allow the
Company to borrow an amount sufficient to finance all of the pending
acquisitions. The Company intends to begin discussions with its banks to
refinance the Bank Credit Agreement promptly upon the completion of the
Offering. The Company believes that such a refinancing can be accomplished on
terms reasonably satisfactory to the Company, but there can be no assurance that
the Company will be able to obtain such an amendment on satisfactory terms. The
1997 Bank Credit Agreement and the indentures relating to the Company's 8 3/4%
Senior Subordinated Notes due 2007, 9% Senior Subordinated Notes due 2007 and
10% Senior Subordinated Notes due 2005 restrict the incurrence of additional
indebtedness and the use of proceeds of an equity issuance, but these
restrictions are not expected to restrict the incurrence of indebtedness or use
of proceeds of an equity issuance to finance the pending acquisitions.
INCOME TAXES
Income tax provision increased to $16.0 million for the year ended December
31, 1997 from a provision of $6.9 million for the year ended December 31, 1996.
The Company's effective tax rate increased to 139.1% for the year ended December
31, 1997 from 86.0% for the year ended December 31, 1996. The increase in the
Company's effective tax rate for the year ended December 31, 1997 as compared to
the year ended December 31, 1996 primarily resulted from non-deductible goodwill
amortization resulting from certain 1995 and 1996 stock acquisitions, a tax
liability related to the dividends paid on the Company's Series C Preferred
Stock (see Note 9, sub-note (a) to the Company's Consolidated Financial
Statements), and state franchise taxes which are not based upon pre-tax income.
Management believes that pre-tax income and "earnings and profits" will increase
in future years which result in a lower effective tax rate and utilization of
certain tax deductions related to dividends paid on the Company's Series C
Preferred Stock.
As of December 31, 1997, the Company has a net deferred tax liability of
$21.5 million as compared to a net deferred tax asset of $782,000 as of December
31, 1996. This change in deferred taxes primarily relates to deferred tax
liabilities associated with book and tax differences relating to the
depreciation and amortization of fixed assets and intangible assets, a deferred
tax liability generated as a result of a reduction in basis of Series C
Preferred Stock (see Note 9, sub-note (a) to the Company's Consolidated
Financial Statements), offset by deferred tax assets resulting from Federal and
state net operating tax losses (NOL's) incurred during 1997. During the year
ended December 31, 1997, the Company carried back certain Federal NOL's to be
applied against prior years Federal taxes paid. These Federal NOL carry-backs
resulted in an income tax receivable of $10.6 million as of December 31, 1997.
The Company's income tax provision increased to $6.9 million for the year
ended December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's effective tax rate increased to 86% for the year ended December
31, 1996 from 51% for the year ended December 31, 1995. The increase for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to certain financial reporting and income tax differences
attributable to certain 1995 and 1996 Acquisitions (primarily non-deductible
goodwill resulting from stock acquisition), and state franchise taxes which are
independent of pre-tax income.
The net deferred tax asset decreased to $782,000 as of December 31, 1996
from $21.0 million at December 31, 1995. The decrease in the Company's net
deferred tax asset as of December 31, 1996 as compared to December 31, 1995 is
primarily due to the Company recording deferred tax liabilities of $18.1 million
relating to the acquisition of all of the outstanding stock of Superior in May
1996, adjustments related to certain 1995 acquisitions, and resulting
differences between the book and tax basis of the underlying assets.
44
<PAGE>
SEASONALITY
The Company's results usually are subject to seasonal fluctuations, which
result in fourth quarter broadcast operating income typically being greater than
first, second and third quarter broadcast operating income. This seasonality is
primarily attributable to increased expenditures by advertisers in anticipation
of holiday season consumer spending and an increase in viewership during this
period.
YEAR 2000
Certain computer programs have been written using two digits rather than
four to define the applicable year, which could result in the computer
recognizing a date using "00" as the year 1900 rather than the year 2000. This,
in turn, could result in major system failures and in miscalculations, and is
generally referred to as the "Year 2000" problem. The Company and all of its
subsidiaries have implemented computer systems which run substantially all of
the Company's principal data processing and financial reporting software
applications. The applications software used in these systems are Year 2000
compliant. Presently, the Company does not believe that Year 2000 compliance
will result in any material investments, nor does the Company anticipate that
the Year 2000 problem will have material adverse effects an the business
operations or financial performance of the Company. In addition, the Company is
not aware of any Year 2000 problems of its customers, suppliers or network
affiliates that will have a material adverse effect on the business, operations
or financial performance of the Company. There can be no assurance, however,
that the Year 2000 problem will not adversely affect the Company and its
business.
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCUSSION ABOUT MARKET PRICE
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement and supplementary data of the Company required by
this item are filed as exhibits hereto, are listed under Item 14(a)(1) and (2),
and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
None
45
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information relating to the Company's executive
officers, directors, certain key employees and persons expected to become
executive officers, directors or key employees.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------- ----- -------------------------------------------------
<S> <C> <C>
David D. Smith ................ 47 President, Chief Executive Officer, Director and
Chairman of the Board
Frederick G. Smith ............ 48 Vice President and Director
J. Duncan Smith ............... 43 Vice President, Secretary and Director
Robert E. Smith ............... 34 Vice President, Treasurer and Director
David B. Amy .................. 45 Chief Financial Officer
Barry Drake ................... 46 Chief Operating Officer, SCI Radio
Robert Gluck .................. 39 Regional Director, SCI
Michael Granados .............. 43 Regional Director, SCI
Steven M. Marks ............... 41 Regional Director, SCI
Stuart Powell ................. 56 Regional Director, SCI
John T. Quigley ............... 54 Regional Director, SCI
Frank Quitoni ................. 53 Regional Director, SCI
Frank W. Bell ................. 42 Vice President, Programming, SCI Radio
M. William Butler ............. 45 Vice President/Group Program Director, SCI
Lynn A. Deppen ................ 40 Vice President, Engineering, SCI Radio
Michael Draman ................ 48 Vice President/TV Sales and Marketing, SCI
Stephen A. Eisenberg .......... 55 Vice President/Director of National Sales, SCI
Nat Ostroff ................... 57 Vice President/New Technology
Delbert R. Parks, III ......... 45 Vice President/Operations and Engineering, SCI
Robert E. Quicksilver ......... 43 Vice President/General Counsel, SCI
Thomas E. Severson ............ 34 Corporate Controller
Michael E. Sileck ............. 37 Vice President/Finance, SCI
Robin A. Smith ................ 41 Chief Financial Officer, SCI Radio
Patrick J. Talamantes ......... 33 Director of Corporate Finance, Treasurer of SCI
Lawrence E. McCanna ........... 54 Director
Basil A. Thomas ............... 82 Director
</TABLE>
In addition to the foregoing, the following persons have agreed to serve as
executive officers and/or directors of the Company as soon as permissible under
the rules of the FCC and applicable laws.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------ ----- -----------------------------------------------
<S> <C> <C>
Barry Baker .................. 45 Executive Vice President of the Company, Chief
Executive Officer of SCI and Director
Kerby Confer ................. 56 Chief Executive Officer, SCI Radio
Roy F. Coppedge, III ......... 49 Director
</TABLE>
In connection with the River City Acquisition, the Company agreed to
increase the size of the Board of Directors from seven members to nine to
accommodate the prospective appointment of each of Barry Baker and Roy F.
Coppedge, III or such other designee as Boston Ventures Limited Partnership IV
and Boston Ventures Limited Partnership IVA (collectively "Boston Ventures") may
select. Mr. Baker and Mr. Confer currently serve as consultants to the Company.
The Company's obligation to appoint Mr. Coppedge or another designee of Boston
Ventures will end its Boston Ventures sells shares as expected in a pending
offering.
Members of the Board of Directors are elected for one-year terms and until
their successors are duly elected and qualified. Executive officers are
appointed by the Board of Directors annually to serve for one-year terms and
until their successors are duly appointed and qualified.
David D. Smith has served as President, Chief Executive Officer and
Chairman of the Board since September 1990. Prior to that, he served as General
Manager of WPTT, Pittsburgh, Pennsylvania, from 1984, and assumed the financial
and engineering responsibility for the Company, including the construction
46
<PAGE>
of WTTE, Columbus, Ohio, in 1984. In 1980, Mr. Smith founded Comark Television,
Inc., which applied for and was granted the permit for WPXT-TV in Portland,
Maine and which purchased WDSI-TV in Chattanooga, Tennessee. WPXT-TV was sold
one year after construction and WDSI-TV was sold two years after its
acquisition. From 1978 to 1986, Mr. Smith co-founded and served as an officer
and director of Comark Communications, Inc., a company engaged in the
manufacture of high power transmitters for UHF television stations. His
television career began with WBFF in Baltimore, where he helped in the
construction of the station and was in charge of technical maintenance until
1978. David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith
are brothers.
Frederick G. Smith has served as Vice President of the Company since 1990
and as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith
was an oral and maxillofacial surgeon engaged in private practice and was
employed by Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation
of which Mr. Smith was the sole officer, director and stockholder.
J. Duncan Smith has served as Vice President, Secretary and a Director of
the Company since 1988. Prior to that, he worked for Comark Communications, Inc.
installing UHF transmitters. In addition, he also worked extensively on the
construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and
WTTA in St. Petersburg, as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.
Robert E. Smith has served as Vice President, Treasurer and a Director of
the Company since 1988. Prior to that, he served as Program Director at WBFF
from 1986 to 1988. Prior to that, he assisted in the construction of WTTE and
also worked for Comark Communications, Inc. installing UHF transmitters.
David B. Amy has served as Chief Financial Officer ("CFO") since October of
1994. In addition, he serves as Secretary of Sinclair Communications, Inc., the
Company subsidiary which owns and operates the broadcasting operations. Prior to
his appointment as CFO, Mr. Amy served as the Corporate Controller of the
Company beginning in 1986 and has been the Company's Chief Accounting Officer
since that time. Mr. Amy has over thirteen years of broadcast experience, having
joined the Company as a business manager for WPTT in Pittsburgh. Mr. Amy
received an MBA degree from the University of Pittsburgh in 1981.
Barry Drake has served as Chief Operating Officer of SCI Radio since
completion of the River City Acquisition. Prior to that time, he was Chief
Operating Officer -- Keymarket Radio Division of River City since July 1995.
Prior to that time, he was President and Chief Operating Officer of Keymarket
since 1988. From 1985 through 1988, Mr. Drake performed the duties of the
President of each of the Keymarket broadcasting entities, with responsibility
for three stations located in Houston, St. Louis and Detroit.
Robert Gluck has served as Regional Director of the Company since August
1997. As Regional Director, Mr. Gluck is responsible for the Milwaukee and
Raleigh/Durham markets. Prior to joining the Company, Mr. Gluck served as
General Manager at WTIC-TV in the Hartford-New Haven market. Prior to joining
WTIC-TV in 1988, Mr. Gluck served as National Sales Manager and Local Sales
Manager of WLVI-TV in Boston. Before joining WLVI-TV, Mr. Gluck served in
various sales and management capacities with New York national sales
representative firms.
Michael Granados has served as a Regional Director of the Company since
July 1996. As a Regional Director, Mr. Granados is responsible for the San
Antonio, Des Moines, Peoria and Las Vegas markets. Prior to July 1996, Mr.
Granados has served in various positions with the Company and, before the River
City Acquisition, with River City. He served as the General Sales Manager of
KABB from 1989 to 1993, the Station Manager and Director of Sales of WTTV from
1993 to 1994 and the General Manager of WTTV prior to his appointment as
Regional Director in 1996.
Steven M. Marks has served as Regional Director for the Company since
October 1994. As Regional Director, Mr. Marks is responsible for the Baltimore,
Norfolk, Flint and Birmingham markets. Prior to his appointment as Regional
Director, Mr. Marks served as General Manager for WBFF since July 1991. From
1986 until joining WBFF in 1991, Mr. Marks served as General Sales Manager at
WTTE. Prior to that time, he was national sales manager for WFLX-TV in West Palm
Beach, Florida.
Stuart Powell has served as a Regional Director since December 15, 1997. As
a Regional Director, Mr. Powell is responsible for the Pittsburgh, Kansas City
and Lexington markets. Prior to joining the Company, Mr. Powell served as Vice
President and General Manager at WXIX-TV in the Cincinnati
47
<PAGE>
market. Prior to joining WXIX-TV in 1992, Mr. Powell served as General Manager
of WFLD in Chicago. Before joining WFLD, Mr. Powell served in various sales and
management capacities with Scripps Howard in Phoenix and Kansas City.
John T. Quigley has served as a Regional Director of the Company since June
1996. As Regional Director, Mr. Quigley is responsible for the Columbus,
Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as
general manager of WTTE since July 1985. Prior to joining WTTE, Mr. Quigley
served in broadcast management positions at WCPO-TV in Cincinnati, Ohio and
WPTV-TV in West Palm Beach, Florida.
Frank Quitoni has served as a Regional Director since completion of the
River City Acquisition. As Regional Director, Mr. Quitoni is responsible for the
St. Louis, Sacramento, Indianapolis and Asheville/ Greenville/Spartanburg
markets. Prior to joining the Company, he was Vice President of Operations for
River City since 1995. Mr. Quitoni had served as the Director of Operations and
Engineering for River City since 1994. Prior thereto Mr. Quitoni served as a
consultant to CBS beginning in 1989. Mr. Quitoni was the Director of Olympic
Operations for CBS Sports for the 1992 Winter Olympic Games and consulted with
CBS for the 1994 Winter Olympic Games. Mr. Quitoni was awarded the Technical
Achievement Emmy for the 1992 and 1994 CBS Olympic broadcasts.
Frank W. Bell has served as Vice President/Radio Programming of SCI Radio
since the Company's acquisition of the assets of River City in 1996. Prior to
that time, he served in the same capacity in the Keymarket Radio Division of
River City Broadcasting since 1995, and for Keymarket Communications since 1987.
From 1981 through 1987, Mr. Bell owned and operated several radio stations in
Pennsylvania and Kansas. Before that, he served two years as a Regional Manager
for the National Association of Broadcasters.
M. William Butler has served as Vice President/Group Program Director, SCI
since 1997. From 1995 to 1997, Mr. Butler served as Director of Programming at
KCAL, the Walt Disney Company station in Los Angeles, California. From 1991 to
1995, he was Director of Marketing and Programming at WTXF in Philadelphia,
Pennsylvania and prior to that he held the same position at WLVI in Boston,
Massachusetts. Mr. Butler attended the Graduate Business School of the
University of Cincinnati from 1975 to 1976.
Lynn A. Deppen has served as Director of Engineering/Radio Division of SCI
Radio since the Company's acquisition of the assets of River City in 1996. Prior
to that time, he served in the same position for the Keymarket Radio Division of
River City Broadcasting since 1995, and for Keymarket Communications since 1985.
Mr. Deppen has owned and operated his own technical consulting firm as well as
radio stations in Pennsylvania, New York and Ohio.
Michael Draman has served as Vice President/TV Sales and Marketing, SCI
since 1997. From 1995 until joining the Company, Mr. Draman served as Vice
President of Revenue Development for New World Television. From 1983 to 1995, he
was Director of Sales and Marketing for WSVN in Miami, Florida. Mr. Draman
attended The American University and The Harvard Business School and served with
the U.S. Marine Corps in Vietnam.
Stephen A. Eisenberg has served as Director of National Sales, SCI since
November 1996. Prior to joining the Company, he worked since 1975 in various
capacities at Petry Television, including most recently as Vice
President/Director of Sales with total national sales responsibility for KTTV in
Los Angeles, California, KCPQ-TV in Seattle, Washington, WTNH-TV in New Haven,
Connecticut, WKYC-TV in Cleveland, Ohio, WBIR-TV in Knoxville, Tennessee,
WKEF-TV in Dayton, Ohio and WTMJ-TV in Milwaukee, Wisconsin. Mr. Eisenberg
received an MS degree in Journalism from Northwestern's Medill School and a BA
degree from Brooklyn College.
Nat Ostroff has served as Vice President for New Technology since joining
the Company in January of 1996. From 1984 until joining the Company, he was the
President and CEO of Comark Communication Inc., a leading manufacturer of UHF
transmission equipment. While at Comark, Mr. Ostroff was nominated and awarded a
Prime Time Emmy Award for outstanding engineering achievement for the
development of new UHF transmitter technologies in 1993. In 1968, Mr. Ostroff
founded Acrodyne
48
<PAGE>
Industries Inc., a manufacturer of TV transmitters and a public company and
served as its first President and CEO. Mr. Ostroff holds a BSEE degree from
Drexel University and an MEEE degree from New York University. He is a member of
several industry organizations, including, AFCCE, IEEE and SBE.
Delbert R. Parks III has served as Vice President of Operations and
Engineering since the completion of the River City Acquisition. Prior to that
time, he was Director of Operations and Engineering for WBFF and Sinclair since
1985, and has been with the Company for 25 years. He is responsible for
planning, organizing and implementing operational and engineering policies and
strategies as they relate to television and computer systems. Currently, he is
consolidating facilities for Sinclair's television stations and has just
completed a digital facility for Sinclair's news and technical operation in
Pittsburgh. Mr. Parks was also a Lieutenant Colonel in the Maryland Army
National Guard and commanded the 1st Battalion, 175th Infantry (Light).
Robert E. Quicksilver has served as Vice President/General Counsel, SCI
since completion of the River City Acquisition. Prior to that time he served as
General Counsel of River City since September 1994. From 1988 to 1994, Mr.
Quicksilver was a partner of the law firm of Rosenblum, Goldenhersh, Silverstein
and Zafft, P.C. in St. Louis. Mr. Quicksilver holds a B.A. from Dartmouth
College and a J.D. from the University of Michigan.
Thomas E. Severson has served as Corporate Controller since January 1997.
Prior to that time, Mr. Severson served as Assistant Controller of the Company
since 1995. Prior to joining the Company, Mr. Severson held positions in the
audit departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991
to 1995. Mr. Severson is a graduate of the University of Baltimore and is a
Certified Public Accountant.
Michael E. Sileck has served as Vice President/Finance of SCI since
completion of the River City Acquisition. Prior to that time he served as the
Director of Finance for River City since 1993. Mr. Sileck joined River City in
July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck is
an active member of the Broadcast Cable Financial Management Association
("BCFM") and was a Director of BCFM from 1993 to 1996. Mr. Sileck, a Certified
Public Accountant, received a B.S. degree in Accounting from Wayne State
University and an M.B.A. in Finance from Oklahoma City University.
Robin A. Smith has served as Chief Financial Officer, SCI Radio since June
1996. From 1993 until joining the Company, Ms. Smith served as Vice President
and Chief Financial Officer of the Park Lane Group of Menlo Park, California,
which owned and operated small market radio stations. From 1982 to 1993, she
served as Vice President and Treasurer of Edens Broadcasting, Inc. in Phoenix,
Arizona, which owns and operates radio stations in major markets. Ms. Smith is a
graduate of the Arizona State University and is a Certified Public Accountant.
Patrick J. Talamantes has served as Director of Corporate Finance and
Treasurer of SCI since completion of the River City Acquisition. Prior to that
time, he served as Treasurer for River City since April 1995. From 1991 to 1995,
he was a Vice President with Chemical Bank, where he completed financings for
clients in the cable, broadcasting, publishing and entertainment industries. Mr.
Talamantes holds a B.A. degree from Stanford University and an M.B.A. from the
Wharton School at the University of Pennsylvania.
Lawrence E. McCanna has served as a Director of the Company since July
1995. Mr. McCanna has been a partner of the accounting firm of Gross, Mendelsohn
& Associates, P.A., since 1972 and has served as its managing partner since
1982. Mr. McCanna has served on various committees of the Maryland Association
of Certified Public Accountants and was chairman of the Management of the
Accounting Practice Committee. He is also a former member of the Management of
an Accounting Practice Committee of the American Institute of Certified Public
Accountants. Mr. McCanna is a member of the board of directors of Maryland
Special Olympics.
Basil A. Thomas has served as a Director of the Company since November
1993. He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and
has been in the private practice of law since 1983. From 1961 to 1968, Judge
Thomas served as an Associate Judge on the Municipal Court of Baltimore City
and, from 1968 to 1983, he served as an Associate Judge of the Supreme Bench of
Baltimore City. Judge Thomas is a trustee of the University of Baltimore and a
member of the American Bar Association and the Maryland
49
<PAGE>
State Bar Association. Judge Thomas attended the College of William & Mary and
received his L.L.B. from the University of Baltimore. Judge Thomas is the father
of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, counsel
to the Company.
Barry Baker has been the Chief Executive Officer of River City since 1989,
and is the President of the corporate general partner of River City and Better
Communications, Inc. ("BCI"). The principal business of both River City and BCI
is television and radio broadcasting. In connection with the River City
Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of
the Company and to elect him as a Director at such time as he is eligible to
hold those positions under applicable FCC regulations. He currently serves as a
consultant to the Company.
Kerby Confer served as a member of the Board of Representatives and Chief
Executive Officer -- Keymarket Radio Division of River City since July 1995.
Prior thereto, Mr. Confer served as Chairman of the Board and Chief Executive
Officer of Keymarket since its founding in December 1981. Prior to engaging in
the acquisition of various radio stations in 1975, Mr. Confer held a number of
jobs in the broadcast business, including serving as Managing Partner of a radio
station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a
pop music television show on WBAL-TV (Baltimore) and WDCA-TV (Washington, D.C.).
Prior thereto, Mr. Confer served as program director or producer/director for
radio and television stations owned by Susquehanna Broadcasting and Plough
Broadcasting Company, Inc. Mr. Confer currently provides services to the Company
and is expected to become Chief Executive Officer of SCI Radio at such time as
he is eligible to hold this position under applicable FCC regulations.
Roy F. Coppedge, III is a general partner of the general partner of each of
the Boston Ventures partnerships, limited partnerships primarily involved in the
business of investments. Mr. Coppedge is a director of Continental Cablevision,
Inc., and American Media, Inc. and a member of the Board of Representatives of
Falcon Holding Group, L.P. In connection with the River City Acquisition, the
Company agreed to elect Mr. Coppedge as a Director at such time as he is
eligible to hold that position under applicable FCC regulations.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation by the Company for services rendered in all capacities
during the year ended December 31, 1997 by the Chief Executive Officer and the
four other executive officers of the Company as to whom the total annual salary
and bonus exceeded $100,000 in 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (A) OPTIONS GRANTED (#) COMPENSATION (B)
- ------------------------------------------ ------ --------------- ----------- ----------------------- -----------------
<S> <C> <C> <C> <C> <C>
David D. Smith
President and Chief Executive Officer ... 1997 $ 1,354,490 $ 98,224 -- $ 6,306
1996 767,308 317,913 -- 6,748
1995 450,000 343,213 -- 4,592
Frederick G. Smith
Vice President .......................... 1997 273,000 -- -- 5,912
1996 260,000 233,054 -- 6,704
1995 260,000 258,354 -- 20,361
J. Duncan Smith
Secretary ................................ 1997 283,500 -- -- 15,569
1996 270,000 243,485 -- 18,494
1995 270,000 268,354 -- 21,467
Robert E. Smith
Secretary ............................... 1997 259,615 -- -- 5,539
1996 250,000 233,054 -- 6,300
1995 250,000 258,354 -- 4,592
David B. Amy
Chief Financial Officer ................. 1997 189,000 50,000 -- 10,140
1996 173.582 31,000 25,000 7,766
1995 132,310 20,000 7,500 7,868
</TABLE>
- ----------
50
<PAGE>
(a) The bonuses reported in this column represent amounts awarded and paid
during the fiscal years noted but relate to the fiscal year immediately
prior to the year noted.
(b) All other compensation consists of income deemed received for personal use
of Company-leased automobiles, the Company's 401 (k) contribution, life
insurance and long-term disability coverage.
In addition to the foregoing, Mr. Barry Baker and Mr. Kerby Confer have
agreed to serve as executive officers and/or directors of the Company as soon as
permissible under the rules of the FCC and applicable laws and have received
consulting fees during the year ended December 31, 1997 of $1,179,856 and
$328,568 respectively.
STOCK OPTIONS
No grants of stock options were made during 1997 to the Named Executive
Officers. The following table shows the number of stock options exercised during
1997 and the 1997 year-end value of the stock options held by the Named
Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(A)
SHARES ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David D. Smith ............. -- $-- -- -- $-- $ --
Frederick G. Smith ......... -- -- -- -- -- --
J. Duncan Smith ............ -- -- -- -- -- --
Robert E. Smith ............ -- -- -- -- -- --
David B. Amy ............... -- -- 11,500 21,000 226,363 212,613
</TABLE>
- ----------
(a) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1997, and
all of the value shown reflects stock price appreciation since the granting
of the option.
DIRECTOR COMPENSATION
Directors of the Company who also are employees of the Company serve
without additional compensation. Independent directors receive $15,000 annually.
These independent directors also receive $1,000 for each meeting of the Board of
Directors attended and $500 for each committee meeting attended. In addition,
the independent directors are reimbursed for any expenses incurred in connection
with their attendance at such meetings.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David D. Smith,
President and Chief Executive Officer of the Company. David Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. The Company's
Compensation Committee has approved an increase in Mr. Smith's total
compensation to $1,200,000. Mr. Smith is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company during
the year. The employment agreement provides that the Company may terminate Mr.
Smith's employment prior to expiration of the agreement's term as a result of
(i) a breach by Mr. Smith of any material covenant, promise or agreement
contained in the employment agreement; (ii) a dissolution or winding up of the
Company; (iii) the disability of Mr. Smith for more than 210 days in any twelve
month period (as determined under the employment agreement); or (iv) for cause,
which includes conviction of certain crimes, breach of a fiduciary duty to the
Company or the stockholders, or repeated failure to exercise or undertake his
duties as an officer of the Company (each, a "Termination Event").
In June 1995, the Company entered into an employment agreement with
Frederick G. Smith, Vice President of the Company. Frederick Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less
51
<PAGE>
than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $260,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with J.
Duncan Smith, Vice President and Secretary of the Company. J. Duncan Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $270,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with Robert
E. Smith, Vice President and Treasurer of the Company. Robert E. Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $250,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In connection with the River City Acquisition, the Company entered into an
employment agreement (the "Baker Employment Agreement") with Barry Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
SCI and Executive Vice President of the Company at such time as Mr. Baker is
able to hold those positions consistent with applicable FCC regulations. Until
such time as Mr. Baker is able to become an officer of the Company, he serves as
a consultant to the Company pursuant to a consulting agreement and receives
compensation that he would be entitled to as an officer under the Baker
Employment Agreement. While Mr. Baker acts as consultant to the Company he will
not direct employees of Sinclair in the operation of its television stations and
will not perform services relating to any shareholder, bank financing or
regulatory compliance matters with respect to the Company. In addition, Mr.
Baker will remain the Chief Executive Officer of River City and will devote a
substantial amount of his business time and energies to those services. Mr.
Baker receives a base salary of approximately $1,135,200 per year, subject to
annual increases of 7 1/2% on January 1 each year. Mr. Baker is also entitled to
receive a bonus equal to 2% of the amount by which the Broadcast Cash Flow (as
defined in the Baker Employment Agreement) of SCI for a year exceeds the
Broadcast Cash Flow for the immediately preceding year. Mr. Baker has received
options to acquire 1,382,435 shares of the Class A Common Stock (or 3.33% of the
common equity of Sinclair determined on a fully diluted basis as of the date of
the River City Acquisition). The option became exercisable with respect to 50%
of the shares upon closing of the River City Acquisition, and became exercisable
with respect to an additional 25% of the shares on the first anniversary of the
closing of the River City Acquisition, and will become exercisable with respect
to the remaining 25% on the second anniversary of the closing of the River City
Acquisition. The exercise price of the option is approximately $30.11 per share.
The term of the Baker Employment Agreement extends until May 31, 2001, and is
automatically extended to the third anniversary of any Change of Control (as
defined in the Baker Employment Agreement). If the Baker Employment Agreement is
terminated as a result of a Series B Trigger Event (as defined below), then Mr.
Baker shall be entitled to a termination payment equal to the amount that would
have been paid in base salary for the remainder of the term of the agreement
plus bonuses that would be paid for such period based on the average bonus paid
to Mr. Baker for the previous three years, and all options shall vest
immediately upon such termination. In addition, upon such a termination, Mr.
Baker shall have the option to purchase from the Company for the fair market
value thereof either (i) all broadcast operations of Sinclair in the St. Louis,
Missouri DMA or (at the option of Mr. Baker) the Asheville, North Carolina/
Greenville/Spartanburg, South Carolina DMA or (ii) all of the Company's radio
broadcast operations. Mr. Baker shall also have the right following such a
termination to receive quarterly payments (which may be paid either in cash or,
at the Company's option, in additional shares of Class A Common Stock) equal to
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<PAGE>
5.00% of the fair market value (on the date of each payment) of all stock
options and common stock issued pursuant to the exercise of such stock options
or pursuant to payments of this obligation in shares of Class A Common Stock and
held by him at the time of such payment (except that the first such payment
shall be 3.75% of such value). The fair market value of unexercised options for
such purpose shall be equal to the market price of underlying shares less the
exercise price of the options. Following termination of Mr. Baker's employment
agreement, the Company shall have the option to purchase the options and shares
from Mr. Baker at their market value. A "Series B Trigger Event" means the
termination of Barry Baker's employment with the Company prior to the expiration
of the initial five-year term of the Baker Employment Agreement (i) by the
Company for any reason other than "for cause" (as defined in the Baker
Employment Agreement) or (ii) by Barry Baker under certain circumstances,
including (a) on 60 days' prior written notice given at any time within 180 days
following a Change of Control; (b) if Mr. Baker is not elected (and continued)
as a director of Sinclair or SCI, as President and Chief Executive Officer of
SCI or as Executive Vice President of Sinclair, or Mr. Baker shall be removed
from any such board or office; (c) upon a material breach by Sinclair or SCI of
the Baker Employment Agreement which is not cured; (d) if there shall be a
material diminution in Mr. Baker's authority or responsibility, or certain of
his economic benefits are materially reduced, or Mr. Baker shall be required to
work outside Baltimore; or (e) the effective date of his employment as
contemplated by clause (b) shall not have occurred by August 31, 1997. Mr. Baker
cannot be appointed to such positions with the Company or SCI until the Company
or SCI takes certain actions with respect to WTTV and WTTK in Indianapolis and
WTTE or WSYX in Columbus. The Company has not taken these actions as of the date
of this Form 10-K and, accordingly, Mr. Baker is able to terminate the Baker
Employment Agreement at any time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than as follows, no Named Executive Officer is a director of a
corporation that has a director or executive officer who is also a director of
the Company. Each of David D. Smith, Frederick G. Smith, J. Duncan Smith and
Robert E. Smith (the "Controlling Stockholders") (all of whom are directors of
the Company and Named Executive Officers) is a director and/or executive officer
of each of various other corporations controlled by the Controlling
Stockholders.
During 1996, none of the Named Executive Officers participated in any
deliberations of the Company's Board of Directors or the Compensation Committee
relating to compensation of the Named Executive Officers.
The members of the Compensation Committee are Messrs. Thomas and McCanna.
Mr. Thomas is of counsel to the law firm of Thomas & Libowitz, and is the father
of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, P.A.
During 1997, the Company paid Thomas & Libowitz, P.A., approximately $919,058 in
fees and expenses for legal services.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of the date hereof the number and
percentage of outstanding shares of the Company's Common Stock beneficially
owned by (i) all persons known by the Company to beneficially own more than 5%
of the Company's Common Stock, (ii) each director and each Named Executive
Officer who is a stockholder, and (iii) all director and executive officers as a
group. Unless noted otherwise, the business address of each of the following is
2000 West 41st Street, Baltimore, MD 21211:
53
<PAGE>
<TABLE>
<CAPTION>
SHARES OF CLASS B SHARES OF SERIES B SHARES OF CLASS A
COMMON STOCK PREFERRED STOCK COMMON STOCK PRERCENT OF
BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED TOTAL
---------------------- -------------------- ---------------------- VOTING
NAME NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT POWER (A)
- ----------------------------------------- ------------ --------- ---------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Smith(b) ....................... 6,924,999 27.5% 6,935,057 32.5% 25.7%
Frederick G. Smith (b)(c) ............... 5,922,795 23.5% 5,926,853 29.2% 22.0%
J. Duncan Smith (b)(d) .................. 6,569,994 26.2% 6,570,020 31.4% 24.4%
Robert E. Smith (b)(e) .................. 5,748,644 22.8% 5,748,702 28.6% 21.3%
David B. Amy (f) ........................ 102,258 * *
Basil A. Thomas ......................... 2,000 * *
Lawrence E. McCanna ..................... 300 * *
Barry Baker (g)(h) ...................... 72,016 6.9% 1,644,311 10.3% *
Putnam Investments, Inc. ................ 4,393,534 23.4% *
One Post Office Square
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. (i) ...... 933,500 6.1% *
100 East Pratt Street
Baltimore, Maryland 21202
Lynn & Mayer Inc. ....................... 819,000 5.4% *
520 Madison Avenue
New York, New York 10022
The Equitable Companies Incorporated..... 807,047 5.3% *
787 Seventh Avenue
New York, New York 10019 ...............
Better Communications, Inc. (h) ......... 134,858 12.1% 490,393 3.3% *
1215 Cole Street
St. Louis, Missouri 63106
BancBoston Investments (h) .............. 150,335 13.3% 546,673 3.7%
150 Royal Street
Canton, Massachusetts 02021
Pyramid Ventures, Inc. .................. 152,995 13.5% 556,345 3.7% *
1215 Cole Street
St. Louis, Missouri 63106
Boston Ventures Limited
Partnership IV (h) ..................... 253,800 20.6% 922,909 6.0% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110
Boston Ventures Limited
Partnership IVA (h) .................... 142,745 12.8% 519,073 3.5% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110
All directors and executive
officers as a group (7 persons) ........ 25,166,432 100,0% -- -- 25,285,785 63.7% 93.4%
</TABLE>
- ----------
*Less than 1%
(a) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share except
for votes relating to "going private" and certain other transactions. The
Class A Common Stock, the Class B Common Stock and the Series B Preferred
Stock vote altogether as a single class except as otherwise may be required
by Maryland law on all matters presented for a vote, with each share of
Series B Preferred Stock entitled to 3.64 votes on all such matters.
Holders of Class B Common Stock may at any time convert their shares into
the same number of shares of Class A Common Stock and holders of Series B
Preferred Stock may at any time convert each share of Series B Preferred
Stock into 3.64 shares of Class A Common Stock.
(b) Shares of Class A Common Stock beneficially owned includes shares of Class
B Common Stock beneficially owned, each of which is convertible into one
share of Class A Common Stock.
(c) Includes 430,145 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(d) Includes 456,695 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(e) Includes 782,855 shares held in irrevocable trusts established by Robert E.
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(f) Includes 100,000 shares of Class A Common Stock that may be acquired upon
exercise of options granted in 1995, 1996 and 1998 pursuant to the
Incentive Stock Option Plan and Long Term Incentive Plan.
54
<PAGE>
(g) Consists of 1,382,435 shares of Class A Common Stock that may be acquired
upon exercise of options granted in 1996 pursuant to the Long Term
Incentive Plan.
(h) Shares of Class A Common Stock beneficially owned includes 3.64 shares for
each share of Series B Preferred Stock beneficially owned as each share of
Series B Preferred Stock is immediately convertible into approximately 3.64
shares of Class A Common Stock.
(i) These securities are owned by various individual and institutional
investors to which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
voting power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, beneficial owner of
such securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since December 31, 1996, the Company has engaged in the following
transactions with persons who are, or are members of the immediate family of,
directors, persons expected to become a director, officers or beneficial owners
of 5% or more of the issued and outstanding Common Stock, or with entities in
which such persons or certain of their relatives have interests.
WPTT NOTE
In connection with the sale of WPTT in Pittsburgh by the Company to WPTT,
Inc., WPTT, Inc., issued to the Company a 15-year senior secured term note of
$6.0 million (the "WPTT Note"). The Company subsequently sold the WPTT Note to
the late Julian S. Smith and Carolyn C. Smith, the parents of the Controlling
Stockholders and both former stockholders of the Company, in exchange for the
payment of $50,000 and the issuance of a $6.6 million note, which bears interest
at 7.21% per annum and requires payments of interest only through September
2001. Monthly principal payments of $109,317 plus interest are payable with
respect to this note commencing in November 2001 and ending in September 2006,
at which time the remaining principal balance plus accrued interest, if any, is
due. During the year ended December 31, 1997, the Company received $439,000 in
interest payments on this note. At December 31, 1997, the balance on this note
was $6.6 million.
WIIB NOTE
In September 1990, the Company sold all the stock of Channel 63, Inc., the
owner of WIIB in Bloomington, Indiana, to the Controlling Stockholders for $1.5
million. The purchase price was delivered in the form of a note issued to the
Company which was refinanced in June 1992 (the "WIIB Note"). The WIIB Note bears
interest at 6.88% per annum, is payable in monthly principal and interest
payments of $16,000 until September 30, 2000, at which time a final payment of
approximately $431,000 is due. Principal and interest paid in 1997 on the WIIB
Note was $211,000. As of December 31, 1997, $842,000 in principal amount of the
WIIB Note remained outstanding.
BAY CREDIT FACILITY
In connection with the capitalization of Bay Television, Inc., the Company
agreed on May 17, 1990 to loan the Controlling Stockholders up to $3.0 million
(the "Bay Credit Facility"). Each of the loans to the Controlling Stockholders
pursuant to the Bay Credit Facility is evidenced by an amended and restated
secured note totaling $2.6 million due December 31, 1999 accruing interest at a
fixed rate equal to 6.88%. Principal and interest are payable over six years
commencing on March 31, 1994, and are required to be repaid quarterly and
$530,000 was paid in 1997. $660,000 is payable in 1998 and $718,000 is payable
in 1999. As of December 31, 1997, approximately $1.3 million in principal amount
was outstanding under this note.
AFFILIATED LEASES
From 1987 to 1992, the Company entered into five lease transactions with
CCI, a corporation wholly owned by the Controlling Stockholders, to lease
certain facilities from CCI. Four of these leases are 10-year leases for rental
space on broadcast towers, two of which are capital leases having renewable
terms of 10 years. The other lease is a month-to-month lease for a portion of
studio and office space at
55
<PAGE>
which certain satellite dishes are located. Aggregate annual rental payments
related to these leases were $641,000 in 1997. The aggregate annual rental
payments related to these leases are scheduled to be $679,000 in 1998 and
$700,000 in 1999.
In January 1991, CTI entered into a 10-year capital lease with KIG, a
corporation wholly owned by the Controlling Stockholders, pursuant to which CTI
leases both an administrative facility and studios for station WBFF and the
Company's present corporate offices. Additionally, in June 1991, CTI entered
into a one-year renewable lease with KIG pursuant to which CTI leases parking
facilities at the administrative facility. Payments under these leases with KIG
were $481,000 in 1997. The aggregate annual rental payments related to the
administrative facility are scheduled to be $519,000 in 1998 and $540,000 in
1999. During 1997, the Company chartered airplanes owned by certain companies
controlled by the Controlling Stockholders and incurred expenses of
approximately $736,000 related to these charters.
TRANSACTIONS WITH GERSTELL
Gerstell LP, an entity wholly owned by the Controlling Stockholders, was
formed in April 1993 to acquire certain personal and real property interests of
the Company in Pennsylvania. In a transaction that was completed in September
1993, Gerstell LP acquired the WPGH office/studio, transmitter and tower site
for an aggregate purchase price of $2.2 million. The purchase price was financed
in part by a $2.1 million note from Gerstell LP bearing interest at 6.18% with
principal payments beginning on November 1, 1994 and a final maturity date of
October 1, 2013. Principal and interest paid in 1997 on the note was $183,000.
At December 31, 1997, $1.9 million in principal amount of the note remained
outstanding. Following the acquisition, Gerstell LP leased the office/studio,
transmitter and tower site to WPGH, Inc. (a subsidiary of the Company) for
$14,875 per month and $25,000 per month, respectively. The leases have terms of
seven years, with four seven-year renewal periods. Aggregate annual rental
payment related to these leases was $561,000 in 1997. The Company believes that
the leases with Gerstell LP are on terms and conditions customary in similar
leases with independent third parties.
STOCK REDEMPTIONS
On September 30, 1990, the Company issued certain notes (the "Founders'
Notes") maturing on May 31, 2005, payable to the late Julian S. Smith and
Carolyn C. Smith, former majority owners of the Company and the parents of the
Controlling Stockholders. The Founders' Notes, which were issued in
consideration for stock redemptions equal to 72.65% of the then outstanding
stock of the Company, have principal amounts of $7.5 million and $6.7 million,
respectively. The Founders' Notes include stated interest rates of 8.75%, which
were payable annually from October 1990 until October 1992, then payable monthly
commencing April 1993 to December 1996, and then semiannually thereafter until
maturity. The effective interest rate approximates 9.4%. The Founders' Notes are
secured by security interests in substantially all of the assets of the Company
and its Subsidiaries, and are personally guaranteed by the Controlling
Stockholders.
Principal and interest payments on the Founders' Note issued to the estate
of Julian S. Smith are payable, in various amounts, each April and October,
beginning October 1991 until October 2004, with a balloon payment due at
maturity in the amount of $5.0 million. Additionally, monthly interest payments
commenced on April 1993 and continued until December 1996. Principal and
interest paid in 1997 on this Founders' Note was $653,000 at December 31, 1997,
$5.8 million in principal amount of this Founders' Note remained outstanding.
Principal payments on the Founders' Note issued to Carolyn C. Smith are
payable, in various amounts, each April and October, beginning October 1991
until October 2002. Principal and interest paid in 1997 on this Founders' Note
was $1.1 million. At December 31, 1997, $3.7 million in principal amount of this
Founders' Note remained outstanding.
RELATIONSHIP WITH GLENCAIRN
Glencairn is a corporation owned by (i) Edwin L. Edwards, Sr. (3%), (ii)
Carolyn C. Smith, the mother of the Controlling Stockholders (7%), and (iii)
certain trusts established by Carolyn C. Smith for the benefit of her
grandchildren (the "Glencairn Trusts") (90%). The 90% equity interest in
Glencairn
56
<PAGE>
owned by the Glencairn Trusts is held through the ownership of non-voting common
stock. The 7% equity interest in Glencairn owned by Carolyn C. Smith is held
through the ownership of common stock that is generally non-voting, except with
respect to certain specified extraordinary corporate matters as to which this 7%
equity interest has the controlling vote. Edwin L. Edwards, Sr. owns a 3% equity
interest in Glencairn through ownership of all of the issued and outstanding
voting stock of Glencairn and is Chairman of the Board, President and Chief
Executive Officer of Glencairn.
There have been, and the Company expects that in the future there will be,
transactions between the Company and Glencairn. Glencairn is the owner-operator
and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in
Raleigh/Durham, WABM in Birmingham, KRRT in San Antonio and WFBC in
Asheville/Greenville/Spartanburg. The Company has entered into LMAs with
Glencairn pursuant to which the Company provides programming to Glencairn for
broadcast on WNUV, WVTV, WRDC, WABM, KRRT and WFBC during the hours of 6:00 a.m.
to 2:00 a.m. each day and has the right to sell advertising during this period,
all in exchange for the payment by the Company to Glencairn of a monthly fee
totaling $789,000.
In June 1995, the Company acquired options from certain stockholders of
Glencairn (the "Glencairn Options") which grant to the Company the right to
acquire, subject to applicable FCC rules and regulations, stock comprising up to
a 97% equity interest in Glencairn. Of the stock subject to the Glencairn
Options, a 90% equity interest is non-voting and the remaining 7% equity
interest is non-voting, except with respect to certain extraordinary matters as
to which this 7% equity interest has the controlling vote. Each Glencairn Option
was purchased by the Company for $1,000 ($5,000 in the aggregate) and is
exercisable only upon the Company's payment of an option exercise price
generally equal to the optionor's proportionate share of the aggregate
acquisition cost of all stations owned by Glencairn on the date of exercise
(plus interest at a rate of 10% from the respective acquisition date). The
Company estimates that the aggregate option exercise price for the Glencairn
Options, if currently exercised, would be approximately $14.8 million.
In addition, the Company has agreed to sell to Glencairn for $2,000,000 the
License Assets of WTTE in Columbus, Ohio, which the Company currently owns. In
addition, the Company has an option to acquire from River City the assets of
WSYX, which is in the same market as WTTE. See "Business--Broadcasting
Acquisition Strategy." Upon the Company's assignment of the License Assets of
WTTE to Glencairn (which the Company does not expect to occur unless the Company
acquires WSYX), the Company intends to enter into an LMA with Glencairn relating
to WTTE pursuant to which the Company will supply programming to Glencairn,
obtain the right to sell advertising during the periods covered by the supplied
programming and make payments to Glencairn in amounts to be negotiated.
In connection with the Sullivan Acquisition, Glencairn has entered into a
plan of merger with Sullivan III which, if completed, would result in
Glencairn's ownership of all the issued and outstanding capital stock of
Sullivan III. After the merger, the Company intends to enter into an LMA with
Glencairn and continue to provide programming services to the five stations the
License. Assets of which are acquired by Glencairn in the merger.
RIVER CITY TRANSACTIONS
Roy F. Coppedge, who will become a director of the Company upon
satisfaction of certain conditions, and Barry Baker, who will become a director
and executive officer of the Company as soon as permissible under the rules of
the FCC and applicable laws, each have a direct or indirect equity interest in
River City Partners, L.P. Therefore, Messrs. Coppedge and Baker have an interest
in the River City Acquisition, which is described above in
"Business--Broadcasting Acquisition Strategy." During 1997, the Company made LMA
payments of $896,000 to River City. In September 1996, the Company entered into
a five-year agreement with River City pursuant to which River City will provide
to the Company certain production services. Pursuant to this agreement, River
City will provide certain services to the Company in return for an annual fee of
$416,000, subject to certain adjustments on each anniversary date.
KEYMARKET OF SOUTH CAROLINA
Kerby Confer, who is expected to become an executive officer of the Company
as soon as permissible under the rules of the FCC and applicable laws, is the
owner of 100% of the common stock of Keymarket of South Carolina, Inc. ("KSC").
The Company has exercised its option to acquire all of the assets of KSC for
forgiveness of debt in an aggregate principal amount of approximately $7.4
million, plus payment of approximately $1.0 million, less certain adjustments.
The Company also purchased two properties from Mr. Confer for an aggregate
purchase price of approximately $1.75 million.
57
<PAGE>
BEAVER DAM LIMITED LIABILITY COMPANY
In May 1996, the Company, along with the Controlling Stockholders, formed
Beaver Dam Limited Liability Company ("BDLLC"), of which the Company owns a 45%
interest. BDLLC was formed for the purpose of constructing and owning a building
which may be the site for the Company's corporate headquarters. The Company made
capital contributions to BDLLC in 1996 of approximately $380,000. During 1997,
the Partnership made a liquidating distribution to the Company of approximately
$380,000 and the Company no longer owns an interest in BDLP.
HERITAGE AUTOMOTIVE GROUP
In January 1997, David D. Smith, the Company's President and Chief
Executive Officer and one of the Controlling Shareholders, made a substantial
investment in, and became a member of the board of directors of, Summa Holdings,
Ltd. which, through wholly owned subsidiaries, owns the Heritage Automotive
Group ("Heritage") and Allstate Leasing ("Allstate"). Mr. Smith is not an
officer, nor does he actively participate in the management, of Summa Holdings,
Ltd., Heritage, or Allstate. Heritage owns and operates new and used car
dealerships in the Baltimore metropolitan area. Allstate owns and operates an
automobile and equipment leasing business with offices in the Baltimore,
Richmond, Houston, and Atlanta metropolitan areas. The Company sells Heritage
and Allstate advertising time on WBFF and WNUV, the television stations operated
by the Company serving the Baltimore DMA. The Company believes that the terms of
the transactions between the Company and Heritage and the Company and Allstate
are and will be comparable to those prevailing in similar transactions with or
involving unaffiliated parties.
58
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) (1) Index to Financial Statements
The financial statements required by this item are submitted in a separate
section beginning on page F-1 of this report.
Index to Financial Statements
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Index to Financial Statements ................................................ F-1
Report of Independent Public Accountants ..................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 ................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995,
1996 and 1997 ............................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended Decem-
ber 31, 1995, 1996 and 1997 ................................................. F-5, F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1996 and 1997 ............................................................... F-7, F-8
Notes to Consolidated Financial Statements ................................... F-9
</TABLE>
(a) (2) Index to Financial Statements Schedules
The financial statements schedules required by this item are submitted on
pages S-1 through S-3 of this Report.
PAGE
-----
Index to Schedules .................................................... S-1
Report of Arthur Andersen LLP Independent Public Accountants .......... S-2
Schedule II -- Valuation and Qualifying Accounts ...................... S-3
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the notes thereto.
(a) (3) Index to Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of the fiscal year ended December 31, 1997, except for the Registrant's
Current Reports on Form 8-K and 8-K/A filed on October 8, 1997, November 26,
1997, December 5, 1997, December 12, 1997 and December 16, 1997.
(c) Exhibits
The exhibits required by this Item are listed under Item 14 (a) (3).
(d) Financial Statements Schedules
The financial statement schedules required by this Item are listed under
Item 14 (a) (2).
59
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
Report of Independent Public Accountants .............................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 .......................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997 ................................................................................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995,
1996 and 1997 ....................................................................... F-5, F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997 ................................................................................ F-7, F-8
Notes to Consolidated Financial Statements ............................................ F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited the accompanying consolidated balance sheets of Sinclair
Broadcast Group, Inc. (a Maryland corporation) and Subsidiaries as of December
31, 1996 and 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1995, 1996
and 1997. 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 Sinclair Broadcast Group,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the years ended December 31, 1995, 1996 and
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 9, 1998, except for Note 24,
as to which the date is February 23, 1998
F-2
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1996 1997
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, and cash equivalents .................................................. $ 2,341 $ 139,327
Accounts receivable, net of allowance for doubtful accounts
of $2,472 and $2,920, respectively ......................................... 112,313 123,018
Current portion of program contract costs ................................... 44,526 46,876
Prepaid expenses and other current assets ................................... 3,704 4,673
Deferred barter costs ....................................................... 3,641 3,727
Refundable income taxes ..................................................... -- 10,581
Deferred tax assets ......................................................... 1,245 2,550
---------- ----------
Total current assets ....................................................... 167,770 330,752
PROGRAM CONTRACT COSTS, less current portion ................................. 43,037 40,609
LOANS TO OFFICERS AND AFFILIATES ............................................. 11,426 11,088
PROPERTY AND EQUIPMENT, net .................................................. 154,333 161,714
NON-COMPETE AND CONSULTING AGREEMENTS, net of
accumulated amortization of $54,236 and $64,229, respectively ............... 10,193 200
OTHER ASSETS ................................................................. 64,235 167,895
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of
accumulated amortization of $85,155 and $138,061, respectively .............. 1,256,303 1,321,976
---------- ----------
Total Assets ............................................................... $1,707,297 $2,034,234
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................ $ 11,886 $ 5,207
Income taxes payable ........................................................ 730 --
Accrued liabilities ......................................................... 35,074 40,532
Current portion of long-term liabilities- ...................................
Notes payable and commercial bank financing ................................ 62,144 35,215
Notes and capital leases payable to affiliates ............................. 1,774 3,073
Program contracts payable .................................................. 58,461 66,404
Deferred barter revenues ................................................... 3,576 4,273
---------- ----------
Total current liabilities .................................................. 173,645 154,704
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ................................. 1,212,000 1,022,934
Notes and capital leases payable to affiliates .............................. 12,185 19,500
Program contracts payable ................................................... 56,194 62,408
Deferred tax liability ...................................................... 463 24,092
Other long-term liabilities ................................................. 2,739 3,611
---------- ----------
Total liabilities .......................................................... 1,457,226 1,287,249
---------- ----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ............................... 3,880 3,697
---------- ----------
COMMITMENTS AND CONTINGENCIES
EQUITY PUT OPTIONS ........................................................... 8,938 --
---------- ----------
COMPANY OBLIGATED MANDATORY REDEEMABLE SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES ...................... -- 200,000
---------- ----------
STOCKHOLDERS' EQUITY:
Series B Preferred stock, $.01 par value, 10,000,000 shares authorized and
1,150,000 and 1,071,381 issued and outstanding ............................. 11 10
Series D Preferred stock, $.01 par value, 3,450,000 shares authorized and
-0- and 3,450,000 shares issued and outstanding, respectively .............. -- 35
Class A Common stock, $.01 par value, 100,000,000 shares authorized
and 6,911,880 and 13,733,430 shares issued and outstanding,
respectively ............................................................... 70 137
Class B Common stock, $.01 par value, 35,000,000 shares authorized and
27,850,581 and 25,436,432 shares issued and outstanding .................... 279 255
Additional paid-in capital .................................................. 256,954 552,949
Additional paid-in capital -- equity put options ............................ -- 23,117
Additional paid-in capital -- deferred compensation ......................... (1,129) (954)
Accumulated deficit ......................................................... (18,932) (32,261)
---------- ----------
Total stockholders' equity ................................................. 237,253 543,288
---------- ----------
Total Liabilities and Stockholders' Equity ................................. $1,707,297 $2,034,234
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions of
$31,797, $56,040 and $74,984, respectively .......................... $ 187,934 $ 346,459 $ 471,228
Revenues realized from station barter arrangements .................... 18,200 32,029 45,207
--------- --------- ---------
Total broadcast revenues ............................................ 206,134 378,488 516,435
--------- --------- ---------
OPERATING EXPENSES:
Program and production ................................................ 28,152 66,652 92,178
Selling, general and administrative ................................... 36,174 75,924 106,084
Expenses realized from station barter arrangements .................... 16,120 25,189 38,114
Amortization of program contract costs and net
realizable value adjustments ........................................ 29,021 47,797 66,290
Stock-based compensation .............................................. -- 739 1,636
Depreciation and amortization of property and equipment ............... 5,400 11,711 18,040
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other assets .............. 45,989 58,530 67,840
Amortization of excess syndicated programming ......................... -- 3,043 --
--------- --------- ---------
Total operating expenses ............................................ 160,856 289,585 390,182
--------- --------- ---------
Broadcast operating income .......................................... 45,278 88,903 126,253
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense .................... (39,253) (84,314) (98,393)
Subsidiary trust minority interest expense.. .......................... -- -- (18,600)
Interest income ....................................................... 3,942 3,136 2,174
Other income. ......................................................... 221 342 54
--------- --------- ---------
Income before provision for income taxes and extraordinary item ..... 10,188 8,067 11,488
PROVISION FOR INCOME TAXES. ............................................ 5,200 6,936 15,984
--------- --------- ---------
Net income (loss) before extraordinary item ........................... 4,988 1,131 (4,496)
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of related income
tax benefit of $3,357 and $4,045, respectively. ..................... (4,912) -- (6,070)
--------- --------- ---------
NET INCOME (LOSS) ...................................................... $ 76 $ 1,131 $ (10,566)
========= ========= =========
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS .......................................................... $ 76 $ 1,131 $ (13,329)
========= ========= =========
BASIC EARNINGS PER SHARE:
Income (loss) per share before extraordinary item ..................... $ .15 $ .03 $ (.20)
========= ========= =========
Net income (loss) per share ........................................... $ - $ .03 $ (.37)
========= ========= =========
Average shares outstanding ............................................ 32,198 34,748 35,951
========= ========= =========
DILUTED EARNINGS PER SHARE:
Income (loss) per share before extraordinary item ..................... $ .15 $ .03 $ (.20)
========= ========= =========
Net income (loss) per share ........................................... $ - $ .03 $ (.37)
========= ========= =========
Average shares outstanding ............................................ 32,205 37,381 40,078
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
PAGE 1 OF 2
-----------
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A SERIES B CLASS A CLASS B
PREFERRED PREFERRED COMMON COMMON
STOCK STOCK STOCK STOCK
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 ..................... $ -- $-- $-- $ 290
Issuance of common shares, net of
related expenses of $9,288 ................... -- -- 58 --
Non-cash distribution prior to KCI merger ..... -- -- -- --
Realization of deferred gain .................. -- -- -- --
Net income .................................... -- -- -- --
------ --- --- -----
BALANCE, December 31, 1995 ..................... -- -- 58 290
Class B Common Stock converted into
Class A Common Stock ......................... -- -- 11 (11)
Issuance of Series A Preferred Stock .......... 12 -- -- --
Series A Preferred Stock converted
into Series B Preferred Stock ................ (12) 12 -- --
Series B Preferred Stock converted into
Class A Common Stock ......................... (1) 1 --
Repurchase of 30,000 shares of
Class A Common Stock ......................... -- -- -- --
Stock option grants ........................... -- -- -- --
Income tax provision for deferred
compensation ................................. -- -- -- --
Equity put options ............................ -- -- -- --
Amortization of deferred
compensation. ................................ -- -- -- --
Net income. ................................... -- -- -- --
------ ----- --- -----
BALANCE, December 31, 1996 ..................... $ -- $11 $70 $ 279
====== ===== === =====
<CAPTION>
ADDITIONAL
ADDITIONAL PAID-IN CAPITAL - TOTAL
PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
CAPITAL COMPENSATION DEFICIT EQUITY
------------ ------------------- ------------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 ..................... $ 4,774 $ -- $ (18,787) $ (13,723)
Issuance of common shares, net of
related expenses of $9,288 ................... 111,403 -- -- 111,461
Non-cash distribution prior to KCI merger ..... (109) -- (1,352) (1,461)
Realization of deferred gain .................. 21 -- -- 21
Net income .................................... -- -- 76 76
-------- -------- --------- ---------
BALANCE, December 31, 1995 ..................... 116,089 -- (20,063) 96,374
Class B Common Stock converted into
Class A Common Stock ......................... -- -- -- --
Issuance of Series A Preferred Stock .......... 125,067 -- -- 125,079
Series A Preferred Stock converted
into Series B Preferred Stock ................ -- -- -- --
Series B Preferred Stock converted into
Class A Common Stock ......................... -- -- -- --
Repurchase of 30,000 shares of
Class A Common Stock ......................... (748) -- -- (748)
Stock option grants ........................... 25,784 (1,868) -- 23,916
Income tax provision for deferred
compensation ................................. (300) -- -- (300)
Equity put options ............................ (8,938) -- -- (8,938)
Amortization of deferred
compensation. ................................ -- 739 -- 739
Net income. ................................... -- -- 1,131 1,131
-------- -------- --------- ---------
BALANCE, December 31, 1996 ..................... $256,954 $ (1,129) $ (18,932) $ 237,253
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
PAGE 2 OF 2
-----------
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES B SERIES D CLASS A CLASS B
PREFERRED PREFERRED COMMON COMMON
STOCK STOCK STOCK STOCK
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......................... $11 $-- $70 $ 279
Repurchase of 186,000 shares of
Class A Common Stock ............................. -- -- (2) --
Class B Common Stock converted into Class A Common
Stock ............................................ -- -- 24 (24)
Series B Preferred Stock converted
into Class A Common Stock ........................ (1) -- 2 --
Issuance of Class A Common Stock,
net of related issuance costs of $7,572........... -- -- 43 --
Issuance of Series D Preferred Stock,
net of related issuance costs of $5,601........... -- 35 -- --
Dividends payable on Series D
Preferred Stock .................................. -- -- -- --
Income tax provision for deferred
compensation ..................................... -- -- -- --
Equity put options ................................ -- -- -- --
Equity put options premium ........................ -- -- -- --
Stock option grants ............................... -- -- -- --
Stock option grants exercised ..................... -- -- -- --
Amortization of deferred compensation ............. -- -- -- --
Net loss .......................................... -- -- -- --
----- --- ----- -----
BALANCE, December 31, 1997 ......................... $10 $35 $137 $ 255
===== === ===== =====
<CAPTION>
ADDITIONAL ADDITIONAL
PAID-IN PAID-IN
ADDITIONAL CAPITAL - CAPITAL - TOTAL
PAID-IN EQUITY PUT DEFERRED ACCUMULATED STOCKHOLDERS'
CAPITAL OPTIONS COMPENSATION DEFICIT EQUITY
-------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 ......................... $256,954 $ -- $ (1,129) $ (18,932) $ 237,253
Repurchase of 186,000 shares of
Class A Common Stock ............................. (4,597) -- -- -- (4,599)
Class B Common Stock converted into Class A Common
Stock ............................................ -- -- -- -- --
Series B Preferred Stock converted
into Class A Common Stock ........................ (1) -- -- -- --
Issuance of Class A Common Stock,
net of related issuance costs of $7,572........... 150,978 -- -- -- 151,021
Issuance of Series D Preferred Stock,
net of related issuance costs of $5,601........... 166,864 -- -- -- 166,899
Dividends payable on Series D
Preferred Stock .................................. -- -- -- (2,763) (2,763)
Income tax provision for deferred
compensation ..................................... (240) -- -- -- (240)
Equity put options ................................ (14,179) 23,117 -- -- 8,938
Equity put options premium ........................ (3,365) -- -- -- (3,365)
Stock option grants ............................... 430 -- (430) -- --
Stock option grants exercised ..................... 105 -- -- -- 105
Amortization of deferred compensation ............. -- -- 605 -- 605
Net loss .......................................... -- -- -- (10,566) (10,566)
---------- ------- -------- --------- ---------
BALANCE, December 31, 1997 ......................... $552,949 $23,117 $ (954) $ (32,261) $ 543,288
========== ======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
<PAGE>
PAGE 1 OF 2
-----------
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................. $ 76 $ 1,131 $ (10,566)
Adjustments to reconcile net income (loss) to net cash flows
from operating activities--
Extraordinary loss .............................................. 8,269 -- 10,115
Amortization of excess syndicated programming ................... -- 3,043 --
Amortization of debt discount ................................... -- -- 4
(Gain) loss on sales of assets .................................. (221) -- 226
Depreciation and amortization of property and equipment ......... 5,400 11,711 18,040
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other assets ......... 45,989 58,530 67,840
Amortization of program contract costs and net realizable
value adjustments .............................................. 29,021 47,797 66,290
Stock-based compensation ........................................ -- 739 1,636
Deferred tax provision (benefit) ................................ (5,089) 2,330 20,582
Realization of deferred gain .................................... (42) -- --
Net effect of change in deferred barter revenues
and deferred barter costs ...................................... 230 (908) 591
Decrease in minority interest ................................... (38) (121) (183)
Changes in assets and liabilities, net of effects of
acquisitions and dispositions ...................................
Increase in accounts receivable, net ............................ (12,245) (41,310) (9,468)
Increase in prepaid expenses and other current assets ........... (273) (217) (591)
Increase in refundable income taxes ............................. -- -- (10,581)
Increase (decrease) in accounts payable and
accrued liabilities ............................................ 7,274 19,941 (4,360)
Decrease in income taxes payable ................................ (2,427) (3,214) (970)
Increase (decrease) in other long-term liabilities .............. -- 297 (921)
Payments on program contracts payable ............................. (19,938) (30,451) (51,059)
--------- --------- ---------
Net cash flows from operating activities ....................... $ 55,986 $ 69,298 $ 96,625
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
PAGE 2 OF 2
-----------
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------------- --------------- ------------
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES ................................. $ 55,986 $ 69,298 $ 96,625
---------- ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ................................... (1,702) (12,609) (19,425)
Payments for acquisition of television and radio station assets ......... (101,000) (74,593) (90,598)
Payments related to the acquisition of the non-license assets
of River City Broadcasting ............................................ -- (818,083) (2,992)
Payments for acquisition of certain other non-license assets ............ (14,283) (29,532) --
Payments for the purchase of outstanding stock of
Superior Communications, Inc. ......................................... -- (63,504) --
Payments to exercise options to acquire certain FCC licenses ............ -- (6,894) (11,079)
Proceeds from assignment of FCC purchase option. ........................ 4,200 -- 2,000
Purchase option extension payments ...................................... -- (6,960) (15,966)
Payments for consulting and non-compete agreements ...................... (1,000) (50) --
Payments to acquire and exercise purchase options ....................... (10,000) -- --
Distributions from (investments in) joint ventures ...................... 240 (380) 380
Proceeds from disposal of property and equipment ........................ 3,330 -- 470
Payment for WPTT subordinated convertible debenture ..................... (1,000) -- --
Loans to officers and affiliates ........................................ (205) (854) (1,199)
Repayments of loans to officers and affiliates .......................... 2,177 1,562 1,694
Deposits and other costs relating to future acquisitions ................ (77) (328) (82,275)
---------- ------------ ----------
Net cash flows used in investing activities.. ........................ (119,320) (1,012,225) (218,990)
---------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and commercial bank financing ............... 138,000 982,500 126,500
Repayments of notes payable, commercial bank financing
and capital leases .................................................... (362,928) (110,657) (693,519)
Repayments of notes and capital leases to affiliates .................... (3,171) (1,867) (2,313)
Payments of costs related to financing .................................. (3,200) (20,009) (4,707)
Payments for interest rate derivative agreements.. ...................... -- (851) (474)
Prepayments of excess syndicated program contract liabilities ........... -- (15,116) (1,373)
Repurchases of the Company's Class A Common Stock ....................... -- (748) (4,599)
Payments relating to redemption of 1993 Notes ........................... -- -- (98,101)
Payment of premium and other costs related to
redemption of 1993 Notes .............................................. -- -- (8,407)
Payments for costs related to subsequent year securities offering ....... -- (434) --
Dividends paid on Series D Preferred Stock .............................. -- -- (2,357)
Proceeds from exercise of stock options ................................. -- -- 105
Payment of equity put option premium .................................... -- -- (507)
Net proceeds from issuances of Senior Subordinated Notes. ............... 293,176 -- 438,427
Net proceeds from issuance of Class A Common Stock ...................... 111,461 -- 151,021
Net proceeds from issuance of Series D Preferred Stock .................. -- -- 166,899
Net proceeds from subsidiary trust securities offering .................. -- -- 192,756
---------- ------------ ----------
Net cash flows from financing activities ............................. 173,338 832,818 259,351
---------- ------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................................. 110,004 (110,109) 136,986
CASH AND CASH EQUIVALENTS, beginning of period. .......................... 2,446 112,450 2,341
---------- ------------ ----------
CASH AND CASH EQUIVALENTS, end of period ................................. $ 112,450 $ 2,341 $ 139,327
========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-8
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Sinclair Broadcast Group, Inc., Sinclair Communications, Inc. and all other
consolidated subsidiaries, which are collectively referred to hereafter as "the
Company, Companies or SBG." The Company owns and operates television and radio
stations throughout the United States. Additionally, included in the
accompanying consolidated financial statements are the results of operations of
certain television stations pursuant to local marketing agreements (LMAs) and
radio stations pursuant to joint sales agreements (JSAs).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all its wholly-owned and majority-owned subsidiaries. Minority interest
represents a minority owner's proportionate share of the equity in two of the
Company's subsidiaries. In addition, the Company uses the equity method of
accounting for 20% to 50% ownership investments. All significant intercompany
transactions and account balances have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses in the
financial statements and in the disclosures of contingent assets and
liabilities. While actual results could differ from those estimates, management
believes that actual results will not be materially different from amounts
provided in the accompanying consolidated financial statements.
Cash Equivalents
Cash equivalents are stated at cost plus accrued interest, which approximates
fair value. Cash equivalents are highly liquid investment grade debt instruments
with an original maturity of three months or less and consist of time deposits
with a number of consumer banks with high credit ratings.
Programming
The Companies have agreements with distributors for the rights to television
programming over contract periods which generally run from one to seven years.
Contract payments are made in installments over terms that are generally shorter
than the contract period. Each contract is recorded as an asset and a liability
when the license period begins and the program is available for its first
showing. The portion of the program contracts payable within one year is
reflected as a current liability in the accompanying consolidated balance
sheets.
The rights to program materials are reflected in the accompanying consolidated
balance sheets at the lower of unamortized cost or estimated net realizable
value. Estimated net realizable values are based upon management's expectation
of future advertising revenues net of sales commissions to be generated by the
program material. Amortization of program contract costs is generally computed
under either a four year accelerated method or based on usage, whichever yields
the greater amortization for each program. Program contract costs, estimated by
management to be amortized in the succeeding year, are classified as current
assets. Payments of program contract liabilities are typically paid on a
scheduled basis and are not affected by adjustments for amortization or
estimated net realizable value.
F-9
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time in
lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights. Network
programming is excluded from these calculations.
The Company broadcasts certain customers' advertising in exchange for equipment,
merchandise and services. The estimated fair value of the equipment, merchandise
or services received is recorded as deferred barter costs and the corresponding
obligation to broadcast advertising is recorded as deferred barter revenues. The
deferred barter costs are expensed or capitalized as they are used, consumed or
received. Deferred barter revenues are recognized as the related advertising is
aired.
Other Assets
Other assets as of December 31, 1996 and 1997 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Unamortized debt acquisition costs ................................ $26,453 $ 43,011
Investments in limited partnerships ............................... 3,039 2,850
Notes receivable .................................................. 10,773 11,102
Purchase options and related extension fees ....................... 22,902 27,826
Deposits and other costs relating to future acquisitions .......... 328 82,275
Other ............................................................. 740 831
------- --------
$64,235 $167,895
======= ========
</TABLE>
Non-Compete and Consulting Agreements
The Company has entered into non-compete and consulting agreements with various
parties. These agreements range from two to three years. Amounts paid under
these agreements are amortized over the life of the agreement.
Acquired Intangible Broadcasting Assets
Acquired intangible broadcasting assets are being amortized over periods of 1 to
40 years. These amounts result from the acquisition of certain television and
radio station license and non-license assets (see Note 12). The Company monitors
the individual financial performance of each of the stations and continually
evaluates the realizability of intangible and tangible assets and the existence
of any impairment to its recoverability based on the projected undiscounted cash
flows of the respective stations.
F-10
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Intangible assets, at cost, as of December 31, 1996 and 1997, consist of the
following (in thousands):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD 1996 1997
--------------- ------------- -------------
<S> <C> <C> <C>
Goodwill ............................... 40 years $ 676,219 $ 755,858
Intangibles related to LMAs ............ 15 years 120,787 128,080
Decaying advertiser base ............... 1 -- 15 years 93,896 95,657
FCC licenses ........................... 25 years 370,533 400,073
Network affiliations ................... 1 -- 25 years 55,966 55,966
Other .................................. 1 -- 40 years 24,057 24,403
---------- ----------
1,341,458 1,460,037
Less- Accumulated amortization ......... (85,155) (138,061)
---------- ----------
$1,256,303 $1,321,976
========== ==========
</TABLE>
Accrued Liabilities
Accrued liabilities consist of the following as of December 31, 1996 and 1997
(dollars in thousands):
1996 1997
---------- ----------
Compensation .......... $10,850 $10,608
Interest .............. 11,915 18,359
Other ................. 12,309 11,565
------- -------
$35,074 $40,532
======= =======
Supplemental Information - Statement of Cash Flows
During 1995, 1996 and 1997 the Company incurred the following transactions (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
o Purchase accounting adjustments related to deferred
taxes ................................................. $ 3,400 $ 18,051 $ --
======= ======== =======
o Capital lease obligations incurred .................... $ -- $ -- $10,927
======= ======== =======
o Issuance of Series A Preferred Stock (see Note 12)..... $ -- $125,079 $ --
======= ======== =======
o Income taxes paid ..................................... $ 7,941 $ 6,837 $ 6,502
======= ======== =======
o Subsidiary trust minority interest payments ........... $ -- $ -- $17,631
======= ======== =======
o Interest paid ......................................... $24,770 $ 82,814 $98,521
======= ======== =======
</TABLE>
Local Marketing Agreements
The Company generally enters into LMAs, JSAs and similar arrangements with
stations located in markets in which the Company already owns and operates a
station, and in connection with acquisitions, pending regulatory approval of
transfer of License Assets. Under the terms of these agreements, the Company
makes specified periodic payments to the owner-operator in exchange for the
grant to the Company of the right to program and sell advertising on a specified
portion of the station's inventory of
F-11
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
broadcast time. Nevertheless, as the holder of the Federal Communications
Commission (FCC) license, the owner-operator retains full control and
responsibility for the operation of the station, including control over all
programming broadcast on the station.
Included in the accompanying consolidated statements of operations for the years
ended December 31, 1995, 1996 and 1997, are net revenues of $49.5 million,
$153.0 million (including $103.3 million relating to River City), and $135.0
million (including $71.9 million relating to River City) respectively, that
relate to LMAs, JSAs and time brokerage agreements ("TBAs").
In connection with the River City Acquisition, the Company entered into an LMA
in the form of TBAs with River City and the owner of KRRT with respect to each
of the nine television and 21 radio stations with respect to which the Company
acquired Non-License Assets. During 1997, the Company exercised its options and
now owns the License Assets of (or has entered into an LMA with respect to) all
of these stations other than WTTV-TV and WTTK-TV in Indianapolis, Indiana.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year presentation.
2. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements .................................... 10 -- 35 years
Station equipment ............................................. 5 -- 10 years
Office furniture and equipment ................................ 5 -- 10 years
Leasehold improvements ........................................ 10 -- 31 years
Automotive equipment .......................................... 3 -- 5 years
Property and equipment and autos under capital leases ......... Shorter of 10 years
or the lease term
</TABLE>
Property and equipment consisted of the following as of December 31, 1996 and
1997 (in thousands):
1996 1997
------------ ------------
Land and improvements .......................... $ 9,795 $ 10,225
Buildings and improvements ..................... 39,008 41,436
Station equipment .............................. 112,994 130,586
Office furniture and equipment ................. 10,140 14,037
Leasehold improvements ......................... 3,377 8,457
Automotive equipment ........................... 3,280 4,090
Construction in progress ....................... 6,923 --
--------- ---------
185,517 208,831
Less- Accumulated depreciation and amortization (31,184) (47,117)
--------- ---------
$ 154,333 $ 161,714
========= =========
3. INTEREST RATE DERIVATIVE AGREEMENTS:
The Company entered into interest rate derivative rate hedging agreements to
reduce the impact of changing interest rates on its floating rate debt,
primarily relating to the 1997 Bank Credit Agreement (see Note 4 ). The 1997
Bank Credit Agreement, as amended and restated, requires the Company to
F-12
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
enter into Interest Rate Protection Agreements at rates not to exceed 9.5% per
annum as to a notional principal amount at least equal to 60% of the Tranche A
term loans scheduled to be outstanding from time to time and at rates not to
exceed 9.75% per annum as to a notional principal amount of 60% of the aggregate
amount of Tranche B scheduled to be outstanding from time to time.
As of December 31, 1997, the Company had several interest rate swap agreements
relating to the Company's indebtedness which expire from June 10, 1998 to July
15, 2007. The swap agreements set rates in the range of 5.64% to 9.0%. The
notional amounts related to these agreements was were $1.0 billion at December
31, 1997, and decrease to $200 million through the expiration dates. The Company
has no intentions of terminating these instruments prior to their expiration
dates unless it were to prepay a portion of its bank debt.
The floating interest rates are based upon the three month London Interbank
Offered Rate (LIBOR) rate, and the measurement and settlement is performed
quarterly. Settlements of these agreements are recorded as adjustments to
interest expense in the relevant periods. Premiums paid under these agreements
were approximately $1.1 million in 1994, $851,000 in 1996 and $474,000 in 1997
and are amortized over the life of the agreements as a component of interest
expense. The counter parties to these agreements are major national financial
institutions. The Company estimates the aggregate cost to retire these
instruments at December 31, 1997 to be $726,000.
4. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
FIRST AMENDED AND RESTATED BANK CREDIT AGREEMENT
------------------------------------------------
In connection with the 1994 Acquisitions, the Company amended and restated its
Bank Credit Agreement (the "1994 Bank Credit Agreement"). The 1994 Bank Credit
Agreement consisted of three classes: Facility A Revolving Credit and Term Loan,
Facility B Credit Loan and Facility C Term Loan. In August 1995, the Company
utilized the net proceeds from the 1995 Notes discussed below to repay amounts
outstanding under the 1994 Bank Credit Agreement.
The weighted average interest rates during 1995, while amounts were outstanding
and as of August 28, 1995 (when outstanding indebtedness relating to Bank Credit
Agreement were repaid) and December 31, 1995 were 8.44% and 7.63%, respectively.
Interest expense relating to the Bank Credit Agreement was $15.6 million for the
year ended December 31, 1995. Simultaneously with the acquisition of the
non-license assets of River City, the 1994 Bank Credit Agreement was amended and
restated with new terms as outlined below.
SECOND AMENDED AND RESTATED BANK CREDIT AGREEMENT
-------------------------------------------------
In order to finance the acquisition of the non-license assets of River City and
potential future acquisitions, the Company amended and restated its Bank Credit
Agreement on May 31, 1996 (the "1996 Bank Credit Agreement"). The 1996 Bank
Credit Agreement consisted of three classes: Tranche A Term Loan, Tranche B Term
Loan and a Revolving Credit Commitment.
The Tranche A Term Loan was a term loan in a principal amount not to exceed $550
million and was scheduled to be paid in quarterly installments beginning
December 31, 1996 through December 31, 2002. The Tranche B Term Loan was a term
loan in a principal amount not to exceed $200 million and was scheduled to be
paid in quarterly installments beginning December 31, 1996 through November
2003. The Revolving Credit Commitment was a revolving credit facility in a
principal amount not to exceed $250 million and was scheduled to have reduced
availability quarterly beginning March 31, 1999 through November 30, 2003. The
Company incurred amendment acquisition costs of approximately $20 million
associated with this indebtedness which are being amortized over the life of the
debt.
F-13
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
The applicable interest rate for the Tranche A Term Loan and the Revolving
Credit Tranche was either LIBOR plus 1.25% to 2.5% or the base rate plus zero to
1.25%. The applicable interest rate for the Tranche A Term Loan and the
Revolving Credit Tranche was adjusted based on the ratio of total debt to four
quarters trailing earnings before interest, taxes, depreciation and
amortization. The applicable interest rate for Tranche B was either LIBOR plus
2.75% or the base rate plus 1.75%. The weighted average interest rates for
outstanding indebtedness relating to the 1996 Bank Credit Agreement during 1996
and as of December 31, 1996, were 8.08% and 8.12%, respectively. Interest
expense relating to the 1996 Bank Credit Agreement was $40.4 million for the
year ended December 31, 1996. The Company amended and restated the 1996 Bank
Credit Agreement as discussed below.
THIRD AMENDED AND RESTATED BANK CREDIT AGREEMENT
------------------------------------------------
In order to expand its capacity and obtain more favorable terms with its
syndicate of banks, the Company amended and restated its Bank Credit Agreement
in May 1997 (the "1997 Bank Credit Agreement"). In connection with the amendment
and restatement, the Company incurred amendment acquisition costs of
approximately $4.7 million, which are being amortized over the life of the debt.
Contemporaneously with the Preferred Stock Offering and the Common Stock
Offering (see Notes 15 and 16) consummated in September 1997, the Company
amended its 1997 Bank Credit Agreement. The 1997 Bank Credit Agreement, as
amended, consists of two classes: Tranche A Term Loan Term loan and a Revolving
Credit Commitment. The Tranche A Term Loan is a term loan in a principal amount
not to exceed $325 million and is scheduled to be paid in quarterly installments
through December 31, 2004. The Revolving Credit Commitment is a revolving credit
facility in a principal amount not to exceed $675 million and is scheduled to
have reduced availability quarterly through December 31, 2004. As of December
31, 1997, outstanding indebtedness under the Tranche A Term Loan and the
Revolving Credit Commitment were $307.1 million and $-0- respectively.
The applicable interest rate for the Tranche A Term Loan and the Revolving
Credit Tranche is either LIBOR plus 0.5% to 1.875% or the base rate plus zero to
0.625%. The applicable interest rate for the Tranche A Term Loan and the
Revolving Credit is adjusted based on the ratio of total debt to four quarters'
trailing earnings before interest, taxes, depreciation and amortization. The
weighted average interest rates for outstanding indebtedness relating to the
1997 Bank Credit Agreement during 1997 and as of December 31, 1997 were 7.43%
and 8.5%, respectively. The interest expense relating to the 1997 Bank Credit
Agreement was $46.7 million for the year ended December 31, 1997.
The Company is required to maintain certain debt covenants in connection with
the 1997 Bank Credit Agreement. As of December 31, 1997, the Company is in
compliance with all debt covenants.
8 3/4% SENIOR SUBORDINATED NOTES DUE 2007:
------------------------------------------
In December 1997, the Company completed an issuance of $250 million aggregate
principal amount of 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4%
Notes") pursuant to the Shelf Registration statement (see Note 14) and generated
net proceeds to the Company of $242.8 million. Of the net proceeds from the
issuance, $106.2 million was utilized to tender the Company's 1993 Notes with
the remainder retained for general corporate purposes which may include payments
relating to future acquisitions.
Interest on the 8 3/4% Notes is payable semiannually on June 15 and December 15
of each year, commencing June 15, 1998. Interest expense for the year ended
December 31, 1997 was $0.9 million. The 8 3/4% Notes are issued under an
Indenture among SBG, its subsidiaries (the guarantors) and the trustee. Costs
associated with the offering totaled $5.8 million, including an underwriting
discount of $5.0 million. These costs were capitalized and are being amortized
over the life of the debt.
Based upon the quoted market price, the fair value of the 8 3/4% Notes as of
December 31, 1997 is $250.6 million.
F-14
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
9% SENIOR SUBORDINATED NOTES DUE 2007:
--------------------------------------
In July 1997, the Company completed an issuance of $200 million aggregate
principal amount of 9% Senior Subordinated Notes due 2007 (the "9% Notes"). The
9% Notes were sold to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) and a limited number of institutional "accredited
investors" and the offering was exempt from registration under the Securities
Act, pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder.
The Company utilized $162.5 million of the approximately $195.6 million net
proceeds of the private issuance to repay outstanding revolving credit
indebtedness under the 1997 Bank Credit Agreement and utilized the remainder to
pay a portion of the $63 million cash down payment relating to the Heritage
Acquisition (see Note 12).
Pursuant to a Registration Rights Agreement entered into in connection with the
private placement of the 9% Notes, the Company offered to holders of the 9%
Notes the right to exchange the 9% Notes with new 9% Notes (the "Notes Exchange
Offer") having the same terms as the existing notes, except that the exchange of
the new Notes for the existing Notes will be registered under the Securities
Act. On October 8, 1997 the Company filed a registration statement on Form S-4
with the Securities and Exchange Commission (the "Commission") for the purpose
of registering the new 9% Notes to be offered in exchange for the aforementioned
existing 9% Notes. The Company's Notes Exchange Offer became effective on
October 10, 1997 and was closed on November 7, 1997, at which time all of the
existing 9% Notes were exchanged for new 9% Notes.
Interest on the 9% Notes is payable semiannually on January 15 and July 15 of
each year, commencing January 15, 1998. Interest expense for the year ended
December 31, 1997 was $9.0 million. The 9% Notes are issued under an Indenture
among SBG, its subsidiaries (the guarantors) and the trustee. Costs associated
with the offering totaled $4.8 million, including an underwriting discount of
$4.0 million. These costs were capitalized and are being amortized over the life
of the debt.
Based upon the quoted market price, the fair value of the 9% Notes as of
December 31, 1997 is $206.4 million.
10% SENIOR SUBORDINATED NOTES DUE 2005
--------------------------------------
In August 1995, the Company completed an issuance of $300 million aggregate
principal amount of 10% Senior Subordinated Notes (the "1995 Notes"), due 2005,
generating net proceeds to the Company of $293.2 million. The net proceeds of
this offering were utilized to repay outstanding indebtedness under the then
existing Bank Credit Agreement of $201.8 million with the remainder being
retained and eventually utilized to make payments related to certain
acquisitions consummated during 1996. In conjunction with the repayment of
outstanding indebtedness under the Bank Credit Agreement, the Company recorded
an extraordinary loss of $4.9 million, net of a tax benefit of $3.4 million.
Interest on the Notes is payable semiannually on March 30 and September 30 of
each year, commencing March 30, 1996. Interest expense for the years ended
December 31, 1996 and 1997, was $30.0 million and $30.0 million, respectively.
The notes are issued under an indenture among SBG, its subsidiaries (the
guarantors) and the trustee. Costs associated with the offering totaled $6.8
million, including an underwriting discount of $6.0 million and are being
amortized over the life of the debt.
Based upon the quoted market price, the fair value of the Notes as of December
31, 1997 is $322.2 million.
10% SENIOR SUBORDINATED NOTES DUE 2003 AND 1997 TENDER OFFER
------------------------------------------------------------
In December 1993, the Company completed an issuance of $200 million aggregate
principal amount of 10% Senior Subordinated Notes (the "1993 Notes"), due 2003
(the Notes). Subsequently, the Company determined that a redemption of $100.0
million was required. This redemption and a refund of $1.0 million of fees from
the underwriters took place in the first quarter of 1994.
F-15
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
In December 1997, the Company completed a tender offer of $98.1 million
aggregate principal amount of the 1993 Notes (the "Tender Offer"). Total
consideration per $1,000 principal amount note tendered was $1,082.08 resulting
in total consideration paid to consummate the Tender Offer of $106.2 million. In
conjunction with the Tender Offer, the Company recorded an extraordinary loss of
$6.1 million, net of a tax benefit of $4.0 million.
Interest on the Notes not tendered is payable semiannually on June 15 and
December 15 of each year. Interest expense for the years ended December 31,
1995, 1996 and 1997, was $10.0 million, $10.0 million and $9.6 million,
respectively. The Notes are issued under an Indenture among SBG, its
subsidiaries (the guarantors) and the trustee.
SUMMARY
- -------
Notes payable and commercial bank financing consisted of the following as of
December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Bank Credit Agreement, Tranche A Term Loan .......................... $ 520,000 $ 307,125
Bank Credit Agreement, Tranche B Term Loan .......................... 198,500 --
Bank Credit Agreement, Revolving Credit Commitment .................. 155,000 --
8 3/4% Senior Subordinated Notes, due 2007 ......................... -- 250,000
9% Senior Subordinated Notes, due 2007 .............................. -- 200,000
10% Senior Subordinated Notes, due 2003 ............................. 100,000 1,899
10% Senior Subordinated Notes, due 2005 ............................. 300,000 300,000
Installment note for certain real estate interest at 8.0% ........... -- 101
Unsecured installment notes to former minority stockholders of
CRI and WBFF, interest at 18% ...................................... 644 --
---------- ----------
1,274,144 1,059,125
Less: Discount on 8 3/4% Senior Subordinated Notes, due 2007 ........ -- (976)
Less: Current portion ............................................... (62,144) (35,215)
---------- ----------
$1,212,000 $1,022,934
========== ==========
</TABLE>
F-16
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
The Revolving Credit Commitment is a revolving credit facility in a principal
amount not to exceed $675 million and is scheduled to have reduced availability
quarterly beginning March 31, 1999 through December 31, 2004. Indebtedness under
Tranche A of the 1997 Bank Credit Agreement and notes payable as of December 31,
1997, mature as follows (in thousands):
<TABLE>
<S> <C>
1998 ................................................................ $ 35,215
1999 ................................................................ 37,924
2000 ................................................................ 48,758
2001 ................................................................ 48,759
2002 ................................................................ 48,759
2003 and thereafter ................................................. 839,710
----------
1,059,125
Less: Discount on 8 3/4% Senior Subordinated Notes, due 2007 ........ (976)
----------
$1,058,149
==========
</TABLE>
Substantially all of the Company's assets have been pledged as security for
notes payable and commercial bank financing. See Note 23 for Guarantor and
Non-Guarantor Subsidiaries under the Company's Indentures.
5. NOTES AND CAPITAL LEASES PAYABLE TO AFFILIATES:
Notes and capital leases payable to affiliates consisted of the following as of
December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Subordinated installment notes payable to former majority own-
ers, interest at 8.75%, principal payments in varying amounts
due annually beginning October 1991, with a balloon payment
due at maturity in May 2005 ........................................... $ 10,448 $ 9,574
Capital lease for building, interest at 17.5% .......................... 1,372 1,198
Capital leases for broadcasting tower facilities, interest rates aver-
aging 10% ............................................................. 249 3,720
Capitalization of time brokerage agreements, interest at 6.73% ......... -- 6,611
Capital leases for building and tower, interest at 8.25% ............... 1,890 1,470
-------- --------
13,959 22,573
Less: Current portion .................................................. (1,774) (3,073)
-------- --------
$ 12,185 $ 19,500
======== ========
</TABLE>
F-17
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Notes and capital leases payable to affiliates, as of December 31, 1997, mature
as follows (in thousands):
1998 ....................................................... $ 4,694
1999 ....................................................... 4,696
2000 ....................................................... 4,615
2001 ....................................................... 4,044
2002 ....................................................... 2,854
2003 and thereafter ........................................ 7,503
--------
Total minimum payments due ................................. 28,406
Less: Amount representing interest ......................... (5,833)
--------
Present value of future notes and capital lease payments ... $ 22,573
========
6. PROGRAM CONTRACTS PAYABLE:
Future payments required under program contracts payable as of December 31,
1997, are as follows (in thousands):
1998 ................................................... $ 66,404
1999 ................................................... 40,026
2000 ................................................... 20,375
2001 ................................................... 1,770
2002 ................................................... 208
2003 and thereafter .................................... 29
---------
128,812
Less: Current portion .................................. (66,404)
---------
Long-term portion of program contracts payable ......... $ 62,408
=========
Included in the current portion amounts are payments due in arrears of $14.3
million. In addition, the Companies have entered into noncancelable commitments
for future program rights aggregating $56.9 million as of December 31, 1997.
The Company has estimated the fair value of its program contract payables and
noncancelable commitments at approximately $102.7 million and $43.1 million,
respectively, as of December 31, 1996, and $118.9 million and $46.7 million,
respectively, at December 31, 1997, based on future cash flows discounted at the
Company's current borrowing rate.
7. PREPAYMENT OF SYNDICATED PROGRAM CONTRACT LIABILITIES:
In connection with the 1996 acquisitions (see Note 12), the Company assumed
certain syndicated program contracts payable for which the underlying value of
the associated syndicated program assets was determined, by management, to be of
little or no value. The Company negotiated the prepayment of syndicated program
contracts payable for certain of the 1996 acquisitions, as well as certain other
of the Company's subsidiaries. During the years ended December 31, 1996 and
1997, the Company made cash payments totaling $15.1 million and $1.4 million,
respectively, relating to these negotiations. For subsidiaries owned prior to
1996, the Company recognized related amortization of excess syndicated
programming of $3.0 million for the year ended December 31, 1996.
F-18
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
8. RELATED PARTY TRANSACTIONS:
In connection with the start-up of an affiliate in 1990, certain SBG Class B
Stockholders issued a note allowing them to borrow up to $3.0 million from the
Company. This note was amended and restated June 1, 1994, to a term loan bearing
interest of 6.88% with quarterly principal payments beginning March 31, 1996
through December 31, 1999. As of December 31, 1996 and 1997, the balance
outstanding was approximately $1.8 and $1.3 million, respectively.
During the year ended December 31, 1993, the Company loaned Gerstell Development
Limited Partnership (a partnership owned by Class B Stockholders) $2.1 million.
The note bears interest at 6.18%, with principal payments beginning on November
1, 1994, and a final maturity date of October 1, 2013. As of December 31, 1996
and 1997, the balance outstanding was approximately $1.9 million.
Concurrently with the initial public offering (see Note 13), the Company
acquired options from certain stockholders of Glencairn that will grant the
Company the right to acquire, subject to applicable FCC rules and regulations,
up to 97% of the capital stock of Glencairn. The Glencairn options were
purchased by the Company for nominal consideration and will be exercisable only
upon payment of an aggregate price equal to Glencairn's cost for the underlying
stations, plus a 10% annual return. Glencairn is the owner-operator and FCC
licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in Raleigh/Durham, WABM
in Birmingham, KRRT in Kerrville and WFBC in Asheville/Greenville/Spartanburg.
The Company has entered into five-year LMA agreements (with five-year renewal
options) with Glencairn pursuant to which the Company provides programming to
Glencairn for airing on WNUV, WVTV, WRDC, WABM, KRRT and WFBC during the hours
of 6:00 a.m. to 2:00 a.m. each day and has the right to sell advertising during
this period. During the years ended December 31, 1995, 1996 and 1997, the
Company made payments of $5.6 million, $7.3 million and $8.4 million
respectively, to Glencairn under these LMA agreements.
During the years ended December 31, 1995, 1996 and 1997, the Company from time
to time entered into charter arrangements to lease airplanes owned by certain
Class B Stockholders. During the years ended December 31, 1995, 1996 and 1997,
the Company incurred expenses of approximately $489,000, $336,000 and $736,000
related to these arrangements, respectively.
In May 1996, the Company acquired certain assets from River City, obtained
options to acquire other assets from River City and entered into an LMA to
provide programming services to certain television and radio stations, of which
River City is the owner of the License Assets. Certain individuals who have
direct or indirect beneficial owners of equity interests in River City are
affiliates of the Company. During the years ended December 31, 1996 and 1997,
the Company incurred LMA expenses relating to River City of $1.4 million and
$896,000, respectively.
In September 1996, the Company entered into a five-year agreement with River
City pursuant to which River City will provide to the Company certain production
services. Pursuant to this agreement, River City will provide certain services
to the Company in return for an annual fee of $416,000, subject to certain
adjustments on each anniversary date. During the years ended December 31, 1996
and 1997, the Company incurred expenses relating to this agreement of $166,000
and $397,000, respectively.
An individual who is an affiliate of the Company is the owner of 100% of the
common stock of Keymarket of South Carolina, Inc. ("KSC"). The Company has
exercised its option to acquire all of the assets of KSC for consideration of
forgiveness of KSC debt in an aggregate principal amount of approximately $7.4
million, plus a payment of approximately $1.0 million, less certain adjustments.
The Company will close this transaction upon FCC approval which is anticipated
to occur during 1998. The Company also purchased two properties from this
affiliate for an aggregate purchase price of approximately $1.75 million as
required by certain leases assigned to the Company in connection with the River
City acquisition.
During May 1996, the Company, along with the Class B Stockholders, formed Beaver
Dam Limited Partnership (BDLP), of which the Company owned a 45% interest. BDLP
was formed for the purpose of construct-
F-19
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
ing and owning a building which may be the site for the Company's corporate
headquarters. The Company made capital contributions of approximately $380,000.
During 1997, the Partnership made a liquidating distribution to the Company of
approximately $380,000 and the Company no longer owns an interest in BDLP.
Certain assets used by the Company's operating subsidiaries are leased from
Cunningham, KIG and Gerstell (entities owned by the Class B Stockholders). Lease
payments made to these entities were $1.3 million, $1.3 million, and $1.4
million for the years ended December 31, 1995, 1996 and 1997, respectively.
9. INCOME TAXES:
The Company files a consolidated federal income tax return and separate company
state tax returns. The provision (benefit) for income taxes consists of the
following as of December 31, 1995, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
----------- --------- -------------
<S> <C> <C> <C>
Provision for income taxes before extraordinary item .......... $ 5,200 $6,936 $ 15,984
Income tax effect of extraordinary item ....................... (3,357) -- (4,045)
-------- ------ ---------
$ 1,843 $6,936 $ 11,939
======== ====== =========
Current:
Federal ...................................................... $ 5,374 $ 127 $ (10,581)
State ........................................................ 1,558 4,479 1,938
-------- ------ ---------
6,932 4,606 (8,643)
-------- ------ ---------
Deferred:
Federal ...................................................... (4,119) 2,065 18,177
State ........................................................ (970) 265 2,405
-------- ------ ---------
(5,089) 2,330 20,582
-------- ------ ---------
$ 1,843 $6,936 $ 11,939
======== ====== =========
</TABLE>
The following is a reconciliation of federal income taxes at the applicable
statutory rate to the recorded provision (benefit):
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income taxes ............................................ 34.0% 34.0% 34.0%
Adjustments-
State income and franchise taxes, net of federal effect .................. 2.8 16.7 6.3
Goodwill amortization .................................................... 16.4 24.3 17.0
Non-deductible expense items.. ........................................... 3.7 6.1 8.5
Tax liability related to dividends on Parent Preferred Stock (a) ......... -- -- 70.3
Other .................................................................... (5.9) 4.9 3.0
---- ---- -----
Provision for income taxes ................................................ 51.0% 86.0% 139.1%
==== ==== =====
</TABLE>
- ----------
(a) In March 1997, the Company issued the HYTOPS securities (see Note 17). In
connection with this transaction, Sinclair Broadcast Group, Inc. (the
"Parent") issued $206.2 million of Series C Preferred Stock (the "Parent
Preferred Stock") to KDSM, Inc., a wholly owned subsidiary. Parent Preferred
Stock dividends paid to KDSM, Inc. are considered taxable income for Federal
tax purposes and not considered income for book purposes. Also for Federal
tax purposes, KDSM, Inc. is allowed a tax deduction for dividends received
on the Parent Preferred Stock in an amount equal to Parent Preferred Stock
dividends received in each taxable year limited to the extent that the
Parent's consolidated group has "earnings and profits". To the extent that
dividends received by KDSM, Inc. are in excess of the Parent's consolidated
group earnings and profits, the Parent will reduce its tax basis in the
Parent Preferred Stock which gives rise to a deferred tax liability (to be
recognized upon redemption) and KDSM, Inc.'s dividend income is treated as a
permanent difference between taxable income and book income. During the year
ended December 31, 1997, the Parent did not generate earnings and profits
which resulted in a reduction in basis of the Parent's Series C Preferred
Stock of $20.8 million which generated a related deferred tax liability of
$8.4 million.
F-20
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Temporary differences between the financial reporting carrying amounts and the
tax basis of assets and liabilities give rise to deferred taxes. The Company had
a net deferred tax asset and deferred tax liability of $782,000 and $21.5
million as of December 31, 1996 and 1997, respectively. The realization of
deferred tax assets is contingent upon the Company's ability to generate
sufficient future taxable income to realize the future tax benefits associated
with the net deferred tax asset. Management believes that deferred assets will
be realized through future operating results.
The Company has total available Federal NOL's of approximately $57.3 million as
of December 31, 1997, which expire during various years from 2004 to 2012. These
NOL's are recorded within refundable income taxes and deferred taxes in the
accompanying Consolidated Balance Sheet as of December 31, 1997. Certain of
these NOL's are limited to use within a specific entity, and certain NOL's are
subject to annual limitations under Internal Revenue Code Section 382 and
similar state provisions.
Total deferred tax assets and deferred tax liabilities as of December 31, 1996
and 1997, including the effects of businesses acquired, 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 (in thousands):
<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Deferred Tax Assets:
Accruals and reserves ................................................. $ 2,195 $ 3,015
Loss on disposal of fixed assets ...................................... -- 148
Net operating losses .................................................. 4,829 10,435
Program contracts ..................................................... 2,734 3,410
Other ................................................................. 713 903
------- -------
$10,471 $17,911
======= =======
Deferred Tax Liabilities:
FCC license ........................................................... $ 2,613 $ 5,346
Parent Preferred Stock deferred tax liability [see (a) above] ......... -- 8,388
Hedging instruments. .................................................. 188 15
Fixed assets and intangibles .......................................... 4,430 23,572
Capital lease accounting .............................................. 1,304 1,647
Affiliation agreement.. ............................................... 691 --
Investment in partnerships. ........................................... 209 420
Other ................................................................. 254 65
------- -------
$ 9,689 $39,453
======= =======
</TABLE>
During 1996, the Company made a $1.1 million deferred tax adjustment to decrease
its deferred tax asset and increase goodwill under the purchase accounting
guidelines of APB 16 and in accordance with SFAS 109 related to the opening
deferred tax asset balances of certain 1995 acquisitions.
10. EMPLOYEE BENEFIT PLAN:
The Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and trust (the
"SBG Plan") covers eligible employees of the Company. Contributions made to the
SBG Plan include an employee elected salary reduction amount, company matching
contributions and a discretionary amount determined each year by the Board of
Directors. The Company's 401(k) expense for the years ended December 31, 1995,
1996 and 1997, was $271,000, $657,000 and $1.0 million, respectively. There were
no discretionary contributions during these periods. During December 1997, the
Company registered 400,000 shares of its Class "A" Common Stock with the
Securities and Exchange Commission (the "Commission") to be issued as a matching
contribution for the 1997 plan year and subsequent plan years.
F-21
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
11. CONTINGENCIES AND OTHER COMMITMENTS:
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 or results of operations.
OPERATING LEASES
----------------
The Company has entered into operating leases for certain property and equipment
under terms ranging from three to ten years. The rent expense under these
leases, as well as certain leases under month-to-month arrangements, for the
years ended December 31, 1995, 1996 and 1997, aggregated approximately $1.1
million, $3.1 million and $3.9 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
1998 ........................ $ 3,427
1999 ........................ 2,226
2000 ........................ 1,583
2001 ........................ 1,382
2002 ........................ 1,172
2003 and thereafter ......... 4,988
-------
$14,778
=======
12. ACQUISITIONS:
1995 ACQUISITIONS AND DISPOSITIONS
----------------------------------
In January and May 1995, the Company acquired the non-license and license
assets, respectively, of WTVZ in Norfolk, Virginia for a purchase price of $49.0
million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets, acquired intangible broadcasting assets and other intangible assets for
$1.4 million, $12.6 million and $35.0 million, respectively, based upon an
independent appraisal. Intangible assets are being amortized over 1 to 40 years.
In January 1995, the Company acquired the license and non-license assets of the
Paramount Station Group of Raleigh/Durham, Inc. which owned and operated WLFL in
Raleigh/Durham, North Carolina for $55.5 million, plus the assumption of $3.7
million in liabilities. The acquisition was accounted for under the purchase
method of accounting whereby the purchase price was allocated to property and
programming assets, acquired intangible broadcasting assets and other intangible
assets for $8.6 million, $15.9 million and $34.7 million, respectively, based
upon an independent appraisal. Intangible assets are being amortized over
periods of 1 to 40 years.
On March 31, 1995, the Company exercised its option to acquire 100% of the
voting stock of FSFA for the exercise price of $100. FSFA was merged into WLFL,
Inc. and became a wholly-owned subsidiary of the Company. Simultaneously, the
Company sold the license assets of FSFA to Glencairn for $2.0 million, and
entered into a five-year LMA (with a five-year renewal option) with Glencairn
(see Note 8).
F-22
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
On May 5, 1995, Keyser Communications, Inc. (KCI), an affiliated entity
wholly-owned by the stockholders of the Company, was merged into the Company for
common stock. Certain assets and liabilities of KCI (other than programming
items, an LMA agreement and consulting agreements), were distributed to the KCI
shareholders immediately prior to the merger. The merger of KCI is being treated
as a reorganization and has been accounted for as a pooling of interests
transaction. Accordingly, the consolidated financial statements for all periods
presented have been restated to include the accounts of KCI.
In July 1995, the Company acquired the non-license assets of WABM in Birmingham,
Alabama for a purchase price of $2.5 million. The acquisition was accounted for
under the purchase method of accounting whereby $1.1 million of the purchase
price was allocated to property and program assets, based upon an independent
appraisal. The excess of the purchase price over the acquired assets of
approximately $1.4 million was allocated to other intangible assets and is being
amortized over 15 years. Simultaneously with the purchase, the Company entered
into a five-year LMA agreement (with a five-year renewal option) with Glencairn.
In November 1995, the Company acquired the non-license assets of WDBB in
Tuscaloosa, Alabama for a purchase price of $400,000. In addition, the Company
made "Option Grant Payments" of $11.3 million to certain parties for options to
purchase the issued and outstanding stock of WDBB, Inc., which holds the license
assets of WDBB. The option agreement further provides for the payment of option
grant installments of $2.6 million over five years and a final option exercise
price of $100,000. The acquisition was accounted for under the purchase method
of accounting whereby $11.1 million was allocated to the property and program
assets based upon an independent appraisal. The total of Option Grant Payments
paid and grant installments accrued of $14.0 million was allocated to other
intangible assets and is being amortized over 15 years.
1996 ACQUISITIONS
- -----------------
RIVER CITY ACQUISITION
In April 1996, the Company entered into an agreement to purchase certain
non-license assets of River City. In May 1996, the Company closed the
transaction for a purchase price of $967.1 million, providing as consideration
1,150,000 shares of Series A Convertible Preferred Stock with a fair market
value of $125.1 million, 1,382,435 stock options with a fair market value of
$23.9 million and cash payments totaling $818.1 million. The Company utilized
indebtedness under its Bank Credit Agreement to finance the transaction. The
acquisition was accounted for under the purchase method of accounting whereby
the purchase price was allocated to property and programming assets, acquired
intangible broadcasting assets and other intangible assets for $82.8 million,
$375.6 million and $508.7 million, respectively, based upon an independent
appraisal. Intangible assets are being amortized over 1 to 40 years.
Simultaneously, the Company entered into option agreements to purchase certain
license assets for an aggregate option exercise price of $20 million. In
September 1996, after receiving FCC approval for license transfer, the Company
made a cash payment of $6.9 million to acquire certain radio station FCC
licenses. During 1997, the Company exercised its options to acquire certain
other FCC licenses and now owns all of the License Assets (or has entered into
an LMA with respect to) all of the television and radio stations with respect to
which it acquired non-license assets from River City, other than WTTV-TV and
WTTK-TV in Indianapolis, Indiana.
Also, simultaneously with the acquisition, the Company entered into an option
agreement to purchase the license and non-license assets of WSYX-TV in Columbus,
Ohio. The option purchase price for this television station is $100 million plus
the amount of River City indebtedness secured by the WSYX assets on the exercise
date (not to exceed the amount at the date of closing of $135 million). Pursuant
to
F-23
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
the WSYX option agreement, the Company is required to make certain "Option
Extension Fees", as defined. These fees are required to begin quarterly
beginning with December 31, 1996, through the earlier of the "Option Grant Date"
or the expiration date of June 30, 1999. The Option Extension Fees are
calculated as 8% per annum of the option purchase price through the first
anniversary of the Option Grant Date, 15% per annum of the option purchase price
through the second anniversary of the Option Grant Date and 25% per annum of the
option purchase price through the expiration of the WSYX option agreement. As of
December 31, 1997, the Company incurred Option Extension Fees and other costs
relating to WSYX-TV totaling $22.9 million.
In conjunction with the River City acquisition, the Company entered into an
agreement to purchase the non-license assets of KRRT, Inc., a television station
in San Antonio, Texas, for a purchase price of $29.5 million. The acquisition
was accounted for under the purchase method of accounting whereby the purchase
price was allocated to property and programming assets, acquired intangible
broadcasting assets and other intangible assets for $3.8 million, $0.4 million
and $25.3 million, respectively, based upon an independent appraisal. Intangible
assets are being amortized over 1 to 15 years.
In connection with the River City acquisition, the Company consummated the
following transactions concurrent with or subsequent to the closing:
1. In June 1996, the Board of Directors of the Company adopted, upon approval
of the stockholders by proxy, an amendment to the Company's amended and
restated charter. This amendment increased the number of Class A Common
Stock shares authorized to be issued by the Company from 35,000,000 shares
to 100,000,000 shares. The amendment also increased the number of shares of
Preferred Stock authorized from 5,000,000 shares to 10,000,000 shares.
2. Series A Preferred Stock -- As partial consideration for the acquisition of
the non-license assets of River City, the Company issued 1,150,000 shares of
Series A Preferred Stock. In June 1996, the Board of Directors of the
Company adopted, upon approval of the stockholders by proxy, an amendment to
the Company's amended and restated charter at which time Series A Preferred
Stock was exchanged for and converted into Series B Preferred Stock. The
Company recorded the issuance of Series A Preferred Stock based on the fair
market value at the date the River City acquisition was announced at the
exchange rate of 3.64 shares of Class A Common Stock for each share of
Series A Preferred Stock.
3. Series B Preferred Stock -- Shares of Series B Preferred Stock are
convertible at any time into shares of Class A Common Stock, with each share
of Series B Preferred Stock convertible into approximately 3.64 shares of
Series A Common Stock. The Company may redeem shares of Series B Preferred
Stock only after the occurrence of certain events. If the Company seeks to
redeem shares of Series B Preferred Stock and the stockholder elects to
retain the shares, the shares will automatically be converted into common
stock on the proposed redemption date. All shares of Series B Preferred
Stock remaining outstanding as of May 31, 2001, will automatically convert
into Class A Common Stock. Series B Preferred Stock is entitled to 3.64
votes on all matters with respect to which Class A Common Stock has a vote.
F-24
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
4. Stock Options and Awards:
Long-Term Incentive Plan-
In June 1996, the Board of Directors adopted, upon approval of the
stockholders by proxy, the 1996 Long-Term Incentive Plan of the Company (the
"LTIP"). The purpose of the LTIP is to reward key individuals for making
major contributions to the success of the Company and its subsidiaries and to
attract and retain the services of qualified and capable employees. A total
of 2,073,673 shares of Class A Common Stock is reserved and available for
awards under the plan. In connection with the River City acquisition, 244,500
options were granted to certain employees and 1,382,454 were granted to Barry
Baker (see Executive Employment Agreement below) under this plan with an
exercise price of $30.11 per share.
The Company recorded deferred compensation of $1.9 million as additional
paid-in capital at the stock option grant date. During the years ended
December 31, 1996 and 1997, compensation expense of $739,000 and $605,000 was
recorded relating to the options issued under the LTIP, respectively. The
remaining deferred compensation of approximately $954,000 will be recognized
as expense on a straight-line basis over the vesting period.
Incentive Stock Option Plan-
In June 1996, the Board of Directors adopted, upon approval of the
stockholders by proxy, certain amendment to the Company's Incentive Stock
Option Plan. The purpose of the amendments was (i) to increase the number of
shares of Class A Common Stock approved for issuance under the plan from
400,000 to 500,000, (ii) to delegate to Barry Baker the authority to grant
certain options, (iii) to lengthen the period after the date of grant before
options become exercisable, from two years to three (iv) and to provide
immediate termination and three-year ratable vesting of options in certain
circumstances. In connection with the River City acquisition, the Company
granted 287,000 options to key management employees at an exercise price of
$37.75, the fair market value at the date of grant.
5. Executive Employment Agreement
In connection with the acquisition of River City, the Company entered into a
five-year employment agreement (the "Baker Employment Agreement") with Barry
Baker, pursuant to which Mr. Baker will become President and Chief Executive
Officer of SCI and Executive Vice President of the Company, at such time as
Mr. Baker is able to hold those positions consistent with applicable FCC
regulations. Until such time as Mr. Baker is able to become an officer of the
Company, he serves as a consultant to the Company pursuant to a consulting
agreement and received compensation that he would be entitled to as an
officer under the Baker Employment Agreement. If the Baker Employment
Agreement is terminated by the Company other than for cause (as defined) or
by Mr. Baker for good cause (constituting certain occurrences specified in
the agreement), Mr. Baker shall be entitled to certain termination payments
entitling him to his salary and bonuses which would have been paid under the
agreement; to purchase certain television or radio assets acquired by the
Company from River City at fair market value, and all stock options held by
Mr. Baker shall vest immediately.
OTHER 1996 ACQUISITIONS
In May 1995, the Company entered into option agreements to acquire all of the
license and non-license assets of WSMH-TV in Flint, Michigan (WSMH). In July
1995, the Company paid the $1.0 million option exercise price to exercise its
option and in February 1996, the Company consummated the acquisition for a
purchase price of $35.4 million. The acquisition was accounted for under the
purchase
F-25
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
method of accounting whereby the purchase price was allocated to property and
programming assets, acquired intangible broadcasting assets and other intangible
assets for $1.9 million, $6.0 million and $27.5 million, respectively, based
upon an independent appraisal.
In March 1996, the Company entered into an agreement to acquire the outstanding
stock of Superior Communications, Inc. (Superior) which owns the license and
non-license assets of the television stations KOCB in Oklahoma City, Oklahoma
and WDKY in Lexington, Kentucky. In May 1996, the Company consummated the
acquisition for a purchase price of $63.5 million. The acquisition was accounted
for under the purchase method of accounting whereby the purchase price was
allocated to property and programming assets, acquired intangible broadcasting
assets and other intangible assets for $7.3 million, $20.4 million,
respectively, based upon an independent appraisal.
In January 1996, the Company entered into an agreement to acquire license and
non-license assets of the television station WYZZ in Peoria, Illinois. In July
1996, the Company consummated the acquisition for a purchase price of $21.1
million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets, acquired intangible broadcasting assets and other intangible assets for
$2.2 million, $4.3 million and $14.6 million, respectively, based upon an
independent appraisal.
In July 1996, the Company entered into an agreement to acquire license and
non-license assets of the television station KSMO in Kansas City, Missouri
through the exercise of its options described in Note 13 for a total purchase
price of $10.0 million. The acquisition was accounted for under the purchase
method of accounting whereby the purchase price was allocated to property and
programming assets and acquired intangible broadcasting assets for $4.6 million
and $5.4 million, respectively, based upon an independent appraisal.
In August 1996, the Company acquired the license and non-license assets of the
television station WSTR in Cincinnati, Ohio for a total purchase price of $8.7
million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets and acquired intangible broadcasting assets for $6.2 million and $2.5
million, respectively, based upon an independent appraisal.
1997 ACQUISITIONS AND AGREEMENTS TO ACQUIRE CERTAIN ASSETS:
- -----------------------------------------------------------
1997 ACQUISITIONS
In January 1997, the Company entered into a purchase agreement to acquire the
license and non-license assets of KUPN-TV, the UPN affiliate in Las Vegas,
Nevada, for a purchase price of $87.5 million. Under the terms of this
agreement, the Company made cash deposit payments of $9.0 million and in May
1997, the Company closed on the acquisition making cash payments of $78.5
million for the remaining balance of the purchase price and other related
closing costs. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets, acquired intangible broadcasting assets and other intangible assets for
$1.6 million, $17.9 million and $68.0 million, respectively, based upon an
independent appraisal. The Company financed the transaction by utilizing
proceeds from the HYTOPS offering (see Note 17) combined with indebtedness under
the 1997 Bank Credit Agreement.
In 1997, the Company exercised options to acquire the license and non-license
assets of the following radio stations: WGR-AM and WWWS-AM (Buffalo, New York)
and WWFH-FM, WILP-AM, WWSH-FM and WKRF-FM (Wilkes-Barre/Scranton, Pennsylvania).
During the year ended December 31, 1997, the Company made payments totaling
approximately $3.1 million to acquire the license and non-license assets of
these radio stations.
F-26
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
EXERCISE OF OPTIONS TO ACQUIRE RIVER CITY LICENSE ASSETS
Since March 31, 1997, the FCC has granted approval for transfer of FCC licenses
with respect to the following television stations: KDNL-TV (St. Louis,
Missouri), KOVR-TV (Sacramento, California), WLOS-TV (Asheville, North
Carolina), KABB-TV (San Antonio, Texas) and KDSM-TV (Des Moines, Iowa). The
Company exercised options to acquire the License Assets (the television and
radio assets essential for broadcasting a television or radio signal in
compliance with regulatory guidelines) of each of these stations from River City
Broadcasting, L.P. ("River City") for aggregate option exercise payments of $9.3
million. In July 1997, the Company made an option exercise payment of $.5
million to River City related to the license assets of WFBC-TV (Greenville,
South Carolina) and simultaneously assigned its option to acquire the License
Assets of WFBC-TV to Glencairn, Ltd. ("Glencairn") for an option assignment fee
of $2.0 million. The Company entered into a local marketing agreement ("LMA")
with Glencairn whereby the Company, in exchange for an hourly fee, obtained the
right to program and sell advertising on substantially all of the station's
inventory of broadcast time. The Company also received FCC approval for the
transfer of the FCC licenses of KPNT-FM and WVRV-FM in St. Louis, Missouri, and
exercised its option to acquire the License Assets of these radio stations for
an option exercise price of $1.2 million. As a result of these license approvals
and option exercises, the Company now owns the License Assets of (or has entered
into an LMA with Glencairn with respect to) all of the television and radio
stations with respect to which it acquired Non-License Assets (assets involved
in the operation of radio and television stations other than License Assets)
from River City, other than WTTV-TV and WTTK-TV in Indianapolis, Indiana.
AGREEMENT TO ACQUIRE HERITAGE
On July 16, 1997, the Company entered into agreements (the "Heritage Acquisition
Agreements") with The News Corporation Limited, Heritage Media Group, Inc. and
certain subsidiaries of Heritage Media Corporation (collectively, "Heritage"),
pursuant to which the Company agreed to acquire certain television and radio
station assets. Under the Heritage Acquisition Agreements, the Company will
acquire the assets of, or the right to program pursuant to LMAs, six television
stations in three markets and the assets of 24 radio stations in seven markets
(the "Heritage Acquisition"). The aggregate purchase price for the assets is
$630 million payable in cash at closing, less deposits paid of $65.5 million and
amounts paid in January 1998 relating to the closing of certain television
assets of $215 million (see Note 24). In January and February 1998, the Company
completed the acquisition of the Heritage radio and television stations except
for the television stations in the Burlington, Vermont-Plattsburgh, New York
market and the radio stations in the New Orleans, Louisiana market. Because of
FCC ownership limitations, the Company will be required to agree to divest one
or more of the radio stations it owns or proposes to acquire in the New Orleans
market before closing the Heritage Acquisition with respect to that market.
Closing of the New Orleans radio stations is conditioned on, among other things,
FCC approval.
AGREEMENT TO ACQUIRE LAKELAND GROUP
In November 1997, the Company entered into an agreement to acquire 100% of the
stock of Lakeland Group Television Inc. for a purchase price of $50 million (the
"Lakeland Acquisition") and made a cash deposit of $1.5 million. Upon the
closing of the Lakeland Acquisition, the Company will acquire television station
KLGT in Minneapolis, Minnesota. The Lakeland Acquisition is expected to close in
the second quarter of 1998.
AGREEMENT TO ACQUIRE MAX MEDIA
On December 2, 1997, the Company entered into agreements to acquire, directly
or indirectly, all of the equity interests of Max Media Properties, L.L.C.
("Max Media"). As a result of this transaction, the Company will acquire, or
acquire the right to program pursuant to LMAs, nine television stations and
F-27
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
eight radio stations in eight markets (the "Max Media Acquisition"). The
aggregate purchase price is $255 million payable in cash at closing (less a
deposit of $12.8 million paid at the time of signing the acquisition agreement),
a portion of which will be used to retire existing debt of Max Media at closing.
Max Media's television station WKEF-TV in Dayton, Ohio has an overlapping
service area with the Company's television stations WTTE-TV in Columbus, Ohio,
WSTR-TV in Cincinnati, Ohio, and with Company LMA station WTTV-TV in
Indianapolis, Indiana. In addition, Max Media's television station WEMT-TV in
Tri-Cities, Tennessee/Virginia has an overlapping service area with the
Company's television station WLOS-TV in Asheville, North Carolina and Max
Media's television station KBSI-TV in Paducah, Kentucky/Cape Girardeau, Missouri
has an overlapping service area with the Company's television station KDNL-TV in
St. Louis, Missouri. Furthermore, the Company owns a television station (and
proposes to acquire radio stations from Heritage) in the Norfolk-Virginia
Beach-Newport News, Virginia market, where four of Max Media's radio stations
are located. Consequently, the Company has requested waivers from the FCC to
allow the Company to complete the Max Media Acquisition. There can be no
assurance that such waivers will be granted. As a result of the Max Media
Acquisition and the Heritage Acquisition, the Company intends to dispose of two
of the FM radio stations in the Norfolk-Virginia Beach-Newport News, Virginia
radio market that it has agreed to acquire from Heritage and Max Media in order
to be in compliance with the FCC regulations that limit the number of radio
stations that can be owned in a market. The Max Media Acquisition is subject to
FCC and Department of Justice (DOJ) approval and certain other conditions, and
is anticipated to be completed in the second quarter of 1998. The transaction is
expected to be financed through borrowings under the Company's Bank Credit
Agreement.
13. INITIAL PUBLIC OFFERING:
In June 1995, the Company consummated an initial public offering of 5,750,000
shares of Class A Common Stock at an initial public offering price of $21.00 per
share realizing net proceeds of approximately $111.5 million. The net proceeds
to the Company from this offering were used to reduce long-term indebtedness.
The Company consummated the following transactions concurrent with or prior to
the offering:
1. The Company purchased the options to acquire the partnership interests and
liabilities of KSMO in Kansas City, Missouri and WSTR in Cincinnati, Ohio
("Option Stations") from the stockholders for an aggregate purchase price
was $9.0 million. The stockholders also assigned to the Company their rights
and obligations under an option agreement among the stockholders and a
commercial bank which held secured debt of KSMO and WSTR.
2. The stockholders assigned the subordinated convertible debenture relating to
the sale of WPTT to the Company in exchange for $1.0 million, a portion of
which was used to retire the outstanding balance of a note due from the
controlling stockholders.
3. The Company acquired options from certain stockholders of Glencairn that
will grant the Company the right to acquire, subject to applicable FCC rules
and regulations, up to 97% of the capital stock of Glencairn.
4. The Board of Directors of the Company adopted Amended and Restated Articles
of Incorporation to authorize up to 35,000,000 shares of Class A Common
Stock, par value $.01 per share, 35,000,000 shares of Class B Common Stock,
par value $.01 per share and 5,000,000 shares of Preferred Stock, par value
$.01 per share; completed a reclassification and conversion of its
outstanding common stock into shares of Class B Common Stock; and effected
an approximately 49.1 for 1 stock split of the Company's common stock
(resulting in 29,000,000 shares of Class B Common Stock outstanding). The
reclassification, conversion and stock split have been retroactively
reflected in the accom-
F-28
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
panying consolidated balance sheets and statements of stockholders' equity.
In June 1996, the Company amended its charter, increasing the number of
shares of Class A Common Stock authorized to be issued from 35,000,000 to
100,000,000 (see Note 12).
5. The Board of Directors of the Company adopted an Incentive Stock Option Plan
for Designated Participants (the Designated Participants Stock Option Plan)
pursuant to which options for shares of Class A Common Stock will be granted
to certain designated employees of the Company upon adoption.
6. On March 27, 1995, the Board of Directors of the Company adopted an
Incentive Stock Option Plan (the Stock Option Plan) pursuant to which
options for shares of Class A Common Stock may be granted to certain
designated classes of employees of the Company. The Stock Option Plan
provides that the maximum number of shares of Class A Common Stock reserved
for issuance under the Stock Option Plan is 500,000, as amended, and that
options to purchase Class A Common Stock may be granted under the plan until
the tenth anniversary of its adoption.
14. SHELF REGISTRATION STATEMENTS:
In September 1996, the Company filed and in November 1996 obtained effectiveness
of a registration statement on Form S-3 with the Commission with respect to the
sale by certain selling stockholders of 5,564,253 shares of Class A Common
Stock. These shares represent 4,181,818 shares of Class A Common Stock issuable
upon conversion of Series B Preferred Stock and 1,382,435 shares of Class A
Common Stock issuable upon exercise of options held by Barry Baker.
In October 1996, the Company filed a registration statement on Form S-3 with the
Commission for the purpose of offering additional shares of its Class A Common
Stock to the public. In August 1997, the Company amended this registration
statement to reflect the registration of $1 billion of securities to be offered
to the public, covering Class A Common Stock, Preferred Stock and debt
securities (the "Shelf Registration"). In September 1997, the Company completed
offerings of its Class A Common Stock and Series D Preferred Stock pursuant to
the Shelf Registration. In December 1997, the Company issued the 8 3/4% Notes
pursuant to the Shelf Registration.
15. SECONDARY PUBLIC OFFERING OF CLASS A COMMON STOCK:
In September 1997, the Company and certain stockholders of the Company completed
a public offering of 4,345,000 and 1,750,000 shares, respectively of Class A
Common Stock (the "Common Stock Offering"). The shares were sold pursuant to the
Shelf Registration for an offering price of $36.50 per share and generated
proceeds to the Company of $151.0 million, net of underwriters' discount and
other offering costs of $7.6 million. The Company utilized a significant portion
of the Common Stock Offering proceeds to repay indebtedness under the 1997 Bank
Credit Agreement (see Note 4).
16. PUBLIC OFFERING OF SERIES D PREFERRED STOCK:
Concurrent with the Common Stock Offering, the Company completed a public
offering of 3,450,000 shares of Series D Convertible Exchangeable Preferred
Stock (the "Preferred Stock Offering"). The shares were sold pursuant to the
Shelf Registration at an offering price of $50 per share and generated proceeds
to the Company of $167.5 million, net of underwriters' discount and other
offering costs of $5.0 million.
The Convertible Exchangeable Preferred Stock has a liquidation preference of $50
per share and a stated annual dividend of $3.00 per share payable quarterly out
of legally available funds and are convertible into shares of Class A Common
Stock at the option of the holders thereof at a conversion price of $45.625 per
share, subject to adjustment. The shares of Convertible Exchangeable Preferred
Stock are
F-29
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
exchangeable at the option of the Company, for 6% Convertible Subordinated
Debentures of the Company, due 2012, and are redeemable at the option of the
Company on or after September 20, 2000 at specified prices plus accrued
dividends.
The Company received total net proceeds of $319.1 million from the Preferred
Stock Offering and the Common Stock Offering. The Company utilized $285.7
million of the net proceeds from the Common Stock Offering and the Preferred
Stock Offering to repay outstanding borrowings under the revolving credit
facility, $8.9 million to repay outstanding amounts under the Tranche A term
loan of the 1997 Bank Credit Agreement and retained the remaining net proceeds
of approximately $24.5 million for general corporate purposes.
17. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
TRUST:
In March 1997, the Company completed a private placement of $200 million
aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred
Securities (the "HYTOPS") of Sinclair Capital, a subsidiary trust of the
Company. The HYTOPS were issued March 12, 1997, mature March 15, 2009, and
provide for quarterly distributions to be paid in arrears beginning June 15,
1997. The HYTOPS were sold to "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act of 1933, as amended) and a limited number of
institutional "accredited investors" and the offering was exempt from
registration under the Securities Act of 1933, as amended ("the Securities
Act"), pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder.
The Company utilized $135 million of the approximately $192.8 million net
proceeds of the private placement to repay outstanding debt and retained the
remainder for general corporate purposes, which included the acquisition of
KUPN-TV in Las Vegas, Nevada.
Pursuant to a Registration Rights Agreement entered into in connection with the
private placement of the HYTOPS, the Company offered holders of the HYTOPS the
right to exchange the HYTOPS for new HYTOPS having the same terms as the
existing securities, except that the exchange of the new HYTOPS for the existing
HYTOPS has been registered under the Securities Act. On May 2, 1997, the Company
filed a registration statement on Form S-4 with the Commission for the purpose
of registering the new HYTOPS to be offered in exchange for the aforementioned
existing HYTOPS issued by the Company in March 1997 (the "Exchange Offer"). The
Company's Exchange Offer was closed and became effective August 11, 1997, at
which time all of the existing HYTOPS were exchanged for new HYTOPS.
Amounts payable to the holders of HYTOPS are recorded as "Subsidiary trust
minority interest expense" in the accompanying financial statements and were
$18.6 million for the year ended December 31, 1997.
18. STOCK-BASED COMPENSATION PLANS:
As permitted under SFAS 123, "Accounting for Stock-Based Compensation," the
Company measures compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and provides pro
forma disclosures of net income and earnings per share as if the fair
value-based method prescribed by SFAS 123 had been applied in measuring
compensation expense.
F-30
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
A summary of changes in outstanding stock options follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE EXERCISABLE PRICE
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Outstanding at end of 1994 ......... -- $ -- -- $ --
1995 Activity:
Granted ........................... 68,000 21.00 -- --
------ ------ -- ------
Outstanding at end of 1995 ......... 68,000 21.00 -- --
1996 Activity:
Granted ........................... 1,904,785 31.50 -- --
Exercised ......................... -- -- -- --
Forfeited ......................... 3,750 21.00 -- --
--------- ------ -- ------
Outstanding at end of 1996 ......... 1,969,035 31.16 736,218 30.11
--------- ------ ------- ------
1997 Activity:
Granted ........................... 274,450 33.74 -- --
Exercised ......................... 5,000 21.00 -- --
Forfeited ......................... 126,200 35.69 -- --
--------- ------ ------- ------
Outstanding at end of 1997 ......... 2,112,285 $ 34.19 1,214,076 $ 29.82
========= ======= ========= =======
</TABLE>
Additional information regarding stock options outstanding at December 31, 1997,
follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
REMAINING REMAINING WEIGHTED-
VESTING CONTRACTUAL AVERAGE
EXERCISE PERIOD LIFE EXERCISE
OUTSTANDING PRICE (IN YEARS) (IN YEARS) EXERCISABLE PRICE
- ------------- ---------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
54,250 $ 21.00 0.13 7.44 38,250 $ 21.00
1,708,935 30.11 0.67 8.49 1,175,826 30.11
326,100 37.75 1.76 8.76 -- --
23,000 41.875 2.97 9.97 -- --
---------- --------- ---- ---- --------- --------
2,112,285 $ 34.19 0.85 8.52 1,214,076 $ 29.82
========== ========= ==== ==== ========= ========
</TABLE>
F-31
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Had compensation cost for the Company's 1995, 1996, and 1997 grants for
stock-based compensation plans been determined consistent with SFAS 123, the
Company's net income, net income applicable to common share before extraordinary
items, and net income per common share for these years would approximate the pro
forma amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
1995 1996 1997
------------------------- ------------------------- --------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------------- ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before extraor-
dinary item ........................ $ 4,988 $4,799 $ 1,131 $ (1,639) $ (4,496) $ (5,871)
------- ------ ------- -------- --------- ---------
Net income (loss) ................... $ 76 $ (113) $ 1,131 $ (1,639) $ (10,566) $ (11,941)
------- ------ ------- -------- --------- ---------
Net income (loss) available to
common shareholders ................ $ 76 $ (113) $ 1,131 $ (1,639) $ (13,329) $ (14,704)
------- ------ ------- -------- --------- ---------
Basic net income per share before
extraordinary items ................ $ .15 $ .15 $ .03 $ (.05) $ (.20) $ (.24)
------- ------ ------- -------- --------- ---------
Basic net income per share after
extraordinary items ................ $ -- $ -- $ .03 $ (.05) $ (.37) $ (.41)
------- ------ ------- -------- --------- ---------
Diluted net income per share be-
fore extraordinary items ........... $ .15 $ .15 $ .03 $ (.05) $ (.20) $ (.24)
------- ------ ------- -------- --------- ---------
Diluted net income per share af-
ter extraordinary items ............ $ -- $ -- $ .03 $ (.05) $ (.37) $ (.41)
------- ------ ------- -------- --------- ---------
</TABLE>
The Company has computed for pro forma disclosure purposes the value of all
options granted during 1995, 1996, and 1997 using the Black-Scholes option
pricing model as prescribed by SFAS No. 123 and the following weighted average
assumptions:
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -------------
Risk-free interest rate 5.78% 6.66% 5.66 - 6.35%
Expected lives 5 years 5 years 5 years
Expected volatility 35% 35% 35%
Adjustments are made for options forfeited prior to vesting.
19. EQUITY PUT AND CALL OPTIONS:
During December 1996, the Company entered into physically settled in cash put
and call option contracts related to the Company's common stock. These option
contracts were entered into for the purpose of hedging the dilution of the
Company's common stock upon the exercise of stock options granted. The Company
entered into 250,000 call options for common stock and 320,600 put options for
common stock, with a strike price of $37.75 and $27.88 per common share,
respectively. To the extent that the Company entered into put option contracts,
the additional paid-in capital amounts were adjusted accordingly and reflected
as Equity Put Options in the accompanying balance sheet as of December 31, 1996.
In March 1997, the Company amended its put option contracts from physically
settled in cash to physically or net physically settled in shares, at the
election of the Company, and reclassified amounts reflected as Equity Put
Options to "Additional paid-in capital -- equity put options" as reflected in
the accompanying balance sheet as of December 31, 1997.
In April 1997, the Company entered into put and call option contracts related to
its common stock for the purpose of hedging the dilution of the common stock
upon the exercise of stock options granted. The Company entered into 550,000
European style (that is, exercisable on the expiration date only) put
F-32
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
options for common stock with a strike price of $25.78 per share which provide
for settlement in cash or in shares, at the election of the Company. The Company
entered into 550,000 American style (that is, exercisable any time on or before
the expiration date) call options for common stock with a strike price of $25.78
per share which provide for settlement in cash or in shares, at the election of
the Company. The option premium amount of $3.4 million for these contracts,
which was recorded as a reduction of additional paid in capital, is payable in
quarterly installments at 8.1% interest per annum through the maturity date,
July 13, 2000.
20. EARNINGS PER SHARE:
The Company adopted SFAS 128 "Earnings per Share" which requires the restatement
of prior periods and disclosure of basic and diluted earnings per share and
related computations.
<TABLE>
<CAPTION>
THE YEARS ENDED
----------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Weighted-average number of common shares ............................... 32,198 34,748 35,951
Dilutive effect of outstanding stock options ........................... 7 170 119
Dilutive effect of conversion of preferred shares ...................... -- 2,463 4,008
------ ------ ------
Weighted-average number of common
equivalent shares outstanding .......................................... 32,205 37,381 40,078
====== ====== ======
Net income (loss) before extraordinary item ............................ $ 4,988 $ 1,131 $ (4,496)
======== ======== =========
Net income (loss) ...................................................... $ 76 $ 1,131 $ (10,566)
Preferred stock dividends payable ...................................... -- -- (2,763)
-------- -------- ---------
Net income (loss) available to common shareholders ..................... $ 76 $ 1,131 $ (13,329)
======== ======== =========
Basic net income (loss) per share before extraordinary items ........... $ .15 $ .03 $ (.20)
======== ======== =========
Basic net income (loss) per share after extraordinary items ............ $ -- $ .03 $ (.37)
======== ======== =========
Diluted net income (loss) per share before extraordinary items ......... $ .15 $ .03 $ (.20)
======== ======== =========
Diluted net income (loss) per share after extraordinary items .......... $ -- $ .03 $ (.37)
======== ======== =========
</TABLE>
21. FINANCIAL INFORMATION BY SEGMENT:
In June 1997, the Financial Accounting Standards Board (FASB) released Statement
of Financial Accounting Standards (SFAS) 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 establishes standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim financial
statements. SFAS 131 supercedes SFAS 14, "Financial Reporting for Segments of a
Business Enterprise" and is effective for financial statements for periods
beginning after December 15, 1997.
As of December 31, 1997, the Company consisted of two principal business
segments - television broadcasting and radio broadcasting. Prior to the
acquisition of River City Broadcasting, L.P. in May 1996, the Company did not
own, operate or program radio stations. As of December 31, 1997 the Company owns
or provides programming services pursuant to LMAs to 29 television stations
located in 21 geographically diverse markets in the continental United States.
The Company owns 30 radio stations in seven geographically diverse markets.
Substantially all revenues represent income from unaffiliated companies.
F-33
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
<TABLE>
<CAPTION>
TELEVISION
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997
------------- -------------
<S> <C> <C>
Total revenues .................................................. $ 338,467 $ 449,878
Station operating expenses. ..................................... 142,231 192,049
Depreciation, program amortization and stock-based compensation.. 56,420 80,799
Amortization of intangibles and other assets. ................... 55,063 57,897
Amortization of excess syndicated programming.. ................. 3,043 --
---------- ----------
Station broadcast operating income .............................. $ 81,710 $ 119,133
========== ==========
Total assets. ................................................... $1,400,521 $1,736,149
========== ==========
Capital expenditures. ........................................... $ 12,335 $ 16,613
========== ==========
</TABLE>
<TABLE>
<CAPTION>
RADIO
YEARS ENDED DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Total revenues .................................................. $ 40,021 $ 66,557
Station operating expenses. ..................................... 25,534 44,327
Depreciation, program amortization and stock-based compensation.. 3,827 5,167
Amortization of intangibles and other assets. ................... 3,467 9,943
Amortization of excess syndicated programming.. ................. -- --
-------- --------
Station broadcast operating income.. ............................ $ 7,193 $ 7,120
======== ========
Total assets. ................................................... $306,776 $298,085
======== ========
Capital expenditures. ........................................... $ 274 $ 2,812
======== ========
</TABLE>
F-34
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
22. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS:
The unaudited pro forma summary consolidated results of operations for the years
ended December 31, 1996 and 1997, assuming the 1996 and 1997 acquisitions had
been consummated on January 1, 1996, are as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
1996 1997
------------- ------------
<S> <C> <C>
Revenues, net .......................................................... $ 489,270 $ 520,359
========== =========
Net loss before extraordinary item ..................................... $ (12,750) $ (3,643)
========== =========
Net Loss ............................................................... $ (12,750) $ (9,713)
========== =========
Net loss available to common shareholders .............................. $ (12,750) $ (12,476)
========== =========
Basic and diluted earnings per share before extraordinary item ......... $ (0.37) $ (0.18)
========== =========
Basic and diluted earnings per share ................................... $ (0.37) $ (0.35)
========== =========
</TABLE>
23. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES:
Prior to the HYTOPS issuance in March 1997, the 1993 Notes and the 10% Notes
were guaranteed by all of the Company's subsidiaries other than Cresap
Enterprises, Inc. (the Company believes that Cresap Enterprises, Inc. is
inconsequential to its operations). In conjunction with the HYTOPS issuance,
KDSM, Inc., KDSM Licensee, Inc. and Sinclair Capital (the "Non-Guarantor
Subsidiaries") are no longer guarantors of indebtedness under the 1993 Notes or
the 10% Notes. Furthermore, the Non-Guarantor Subsidiaries are not guarantors
under the Company's 1997 Bank Credit Agreement or the indentures relating to the
9% Notes or the 8 3/4% Notes issued in July 1997 and December 1997,
respectively. The following supplemental financial information sets forth on a
condensed basis the balance sheet and statement of operations as of and for the
year ended December 31, 1997 for Sinclair Broadcast Group, Inc. (without its
subsidiaries, the "Parent"), the Non-Guarantor Subsidiaries, and the
subsidiaries (the "Guarantor Subsidiaries") that continue to guarantee
indebtedness under the 1997 Bank Credit Agreement, the 1993 Notes, the 10%
Notes, the 9% Notes and the 8 3/4% Notes. Certain reclassifications have been
made to provide for uniform disclosure of all periods presented. The Company
believes that these reclassifications are not material.
F-35
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Balance Sheet information as of December 31, 1997:
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATION
PARENT SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ..................... $ 137,683 $ 1,633 $ 11 $ -- $ 139,327
Accounts receivable, net ...................... 6,127 125,322 2,150 133,599
Other current assets .......................... 1,826 53,794 2,206 57,826
---------- ---------- -------- ----------
Total current assets .......................... 145,636 180,749 4,367 -- 330,752
Other long-term assets and acquired in-
tangible broadcasting assets, net ............ 1,390,698 1,259,250 254,173 (1,200,639) 1,703,482
---------- ---------- -------- ------------ ----------
Total assets .................................. $1,536,334 $1,439,999 $258,540 $ (1,200,639) $2,034,234
========== ========== ======== ============ ==========
Accounts payable and accrued expenses.......... $ 27,507 $ 17,806 $ 426 $ -- $ 45,739
Notes payable and commercial bank fi-
nancing ...................................... 35,207 8 -- 35,215
Other current liabilities ..................... 1,595 1,021,272 2,790 (951,907) 73,750
---------- ---------- -------- ------------ ----------
Total current liabilities ..................... 64,309 1,039,086 3,216 (951,907) 154,704
Notes payable and commercial bank fi-
nancing ...................................... 1,022,841 93 -- 1,022,934
Other long-term liabilities ................... 9,916 98,120 1,575 109,611
---------- ---------- -------- ----------
Total liabilities ............................. 1,097,066 1,137,299 4,791 (951,907) 1,287,249
Minority interest in consolidated subsid-
iaries ....................................... -- 3,697 -- 3,697
Company Obligated Mandatorily Re-
deemable Security of Subsidiary Trust
Holding Solely KDSM Senior Deben-
tures ........................................ -- -- 200,000 200,000
Stockholder's equity .......................... 439,268 299,003 53,749 (248,732) 543,288
---------- ---------- -------- ------------ ----------
Total liabilities and stockholders' equity . $1,536,334 $1,439,999 $258,540 $ (1,200,639) $2,034,234
========== ========== ======== ============ ==========
</TABLE>
F-36
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
Statement of operations information for the year ended December 31, 1997:
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATION
PARENT SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ -------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Total revenues ................................ $ -- $ 507,897 $ 8,538 $ -- $ 516,435
--------- --------- --------- --------- ----------
Program and production including barter
expenses ..................................... -- 128,810 1,482 130,292
Selling, general and administrative ........... 7,501 96,124 2,459 106,084
Amortization of program contract costs
and net realizable value adjustments ......... -- 64,711 1,579 66,290
Amortization of acquired intangible
broadcasting assets, non-compete and
consulting agreements and other assets 4,916 61,336 1,588 67,840
Other depreciation and amortization ........... 713 18,586 377 19,676
--------- --------- --------- ----------
Broadcast operating income .................... (13,130) 138,330 1,053 -- 126,253
Interest and amortization of debt dis-
count expense ................................ (97,625) (98,392) (18,600) 97,624 (116,993)
Interest and other income (expense) ........... 96,297 (17,271) 20,826 (97,624) 2,228
--------- --------- --------- --------- ----------
Income (loss) before provision (benefit)
for income taxes and extraordinary
item ......................................... (14,458) 22,667 3,279 -- 11,488
Provision (benefit) for income taxes .......... 14,740 (140) 1,384 15,984
--------- --------- --------- ----------
Net income before extraordinary item .......... (29,198) 22,807 1,895 -- (4,496)
Extraordinary item net of income tax
benefit ...................................... (5,239) (831) -- (6,070)
--------- --------- --------- ----------
Net income (loss) ............................. $ (34,437) $ 21,976 $ 1,895 $ -- $ (10,566)
========= ========= ========= ========= ==========
</TABLE>
24. SUBSEQUENT EVENTS:
Heritage Acquisition. As of the date hereof and pursuant to the Heritage
Acquisition, (dispositions described below) the Company has acquired or is
providing programming services to three television stations in two separate
markets and 13 radio stations in four separate markets. The Company has made
cash payments totaling $544 million in connection with the closing of these
stations during the first quarter of 1998. The Company also has the right to
acquire three radio stations in the New Orleans, Louisiana market. Acquisition
of the Heritage radio stations in the New Orleans market is subject to approval
by the FCC and termination of the applicable waiting period under the HSR Act.
The Company has reached an agreement to divest certain radio stations it owns or
has the right to acquire in the New Orleans market and expects to receive FCC
approval and clearance under the HSR Act in connection with such disposition.
The Company has entered into agreements to sell to STC Broadcasting of Vermont,
Inc. ("STC") two television stations and the Non-License Assets and rights to
program a third television station, all of which were acquired in the Heritage
Acquisition. The three television stations are in the Burlington, Vermont and
Plattsburgh, New York market and will be sold for aggregate consideration of
approximately $72 million. The Company expects to close the sale to STC during
the second quarter of 1998 subject to, among other conditions, approval by the
FCC and termination of the applicable waiting period under the HSR Act.
F-37
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
The Company has also agreed to sell to Entertainment Communications, Inc.
("Entercom") seven radio stations it acquired in the Heritage Acquisition. The
seven stations are located in the Portland, Oregon and Rochester, New York
markets and will be sold for aggregate consideration of approximately $126.5
million. Subject to approval by the FCC and termination of the applicable
waiting period under the HSR Act, the Company anticipates it will close on the
sale of the Portland and Rochester radio stations to Entercom during the second
quarter of 1998. Entercom is operating these stations pursuant to an LMA pending
closing of the sale.
Montecito Acquisition. In February 1998, the Company entered into an agreement
to acquire all of the capital stock of Montecito Broadcasting Corporation
("Montecito") for approximately $33 million (the "Montecito Acquisition").
Montecito owns all of the issued and outstanding stock of Channel 33, Inc. which
owns and operates KFBT-TV in Las Vegas, Nevada. Currently, the Company is a
Guarantor of Montecito Indebtedness of approximately $33 million. The Company
cannot acquire Montecito unless and until FCC rules permit Sinclair to own the
broadcast license for more than one station in the Las Vegas market, or unless
Sinclair no longer owns the broadcast license for KUPN-TV in Las Vegas. The
Company will operate KFBT-TV through an LMA upon expiration of the applicable
HSR Act waiting period. The Company expects to be able to enter into the LMA in
the second quarter of 1998.
Sullivan Acquisition. In February 1998, the Company entered into an agreement to
acquire all of the capital stock of Sullivan Broadcast Holdings, Inc. ("Sullivan
Holdings") and Sullivan Broadcasting Company II, Inc. ("Sullivan II" and,
together with Sullivan Holdings, "Sullivan") for a purchase price expected to be
approximately $950 million to $1 billion, less the amount of certain outstanding
indebtedness of Sullivan Holdings assumed by the Company (the "Sullivan
Acquisition"). Upon the closing of all aspects of the Sullivan Acquisition, the
Company will own or provide programming services to 13 additional television
stations in 11 separate markets. The final purchase price will be based on a
multiple of Sullivan's projected 1998 cash flow calculated at the initial
closing of the Sullivan Acquisition. As part of the total consideration, the
Company, at its option, may issue to the sellers up to $100 million of Class A
Common Stock based on an average closing price of the Class A Common Stock.
Among other conditions, the Sullivan Acquisition is subject to approval by the
Federal Communications Commission ("FCC") and termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). An initial closing, at which the Company will
acquire control of operating assets (excluding the License Assets) of, and
acquire the right to program, the 13 television stations, is expected to occur
in the second quarter of 1998. A second closing, at which the Company will
acquire control of the License Assets of six of the stations, is expected to
occur in the third quarter of 1998.
F-38
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
INDEX TO SCHEDULES
Schedule II -- Valuation and Qualifying Accounts ......... S - 3
All schedules except those listed above are omitted as not applicable or not
required or the required information is included in the consolidated financial
statements or in the notes thereto.
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets, statements of operations, changes in
stockholders' equity and cash flows balance sheets, statements of operations,
changes in stockholders' equity and cash flows of Sinclair Broadcast Group, Inc.
and Subsidiaries included in this Form 10-K registration statement and have
issued our report thereon dated February 9, 1998. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedules listed in the accompanying index is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Baltimore, Maryland,
February 9, 1998
S-2
<PAGE>
SCHEDULE II
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT ENDED
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIODS
- ------------------------------------- ------------ ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful accounts ..... $ 855 $ 978 $-- $ 767 $1,066
1996
Allowance for doubtful accounts ..... 1,066 1,563 575 (1) 732 2,472
1997
Allowance for doubtful accounts ..... 2,472 2,655 -- 2,207 2,920
</TABLE>
- ----------
(1) Amount represents allowance for doubtful account balances purchased in
connection with the acquisition of certain television stations during 1996.
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Section 14 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereto duly authorized on March 17,
1998.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
------------------------------------
David B. Amy
Chief Financial Officer
Principal Accounting Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints David D. Smith and
David B. Amy as his or her true and lawful attorneys-in-fact each acting alone,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities to sign any or all
amendments to this Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully for all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------------- --------------
<S> <C> <C>
/s/ David D. Smith
- ------------------------- Chairman of the Board, March 17, 1998
David D. Smith Chief Executive Officer
(Principal executive officer)
/s/ David B. Amy
- ------------------------- Chief Financial Officer and March 17, 1998
David B. Amy (Principal Financial and
Accounting Officer
/s/ Frederick G. Smith
- ------------------------- Director March 17, 1998
Frederick G. Smith
/s/ J. Duncan Smith
- ------------------------- Director March 17, 1998
J. Duncan Smith
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------------- --------------
<S> <C> <C>
/s/ Robert E. Smith
- ------------------------- Director March 17, 1998
Robert E. Smith
------------------------- Director March , 1998
Basil A. Thomas
- ------------------------- Director March , 1998
Lawrence E. McCanna
</TABLE>
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 By-laws (2)
4.1 Indenture, dated as of December 9, 1993, among Sinclair Broadcast
Group, Inc., its wholly-owned subsidiaries and First Union National
Banks of North Carolina, as trustee. (2)
4.2 Indenture, dated as of August 28, 1995, among Sinclair Broadcast
Group, Inc., its wholly-owned subsidiaries and the United States Trust
Company of New York as trustee. (2)
4.3 Form of Senior Subordinated Indenture among Sinclair Broadcast Group,
Inc. and First Union National Bank, as trustee. (9)
4.4 Form of First Supplemental Indenture among Sinclair Broadcast Group,
Inc., the Guarantors named therein and First Union National Bank, as
trustee, including Form of Note. (9)
10.1 Asset Purchase Agreement, dated as of April 10, 1996, by and between
River City Broad- casting, L.P. as seller and Sinclair Broadcast
Group, Inc. as buyer. (3)
10.2 Option Agreement, dated as of April 10, 1996, by and among River City
Broadcasting, L.P., as sellers and Sinclair Broadcast Group, Inc. (3)
10.3 Modification Agreement, dated as of April 10, 1996, by and between
River City Broadcast Group, L.P. as seller, and Sinclair Broadcast
Group, Inc. as buyer, with reference to Asset Purchase Agreement. (3)
10.4 Stock Option Agreement dated April 10, 1996 by and between Sinclair
Broadcast Group, Inc. and Barry Baker. (10)
10.5 Employment Agreement, dated as of April 10, 1996, with Barry Baker.
(1)
10.6 Indemnification Agreement, dated as of April 10, 1996, with Barry
Baker. (1)
10.7 Time Brokerage Agreement, dated as of May 31, 1996, by and among
Sinclair Communica- tions, Inc., River City Broadcasting, L.P. and
River City License Partnership and Sinclair Broadcast Group, Inc. (1)
10.8 Registration Rights Agreement, dated as of May 31, 1996, by and
between Sinclair Broadcast Group, Inc. and River City Broadcasting,
L.P. (1)
10.9 Time Brokerage Agreement, dated as of August 3, 1995, by and between
River City Broad- casting, L.P. and KRRT, Inc. and Assignment and
Assumption Agreement dated as of May 31, 1996 by and among KRRT, Inc.,
River City Broadcasting, L.P. and KABB, Inc. (as Assignee of Sinclair
Broadcast Group, Inc.). (1)
10.10 Loan Agreement, dated as of July 7, 1995, by and between Keymarket of
South Carolina, Inc. and River City Broadcasting, L.P. and First
Amendment to Loan Agreement dated as of May 24, 1996. (1)
10.11 Option Agreement, dated as of July 7, 1995, by and among Keymarket of
South Carolina, Kerby E. Confer and River City Broadcasting, L.P. (1)
10.12 Letter Agreement, dated August 20, 1996, between Sinclair Broadcast
Group, Inc., River City Broadcasting, L.P. and Fox Broadcasting
Company. (4)
10.13 Asset Purchase Agreement, dated January 31, 1997, by and between
Channel 21, L.P. and KUPN, Inc. (10)
10.14 Promissory Note, dated as of May 17, 1990, in the principal amount of
$3,000,000 among David D. Smith, Frederick G. Smith, J. Duncan Smith
and Robert E. Smith (as makers) and Sinclair Broadcast Group, Inc.,
Channel 63, Inc., Commercial Radio Institute, Inc., WTTE, Channel 28,
Inc. and Chesapeake Television, Inc. (as holders). (5)
10.15 Term Note, dated as of September 30, 1990, in the principal amount of
$7,515,000 between Sinclair Broadcast Group, Inc. (as borrower) and
Julian S. Smith (as lender). (6)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------------ ------------------------------------------------------------------
10.16 Replacement Term Note dated as of September 30, 1990 in the principal
amount of $6,700,000 between Sinclair Broadcast Group, Inc. (as
borrower) and Carolyn C. Smith (as lender) (2)
10.17 Note dated as of September 30, 1990 in the principal amount of
$1,500,000 between Frederick G. Smith, David D. Smith, J. Duncan Smith
and Robert E. Smith (as borrowers and Sinclair Broadcast Group, Inc.
(as lender) (5)
10.18 Amended and Restated Note dated as of June 30, 1992 in the principal
amount of $1,458,489 between Frederick G. Smith, David D. Smith, J.
Duncan Smith and Robert E. Smith (as borrowers) and Sinclair Broadcast
Group, Inc. (as lender) (5)
10.19 Term Note dated August 1, 1992 in the principal amount of $900,000
between Frederick G. Smith, David D. Smith, J. Duncan Smith and Robert
E. Smith (as borrowers) and Commer- cial Radio Institute, Inc. (as
lender) (5)
10.20 Management Agreement dated as of January 6, 1992 between Keyser
Communications, Inc. and WPGH, Inc. (5)
10.21 Promissory Note dated as of December 28, 1986 in the principal amount
of $6,421,483.53 between Sinclair Broadcast Group, Inc. (as maker) and
Frederick H. Himes, B. Stanley Resnick and Edward A. Johnston (as
representatives for the holders) (5)
10.22 Term Note dated as of March 1, 1993 in the principal amount of
$6,559,000 between Julian S. Smith and Carolyn C. Smith (as
makers-borrowers) and Commercial Radio Institute, Inc. (as
holder-lender) (5)
10.23 Restatement of Stock Redemption Agreement by and among Sinclair
Broadcast Group, Inc. and Chesapeake Television, Inc., et al. dated
June 19, 1990 (5)
10.24 Corporate Guaranty Agreement dated as of September 30, 1990 by
Chesapeake Television, Inc., Commercial Radio, Inc., Channel 63, Inc.
and WTTE, Channel 28, Inc. (as guarantors) to Julian S. Smith and
Carolyn C. Smith (as lenders) (5)
10.25 Security Agreement dated as of September 30, 1990 among Sinclair
Broadcast Group, Inc., Chesapeake Television, Inc., Commercial Radio
Institute, Inc., WTTE, Channel 28, Inc. and Channel 63, Inc. (as
borrowers and subsidiaries of the borrower) and Julian S. Smith and
Carolyn C. Smith (as lenders) (5)
10.26 Term Note dated as of September 22, 1993, in the principal amount of
$1,900,000 between Gerstell Development Limited Partnership (as
maker-borrower) and Sinclair Broadcast Group, Inc. (as holder-lender)
(5)
10.27 Third Amended and Restated Credit Agreement, dated as of May 20, 1997,
by and among Sinclair Broadcast Group, Inc., Certain Subsidiary
Guarantors, Certain Lenders and the Chase Manhattan Bank as Agent.
(11)
10.28 Incentive Stock Option Plan for Designated Participants. (2)
10.29 Incentive Stock Option Plan of Sinclair Broadcast Group, Inc. (2)
10.30 First Amendment to Incentive Stock Option Plan of Sinclair Broadcast
Group, Inc., adopted April 10, 1996. (10)
10.31 Second Amendment to Incentive Stock Option Plan of Sinclair Broadcast
Group, Inc., adopted May 31, 1996. (10)
10.32 1996 Long Term Incentive Plan of Sinclair Broadcast Group, Inc. (10)
10.33 Employment Agreement by and between Sinclair Broadcast Group, Inc. and
Robert E. Smith, dated as of June 12, 1995. (10)
10.34 Employment Agreement by and between Sinclair Broadcast Group, Inc. and
J. Duncan Smith, dated as of June 12, 1995*. (10)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -------------------------------------------------------------------
10.35 Employment Agreement by and between Sinclair Broadcast Group, Inc. and
Frederick G. Smith, dated as of June 12, 1995. (10)
10.36 Employment Agreement by and between Sinclair Broadcast Group, Inc. and
David D. Smith, dated as of June 12, 1995. (10)
10.37 Common Stock Option dated as of August 26, 1994 by and between
Communications Corporation of America (as optionee) and Sinclair
Broadcast Group, Inc. (as optionor) (2)
10.38 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and
between Sinclair Broadcast Group, Inc. and William Richard Schmidt, as
trustee (2)
10.39 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and
between Sinclair Broadcast Group, Inc. and C. Victoria Woodward, as
trustee (2)
10.40 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and
between Sinclair Broadcast Group, Inc. and Dyson Ehrhardt, as trustee
(2)
10.41 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and
between Sinclair Broadcast Group, Inc. and Mark Knobloch, as trustee
(2)
10.42 Agreement and Plan of Merger of Keyser Communications, Inc. into
Sinclair Broadcast Group, Inc. dated May 4, 1995 and Articles of
Merger dated May 4, 1995 (2)
10.43 Amended and Restated Asset Purchase Agreement by and between River
City Broadcasting, L.P. and Sinclair Broadcast Group, Inc. dated as of
April 10, 1996 and amended and restated as of May 31, 1996 (7)
10.44 Group I Option Agreement by and among River City Broadcasting, L.P.
and Sinclair Broad- cast Group, Inc. dated as of May 31, 1996 (7)
10.45 Columbus Option Agreement by and among River City Broadcasting, L.P.
and River City License Partnership and Sinclair Broadcast Group, Inc.
dated as of May 31, 1996 (7)
10.46 Option Agreement dated as of May 24, 1994 between Kansas City TV 62
Limited Partnership and the Individuals Named Herein, on Behalf of an
Entity To Be Formed (1)
10.47 Option Agreement dated as of May 24, 1994 between Cincinnati 64
Limited Partnership and the Individuals Named Herein, on Behalf of an
Entity To Be Formed (1)
10.48 Stock Purchase Agreement dated as of March 1, 1996 by and between
Sinclair Broadcast Group, Inc. and The Stockholders of Superior
Communications Group, Inc. (1)
10.49 Asset Purchase Agreement dated as of January 16, 1996 by and between
Bloomington Comco, Inc. And WYZZ, Inc. (1)
10.50 Asset Purchase Agreement dated as of June 10, 1996 by and between
WTTE, Channel 28, Inc. and WTTE, Channel 28 Licensee, Inc. and
Glencairn, Ltd. (1)
10.51 Asset Purchase Agreement dated April 10, 1996 by and between KRRT,
Inc. and SBGI, Inc. (8)
10.52 Agreement for the purchase of assets dated as of January 16, 1996 and
escrow agreement dated as of January 16, 1996 between Bloomington
Comco, Inc. and Sinclair Broadcast Group (6)
10.53 Stock Purchase Agreement dated as of March 1, 1996 by and among
Sinclair Broadcast Group, Inc. and PNC Capital Corp., Primus Capital
Fund II, Ltd., Albert M. Holtz, Perry A. Sook, Richard J. Roberts,
George F. Boggs, Albert M. Holtz, as Trustee for the Irrevocable Deed
of Trust for Tara Ellen Holtz, dated December 6, 1994, and Albert M.
Holtz as trustee for the Irrevocable Deed of Trust for Meghan Ellen
Holtz, dated December 6, 1994 (6)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------------ ------------------------------------------------------------------
10.54 Primary Television Affiliation Agreement dated as of March 24, 1997 by
and between Amer- ican Broadcasting Companies, Inc., River City
Broadcasting, L.P. and Chesapeake Television, Inc. (Confidential
treatment has been requested. The copy filed omits the information
subject to a confidentiality request.)
10.55 Primary Television Affiliation Agreement dated as of March 24, 1997 by
and between Amer- ican Broadcasting Companies, Inc., River City
Broadcasting, L.P. and WPGH, Inc. (Confidential treatment has been
requested. The copy filed omits the information subject to a
confidentiality request.)
10.56 Assets Purchase Agreement by and among Entertainment Communications,
Inc., Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland
Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc., dated
as of January 26, 1998.
10.57 Time Brokerage Agreement by and among Entertainment Communications,
Inc., Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland
Licensee, Inc. and Sinclair Radio or Rochester Licensee, Inc., dated
as of January 26, 1998.
10.58 Stock Purchase Agreement by and among the sole stockholders of
Montecito Broadcasting Corporation, Montecito Broadcasting Corporation
and Sinclair Communications, Inc., dated as of February 3, 1998.
10.59 Stock Purchase Agreement by and among Sinclair Communications, Inc.,
the stockholders of Max Investors, Inc., Max Investors, Inc. and Max
Media Properties LLC., dated as of December 2, 1997
10.60 Asset Purchase Agreement by and among Sinclair Communications, Inc.,
Max Management LLC and Max Media Properties LLC., dated as of December
2, 1997.
10.61 Asset Purchase Agreement by and among Sinclair Communications, Inc.,
Max Television Company, Max Media Properties LLC and Max Media
Properties II LLC., dated as of December 2, 1997.
10.62 Asset Purchase Agreement by and among Sinclair Communications, Inc.,
Max Television Company, Max Media Properties LLC and Max Media
Properties II LLC., dated as of January , 1998.
10.63 Asset Purchase Agreement by and among Tuscoloosa Broadcasting, Inc.,
WPTZ Licensee, Inc., WNNE Licensee, Inc., and STC Broadcasting of
Vermont, Inc., dated as of February 3, 1998.
10.64 Stock Purchase Agreement by and among Sinclair Communications, Inc.
and the stockholders of Lakeland Group Television, Inc., dated as of
November 14, 1997.
10.65 Stock Purchase Agreement by and among Sinclair Communications, Inc.,
the stockholders of Max Radio, Inc., Max Radio Inc. and Max Media
Properties LLC, dated as of December 2, 1997.
10.66 Agreement and Plan of Merger among Sullivan Broadcasting Company II,
Inc., Sinclair Broadcast Group, Inc., and ABRY Partners, Inc.
Effective as of February 23, 1998.
10.67 Agreement and Plan of Merger among Sullivan Broadcast Holdings, Inc.,
Sinclair Broadcast Group, Inc., and ABRY Partners, Inc. Effective as
of February 23, 1998.
10.68 Amendment No. 1 dated as of September 2, 1997 to the Third Amended and
Restated Credit Agreement dated as of May 20, 1997 by and among
Sinclair Broadcast Group, Inc., certain Subsidiary Guarantors, certain
Lenders and The Chase Manhattan Bank as Agent. (12)
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------
12 Computation of Ratio of Earnings to Fixed Charges
23 Consent of Independent Public Accountants
27 Financial Data Schedule
- ----------------
(1) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1996
(2) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-90682
(3) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended March 31, 1996
(4) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended September 30, 1996.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-69482
(6) Incorporated by reference from the Company's Report on Form 10-K for the
annual period ended December 31, 1995.
(7) Incorporated by reference from the Company's Amended Current Report on Form
8-K/A, filed May 9, 1996.
(8) Incorporated by reference from the Company's Current Report on Form 8-K,
filed May 17, 1996.
(9) Incorporated by reference from the Company's Current Report on Form 8-K,
dated as of December 16, 1997.
(10) Incorporated by reference from the Company's Report on Form 10-K for the
annual period ended December 31, 1996.
(11) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1997.
(12) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended September 30, 1997.
ASSET PURCHASE AGREEMENT
AMONG
ENTERTAINMENT COMMUNICATIONS, INC.,
TUSCALOOSA BROADCASTING, INC.,
SINCLAIR RADIO OF PORTLAND LICENSEE, INC.
AND
SINCLAIR RADIO OF ROCHESTER LICENSEE, INC.
DATED AS OF
JANUARY 26, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I. DEFINITIONS.................................................. 2
ARTICLE II. SALE AND PURCHASE............................................ 7
2.1. TRANSFER OF ASSETS........................................... 7
2.2. EXCLUDED ASSETS.............................................. 9
2.3. PURCHASE PRICE............................................... 11
2.4. ESCROW....................................................... 11
2.5. PAYMENT...................................................... 11
2.6. ALLOCATION OF PURCHASE PRICE................................. 11
ARTICLE III. LIABILITIES.................................................. 12
3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM........................ 12
3.2. OTHER LIABILITIES............................................ 12
3.3. NON-ASSIGNABLE STATION CONTRACTS............................. 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES............................... 13
4.1. SELLERS' REPRESENTATIONS..................................... 13
4.2. ENTERCOM'S REPRESENTATIONS................................... 22
ARTICLE V. CONDITIONS................................................... 24
5.1. MUTUAL CONDITIONS............................................ 24
5.2. ENTERCOM'S CONDITIONS........................................ 25
5.3. SELLERS' CONDITIONS.......................................... 25
ARTICLE VI. COVENANTS AND AGREEMENTS..................................... 26
6.1. AFFIRMATIVE COVENANTS OF SELLERS............................. 26
6.2. NEGATIVE COVENANTS OF SELLERS................................ 28
6.3. AFFIRMATIVE COVENANTS OF ENTERCOM............................ 28
6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM..................... 29
6.5. NO CONTROL BY ENTERCOM....................................... 30
ARTICLE VII. PREPARATION FOR CLOSING...................................... 30
7.1. APPLICATION TO COMMISSION.................................... 30
7.2. INSPECTION BY ENTERCOM....................................... 30
7.3. HART-SCOTT-RODINO NOTIFICATION............................... 31
ARTICLE VIII. CLOSING...................................................... 31
8.1. CLOSING...................................................... 31
8.2. ADJUSTMENTS.................................................. 31
8.3. CLOSING DELIVERIES TO ENTERCOM............................... 33
8.4. CLOSING DELIVERIES TO SELLERS................................ 34
8.5. COVENANTS OF FURTHER ASSURANCE............................... 35
8.6. DAMAGE TO PROPERTY........................................... 35
8.7. TAXES ON TRANSACTION......................................... 35
i
<PAGE>
ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION..................... 36
9.1. TERMINATION BY REASON OTHER THAN DEFAULT..................... 36
9.2. EFFECT OF TERMINATION BY REASON OTHER THAN
DEFAULT................................................. 36
9.3. DEFAULT...................................................... 36
9.4. REMEDIES OF SELLERS.......................................... 37
9.5. ENTERCOM'S REMEDIES.......................................... 37
9.6. LIQUIDATED DAMAGES NOT A PENALTY............................. 37
9.7. INDEMNIFICATION.............................................. 38
ARTICLE X. GENERAL PROVISIONS........................................... 40
10.1. EXPENSES OF THE PARTIES...................................... 40
10.2. BROKERS...................................................... 40
10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES................................................... 40
10.4. AMENDMENT AND WAIVER......................................... 41
10.5. ASSIGNMENT................................................... 41
10.6. EFFECT OF THIS AGREEMENT..................................... 41
10.7. HEADINGS..................................................... 41
10.8. COUNTERPARTS................................................. 41
10.9. GOVERNING LAW................................................ 41
10.10. NOTICES...................................................... 41
10.11. STATION EMPLOYEES............................................ 43
10.12. SECTION 1031 ASSET EXCHANGE.................................. 43
ii
<PAGE>
EXHIBITS
A Form of Time Brokerage Agreement
B Form of Sinclair Communications, Inc. Guarantee
C Form of Escrow Agreement
D Form of Indemnification Escrow Agreement
E Forms of Bill of Sale and Assignment of Assets, Assignments of FCC
Licenses, Assignment of Contracts and Leases, and Assumption
Agreement
F Form of Sellers' Corporate Legal Opinion
G Form of Sellers' FCC Legal Opinion
H Form of Entercom's Legal Opinion
SCHEDULES
2.1.1 FCC Licenses
2.1.2 Real and Leased Property
2.1.3 Tangible Personal Property
2.1.5 Program Contracts
2.1.6 Trade-out Agreements
2.1.8 Operating Contracts
2.1.9 Vehicles
2.2.11 Miscellaneous Excluded Assets
4.1.6 Changes or Events
4.1.7 Litigation
4.1.8 Permitted Encumbrances
4.1.9 FCC Matters
4.1.14 Employee Benefit Plans
4.1.15 Labor Relations
4.1.16 Environmental Matters
4.1.17 Insurance
4.1.19 Matters Regarding the Heritage Agreement
4.2.3 Entercom's Qualifications as Assignee
iii
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT made and entered into this 26th day
of January, 1998 by and among, TUSCALOOSA BROADCASTING, INC., a Maryland
corporation (hereinafter "Tuscaloosa"), SINCLAIR RADIO OF PORTLAND LICENSEE,
INC., a Maryland corporation ("SRPLI"), SINCLAIR RADIO OF ROCHESTER LICENSEE,
INC., a Maryland corporation ("SRRLI"), (Tuscaloosa, SRPLI and SRRLI are
sometimes collectively referred to herein as "Sellers"), and ENTERTAINMENT
COMMUNICATIONS, INC., a Pennsylvania corporation (hereinafter "Entercom").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to authorizations duly granted and issued by the
Federal Communications Commission (the "Commission"), certain subsidiaries (the
"Operating Subsidiaries") of HMC Acquisition Corp., a Delaware corporation
("HMC" and collectively with the Operating Subsidiaries, "Heritage") presently
own and operate radio stations KKSN(AM), Vancouver, Washington, KKSN-FM,
Portland, Oregon, KKRH(FM), Salem, Oregon, WKLX(FM), WBEE(FM) and WBBF(AM),
Rochester, New York, and WQRV(FM), Avon, New York (each, a "Station" and
collectively, the "Stations"); and
WHEREAS, on August 20, 1997, Heritage Media Corporation, formerly
the parent of the Operating Subsidiaries, merged with and into HMC, a
wholly-owned subsidiary of The News Corporation, Limited ("News Corp."); and
WHEREAS, Sinclair Broadcast Group, Inc. ("Sinclair") has agreed,
pursuant to an Asset Purchase Agreement, among Sinclair and certain subsidiaries
of Heritage, dated as July 16, 1997 (as such agreement may be amended from time
to time, the "Heritage Agreement"), to acquire the assets owned, leased or used
by Heritage or such subsidiaries in connection with the business and operations
of the Stations and other radio and television stations; and
WHEREAS, Tuscaloosa, SRPLI and SRRLI are wholly-owned subsidiaries
of Sinclair and will acquire the Stations pursuant to one or more assignments of
Sinclair's rights and obligations under the Heritage Agreement from Sinclair to
Tuscaloosa, SRPLI and SRRLI; and
WHEREAS, Entercom and Sellers have agreed, subject to the prior
acquisition of the Stations by Sellers, prior approval by the Commission and
certain other conditions, to transfer and assign the assets, properties, rights,
privileges, licenses and all other authorizations used in connection with or
relating to the Stations from Sellers to Entercom as hereinafter set forth; and
WHEREAS, Entercom may elect to accomplish such transfer in whole or
part as the acquisition of replacement property in a deferred like-kind exchange
under Section 1031 of the Code; and
<PAGE>
WHEREAS, concurrently with the execution of this Agreement, (i)
Entercom and Sellers are entering into a Time Brokerage Agreement substantially
in the form of Exhibit A hereto (the "TBA") providing for the programming and
sale by Entercom, upon the acquisition by Sellers of the Station, of
substantially all of the broadcast time available on the Stations and (ii)
Sinclair Communications, Inc., a Maryland corporation and wholly-owned
subsidiary of Sinclair ("SCI"), is delivering a guarantee substantially in the
form of Exhibit B hereto (the "Sinclair Guarantee") of certain of Sellers'
obligations under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and of the representations and warranties hereinafter set forth and
for other good and valuable consideration, the parties, intending to be legally
bound hereby, agree as follows:
ARTICLE I.
----------
DEFINITIONS
-----------
As used herein, the following terms shall have the following
respective meanings:
"ADJUSTMENT TIME" shall mean 12:00:01 a.m. eastern standard time on
the Closing Date.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"APPLICATIONS" shall have the meaning set forth in Section 7.1
hereof.
"BENEFIT ARRANGEMENT" means any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Plan, including, without
limitation, employment agreements, executive compensation arrangements,
incentive programs or arrangements, sick leave, vacation pay, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, perquisite, company cars, any
plans subject to Code Section 125 and any plans providing benefits or payments
in the event of a change of control, change in ownership, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
"CLOSING" shall mean the event of consummation of the transactions
contemplated by this Agreement as more fully described in Article VIII of this
Agreement.
"CLOSING DATE" shall mean the date specified for Closing in Section
8.1 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
2
<PAGE>
"COMMISSION" shall mean the Federal Communications Commission.
"DOJ" shall mean the Antitrust Division of the United States
Department of Justice.
"ENCUMBRANCES" shall mean any mortgages, pledges, liens, security
interests, defects in title, easements, rights-of-way, encumbrances,
restrictions and any other matter affecting title.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss.
9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.;
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 et seq.;
the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401
et seq.; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss. 651 et
seq.; or any other applicable federal, state, or local laws relating to
Hazardous Materials generation, production, use, storage, treatment,
transportation or disposal, or the protection of the environment from Hazardous
Materials.
"ENTERCOM" shall mean the corporation identified as such in the
Preamble to this Agreement and any Qualified Intermediary to which Entercom may
elect to assign all or part of its rights hereunder pursuant to Section 10.12
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all laws promulgated pursuant thereto or in connection
therewith.
"ERISA AFFILIATE" shall mean any person that, together with any
other person, would be or was prior to March 17, 1997 treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA.
"FINAL ORDER" shall mean an action by the Commission upon any
application including, without limitation, the Applications, for its consent,
approval or authorization, which action has not been reversed, stayed, enjoined,
set aside, annulled or suspended, and with respect to which action, no protest,
petition to deny, petition for rehearing or reconsideration, appeal or request
for stay is pending, and as to which action the time for filing of any such
protest, petition, appeal or request and any period during which the Commission
may reconsider or review such action on its own authority has expired.
"FTC" shall mean the United States Federal Trade Commission.
"HAZARDOUS MATERIALS" shall mean any wastes, substances, or
materials (whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined as
"hazardous waste," "hazardous substances," "toxic
3
<PAGE>
substances," "radioactive materials," or other similar designations in, or
otherwise subject to regulation under, any Environmental Laws.
"HERITAGE" shall mean HMC and the Operating Subsidiaries.
"HERITAGE AGREEMENT CLOSING DATE" shall mean the latest date on
which all of the Stations are acquired by Sinclair under the Heritage Agreement,
whether or not all stations subject to the Heritage Agreement are acquired on
such date.
"HERITAGE AGREEMENT DATE" shall mean July 16, 1997.
"HMC" shall mean the corporation identified as such in the Preamble
to this Agreement.
"KNOWLEDGE" shall mean the actual knowledge of the party to whom
such knowledge is imputed or the knowledge that the party should have upon
reasonable investigation in light of the facts and circumstances available to
such party.
"LIABILITIES" shall mean, as to any Person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent of
such Person, whether accrued, vested or otherwise, whether in contract, tort,
strict liability or otherwise and whether or not actually reflected, or required
by generally accepted accounting principles to be reflected, in such Person's
balance sheets or other books and records.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the business, assets or financial condition of the Stations taken as a whole,
except for any such material adverse effect resulting from (a) general economic
conditions applicable to the radio broadcast industry, (b) general conditions in
the markets in which the Stations operate or (c) circumstances that are not
likely to recur and either have been substantially remedied or can be
substantially remedied without substantial cost or delay.
"MULTIEMPLOYER PLAN" shall mean any Plan described in Section 3(37)
of ERISA.
"NEWS CORP." shall mean The News Corporation Limited, a South
Australian corporation.
"ORDINARY COURSE OF BUSINESS" shall mean, with respect to any
person, the ordinary course of business consistent with past practices of such
person both with respect to type and amount; any actions taken pursuant to the
requirements of law or contracts existing on the date hereof shall be deemed to
be action in the Ordinary Course of Business.
"PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances of a landlord
or other statutory lien not yet due and payable, or a landlord's lien arising in
the Ordinary Course of Business, (b) Encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Station
Contracts set forth on the Schedules which have been made
4
<PAGE>
available to Entercom, (c) Encumbrances arising pursuant to the terms of leases
on Real Property or Leased Property as set forth on Schedule 2.1.1 and Schedule
2.1.8 which are subject to any lease or sublease to a third party, (d)
Encumbrances for taxes not yet due and payable or which are being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained in accordance with generally accepted accounting
principles, (e) Encumbrances that do not materially detract from the value of
any of the Assets or materially interfere with the use thereof as currently
used, or (f) those Encumbrances on Schedule 4.1.8.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as such term is defined in
Section 3(3) of ERISA and (a) which was or is established or maintained by
Heritage, Sellers or any ERISA Affiliate of such parties; (b) to which Heritage,
Sellers contributed or was obligated to contribute or to fund or provide
benefits or had any liability (whether actual or contingent) with respect to any
of its assets or otherwise; or (c) which provides or promises benefits to any
person who performs or who has performed services for Heritage, Sellers and
because of those services is or has been (i) as participant therein or (ii)
entitled to benefits thereunder.
"PORTLAND STATIONS" shall mean KKSN(AM), KKSN-FM and KKRH(FM).
"PRORATION ITEMS" shall mean any power and utility charges,
business and license fees (including retroactive adjustments thereof), sales and
service charges, commissions, special assessments, and rental payments and
personal and real estate taxes and assessments with respect to the Real
Property, taxes (except for taxes arising from the transfer of the Assets
hereunder), deposits, Trade-out Agreements, accrued vacation, unused sick leave
and other similar prepaid and deferred items and any other operating expenses
incurred in the Ordinary Course of Business. The parties acknowledge and agree
that there shall be excluded from Proration Items the following: (a) except as
otherwise provided in the TBA, severance pay relating to any employee of the
Stations who shall have been terminated prior to the Closing Date, and (b) any
Liabilities not being assumed by Entercom in accordance with Section 3.1.
"QUALIFIED INTERMEDIARY" shall mean a party described in U.S.
Treasury Regulations Section 1.1031(k)-1(g)(4).
"QUALIFIED PLAN" shall mean a Plan that satisfies, or is intended
to satisfy, the requirements for tax qualification described in Section 401 of
the Code including, without limitation, any Plan that was terminated on or after
July 1, 1989, as to which a person may have any actual or contingent liability.
"ROCHESTER STATIONS" shall mean WKLX(FM), WBEE(FM), WBBF(AM) and
WQRV(FM).
"SCI" shall mean the corporation identified as such in the Preamble
to this Agreement.
"SELLERS" shall mean Tuscaloosa, SRPLI and SRRLI.
5
<PAGE>
"SELLERS' KNOWLEDGE" shall mean, except as otherwise expressly
provided in Section 4.1.16.1 of this Agreement, the knowledge of the Sellers,
Sinclair, SCI or any of their respective affiliates, officers, directors,
partners, agents, representatives or consultants.
"SINCLAIR" shall mean the corporation identified as such in the
Preamble to this Agreement.
"SINCLAIR GUARANTEE" shall mean the guarantee, substantially in the
form of Exhibit B hereto, dated of even date herewith, providing for the
guarantee by SCI of Sellers' obligations under this Agreement.
"STATIONS" shall mean (i) the frequency modulation (FM) radio
broadcast station licensed by the Commission to Portland, Oregon broadcasting on
97.1 MHz and currently assigned the call letters KKSN-FM, (ii) the amplitude
modulation (AM) radio broadcast station licensed by the Commission to Vancouver,
Washington broadcasting on 910 kHz and currently assigned the call letters
KKSN(AM), (iii) the frequency modulation (FM) radio broadcast station licensed
by the Commission to Salem, Oregon broadcasting on 105.1 MHz and currently
assigned the call letters KKRH(FM), (iv) the frequency modulation (FM) radio
broadcast station licensed by the Commission to Rochester, New York broadcasting
on 98.9 MHz and currently assigned the call letters WKLX(FM), (v) the frequency
modulation (FM) radio broadcast station licensed by the Commission to Rochester,
New York broadcasting on 92.5 MHz and currently assigned the call letters
WBEE(FM), (vi) the frequency modulation (FM) radio broadcast station licensed by
the Commission to Avon, New York broadcasting on 93.3 MHz and currently assigned
the call letters WQRV(FM) and (vii) the amplitude modulation (AM) radio
broadcast station licensed by the Commission to Rochester, New York broadcasting
on 950 kHz and currently assigned the call letters WBBF(AM).
"SRPLI" shall mean the corporation identified as such in the
Preamble to this Agreement.
"SRRLI" shall mean the corporation identified as such in the
Preamble to this Agreement.
"TBA" shall mean the Time Brokerage Agreement, substantially in the
form of Exhibit A hereto, dated of even date herewith, providing for the
programming by and sale to Entercom of substantially all of the broadcast time
available on the Stations upon acquisition thereof by Sellers.
"TUSCALOOSA" shall mean the corporation identified as such in the
Preamble to this Agreement.
"WELFARE PLAN" shall mean an "employee welfare benefit plan" as
such term is defined in Section 3(1) of ERISA.
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ARTICLE II.
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SALE AND PURCHASE
-----------------
2.1. TRANSFER OF ASSETS. Subject to the terms and conditions set
forth in this Agreement, at the Closing Sellers shall transfer, convey, grant,
assign and deliver to Entercom, free and clear of all Encumbrances (other than
Permitted Encumbrances) and Entercom shall buy, accept and receive from Sellers,
all right, title and interest in, to and under all real, personal and mixed
assets, rights, benefits and privileges, both tangible and intangible, owned,
leased, used or useful in connection with the business and operations of the
Stations (collectively, the "Assets"), but excluding the Excluded Assets
described in Section 2.2.
The Assets shall include, without limitation, all right, title and
interest in, to and under the following:
2.1.1. FCC LICENSES. All licenses, permits and other
authorizations issued by the Commission to Heritage, prior to the Heritage
Agreement Closing Date, or issued to Sellers or Sinclair after such date, for
the operation of the Stations (the "FCC Licenses"), including without limitation
those listed in Schedule 2.1.1. and all applications therefor, together with any
renewals, extensions or modifications thereof and additions thereto.
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property owned by Heritage, prior to
the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such
date, and related to the business and operations of the Stations including,
without limitation, all land, fee interests, easements and other interests of
every kind and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon owned by
Heritage, prior to the Heritage Agreement Closing Date, or owned by Sellers or
Sinclair, after such date, and used or useful in connection with the business
and operations of the Stations ("Real Property"), including, without limitation,
all of those items listed in Schedule 2.1.2.
(b) All the real property leasehold interests of
Heritage, prior to the Heritage Agreement Closing Date, or the real property
leasehold interests of Sellers or Sinclair, after such date, related to the
business and operations of the Stations, including, without limitation, leases
and subleases of any land, easements and other real property leasehold interests
of every kind and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon leased by
Heritage, prior to the Heritage Agreement Closing Date, or leased by Sellers or
Sinclair, after such date, in connection with the business and operations of the
Stations ("Leased Property"), including, without limitation, all of those items
listed in Schedule 2.1.2.
2.1.3. TANGIBLE PERSONAL PROPERTY. All of the furniture,
fixtures, furnishings, machinery, computers, equipment, inventory, spare parts,
supplies, office materials and other tangible property of every kind and
description owned, leased or used by
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Heritage, prior to the Heritage Agreement Closing Date, or owned, leased or used
by Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, together with any replacements thereof and additions
thereto made before the Closing, and less any retirements or dispositions
thereof made before the Closing in the Ordinary Course of Business, including,
without limitation, those items which have a book value in excess of Five
Thousand Dollars ($5,000), all of which as of the Heritage Agreement Date are
set forth and identified in Schedule 2.1.3.
2.1.4. INTELLECTUAL PROPERTY. All of the service marks,
copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and
other similar intangible assets maintained, owned, leased or used by Heritage,
prior to the Heritage Agreement Closing Date, or maintained, owned, leased or
used by Sellers or Sinclair, after such date, in connection with the business
and operations of the Stations (including any and all applications,
registrations extensions and renewals relating thereto) (the "Intellectual
Property"), and all of the rights, benefits and privileges associated therewith
including, without limitation, the right to use the call letters for the
Stations.
2.1.5. PROGRAM CONTRACTS. The program licenses and contracts
under which Heritage, prior to the Heritage Agreement Closing Date, or under
which Sellers or Sinclair, after such date, are authorized to broadcast programs
on the Stations (collectively the "Program Contracts") including, without
limitation, (a) all program (cash and non-cash) licenses and contracts listed on
Schedule 2.1.5, and (b) any other such program contracts that have been or will
be entered into between the date of the Heritage Agreement and the Closing Date
in accordance with the terms of the Heritage Agreement and this Agreement.
2.1.6. TRADE-OUT AGREEMENTS. All contracts and agreements
(excluding Program Contracts) pursuant to which commercial air time on the
Stations has been sold, traded or bartered in consideration for any property or
services in lieu of or in addition to cash (collectively, the "Trade-out
Agreements"), including, without limitation, those set forth and identified in
Schedule 2.1.6.
2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and
agreements pursuant to which commercial air time has been sold on the Stations
for cash (collectively the "Time Sales Agreements").
2.1.8. OPERATING CONTRACTS. All other operating contracts and
agreements relating to the business or operations of the Stations, all material
such contracts as of the Heritage Agreement Date being listed on Schedule 2.1.8.
(including, without limitation, all employment agreements and talent contracts,
all leases and subleases relating to the Leased Property, all agreements
relating to any motor vehicles, all network affiliation agreements and all
national and local advertising representation agreements for the Stations),
together with all contracts and agreements that have been or will be entered
into between the Heritage Agreement Date and the Closing Date in accordance with
the terms of the Heritage Agreement and this Agreement (collectively, the
"Operating Contracts" and together with the Program Contracts, Trade-out
Agreements and the Time Sales Agreements, the "Station Contracts").
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2.1.9. VEHICLES. All automotive equipment and motor vehicles
maintained, owned, leased or otherwise used by Heritage, prior to the Heritage
Agreement Closing Date, or maintained, owned, leased or otherwise used by
Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, including, without limitation, those set forth and
described in Schedule 2.1.9.
2.1.10. FILES AND RECORDS. All engineering, business and other
books, papers, logs, files and records pertaining to the business and operations
of the Stations, but not the organizational documents and records described in
Section 2.2.7.
2.1.11. AUXILIARY FACILITIES. All translators, earth stations,
and other auxiliary facilities, and all applications therefor owned, leased or
otherwise used or useful by Heritage, prior to the Heritage Agreement Closing
Date, or used or useful by Sellers or Sinclair, after such date, in connection
with the business and operations of the Stations.
2.1.12. PERMITS AND LICENSES. All permits, approvals, orders,
authorizations, consents, licenses, certificates, franchises, exemptions of, or
filings or registrations with, any court or governmental authority (other than
the Commission) in any jurisdiction, which have been issued or granted to or are
owned or used or useful by Heritage, prior to the Heritage Agreement Closing
Date, or which have been issued or granted to or are owned or used or useful by
Sellers or Sinclair, after such date, in connection with the business and
operations of the Stations, and all pending applications therefor.
2.1.13. GOODWILL. The business of the Stations as a "going
concern," customer relationships and goodwill, if any.
2.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary in
this Agreement, there shall be excluded from the Assets and retained by Sellers,
to the extent in existence as of the Closing Date for a particular Station, the
following assets (collectively, the "Excluded Assets").
2.2.1. CASH. All cash, cash equivalents or deposits held by
Sellers, all interest payable in connection with any such cash, cash equivalents
or deposits or short term investments, bank balances and rights in and to bank
accounts, marketable and other securities of Sellers.
2.2.2. ACCOUNTS RECEIVABLE. Except as otherwise provided in
the TBA, all Accounts Receivable arising out of the business and operations of
the Stations by Sellers prior to the Adjustment Time.
2.2.3. PERSONAL PROPERTY DISPOSED OF. All tangible personal
property disposed of or consumed in the Ordinary Course of Business by Heritage
or by Sellers as permitted by the Heritage Agreement or this Agreement.
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2.2.4. INSURANCE. All contracts of insurance and all insurance
plans and the assets thereof.
2.2.5. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit
Arrangements (except for any Station Contracts, Proration Items or other matters
which are specifically assumed by Entercom pursuant to the terms hereof),
Qualified Plans and Welfare Plans and the assets hereof.
2.2.6. RIGHT TO TAX REFUNDS. Any and all claims of Sellers
with respect to any tax refunds.
2.2.7. CERTAIN BOOKS AND RECORDS. All of (a) the Stations'
originals of account books of original entry, (b) duplicated copies of any
books, records, accounts, checks, payment records, tax records (including
payroll, unemployment, real estate and other tax records) and other similar
books, records and information relating to the operation of the business of the
Stations prior to the Closing, and (c) all records and documents relating to any
Excluded Assets maintained by or in the possession of Sellers; provided, in each
case, that (i) prior to the Heritage Agreement Closing Date, to the extent
permitted under the Heritage Agreement and (ii) at and after the Heritage
Agreement Closing Date, without such limitation, Entercom shall be permitted
full access to all such books and records and to make copies thereof upon
reasonable request.
2.2.8. THIRD-PARTY CLAIMS. All rights and claims of Sellers,
whether mature, contingent or otherwise, against third parties relating to the
Assets or the Stations, whether in tort, contract, or otherwise.
2.2.9. DEPOSIT AND PREPAID EXPENSES. All deposits and prepaid
expenses related to Sellers' ownership or operation of the Stations, provided,
however, any deposit and prepaid expenses shall be included in the Assets
conveyed pursuant hereto to the extent that Sellers receive a credit therefor in
the calculation of the Proration Amount pursuant to Section 8.2.
2.2.10. NAMES. Any and all rights to use the names "Heritage
Broadcasting," "Heritage Media," "Tuscaloosa," "Tuscaloosa Broadcasting,"
"Sinclair," or "Sinclair Communications" and any logo or variation thereof and
the goodwill associated therewith.
2.2.11. MISCELLANEOUS EXCLUDED ASSETS. The assets listed and
identified on Schedule 2.2.11.
2.3. PURCHASE PRICE. The Purchase Price for the Assets is the sum
of ONE HUNDRED TWENTY SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($126,500,000).
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2.4. ESCROW. For and in partial consideration of the execution and
delivery of this Agreement, simultaneously with the execution and delivery of
this Agreement, Entercom is depositing in escrow with an escrow agent (the
"Escrow Agent") an irrevocable standby letter of credit (in form satisfactory to
Sellers and for the benefit of Sellers ) in the amount of NINE MILLION FOUR
HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($9,487,500) (the "Letter of
Credit"), to secure Entercom's obligations described herein, in accordance with
the terms and conditions of an escrow agreement substantially in the form
attached as Exhibit C hereto (the "Escrow Agreement"). The Escrow Agent shall be
a bank or financial institution with a combined capital and surplus of at least
$100,000,000.00.
2.5. PAYMENT. The Purchase Price to be paid by Entercom shall be
payable in cash delivered at the Closing by wire transfer of immediately
available federal funds to the account of Sellers at such financial institution
as Sellers shall specify in writing.
2.6. ALLOCATION OF PURCHASE PRICE. Entercom and Sellers agree that
the aggregate fair market value of the Assets (the "Aggregate Fair Market
Value") will be appraised by the appraisal firm of BIA Consulting, Inc. ("BIA")
(the "Appraisal"). All costs and expenses of BIA in preparing the Appraisal
shall be borne one-half by Entercom and one-half by Sellers. The parties
acknowledge that a draft Appraisal has been prepared by BIA prior to the date of
this Agreement, and that Sellers and Entercom will cooperate to finalize such
Appraisal. Entercom shall prepare IRS Form 8594 reflecting the Aggregate Fair
Market Value as found by BIA and such other information as required by the form,
and shall forward it within 30 days after Closing to Sellers for their approval,
which approval shall not be withheld unreasonably. Entercom and Sellers shall
each file with their respective federal income tax return for the tax year in
which the Closing occurs, IRS Form 8594 containing the information agreed upon
by the parties pursuant to the this Section 2.6. Entercom agrees to report the
purchase of the Assets and each of Sellers agrees to report the sale of such
assets for income tax purposes in a manner consistent with the information
agreed upon by the parties pursuant to this Section 2.6 and contained in its IRS
Form 8594. In the event either or both of the parties elects to treat all or a
portion of the Assets transferred as part of a deferred like-kind exchange under
Section 1031 of the Code, each party shall, in completing any IRS Forms 8824
that the party might be required to file with the IRS, reflect the values for
the Assets as determined pursuant to this Section 2.6. The parties expressly
agree that Seventy Six Million Dollars ($76,000,000) of the Purchase Price shall
be allocated to the Portland Stations, and Fifty Million Five Hundred Thousand
Dollars ($50,500,000) of the Purchase Price shall be allocated to the Rochester
Stations. Notwithstanding any other provision of this Agreement, the provisions
of this Section 2.6 shall survive the Closing without limitation.
ARTICLE III.
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LIABILITIES
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3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM. From and after the
Closing Date, Entercom shall assume, pay, perform, and discharge the following
Liabilities (collectively, the "Assumed Liabilities") of Sellers:
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3.1.1. The Liabilities arising out of events occurring on or
after the Closing Date related to the businesses or operations of the Stations
or Entercom's ownership of the Assets;
3.1.2. All Liabilities arising out of events occurring on or
after the Closing Date with respect to the FCC Licenses;
3.1.3. All Liabilities arising on or after the Closing Date
under the Station Contracts (including, without limitation, Trade-out
Agreements) pursuant to their terms (except for Liabilities for any breaches
thereunder by Sellers or Heritage occurring prior to the Closing Date); and
3.1.4. All those Liabilities for which, and only to the
extent, that Entercom receives the benefit of a Proration Item in accordance
with Section 8.2 hereof.
3.2. OTHER LIABILITIES. Except for the Assumed Liabilities or as
otherwise expressly provided in the TBA, Entercom does not and shall not assume
any other Liabilities of any kind or description.
3.3. NON-ASSIGNABLE STATION CONTRACTS.
3.3.1. Sellers shall, beginning immediately upon execution of
this Agreement, take all reasonable action required to obtain all consents,
approvals and agreements of any third parties necessary to authorize, approve or
permit the consummation of the transactions contemplated by this Agreement,
including, without limitation, any consent of the parties to the Station
Contracts designated as necessary in Schedule 2.1.8 in order to consummate the
transactions contemplated hereby (collectively, the "Restricted Contracts").
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, to the extent that the consent or approval of any third party is
required under any Restricted Contract, Sellers shall only be required to use
reasonable efforts (not involving the payment by Sellers of any money to any
party to any such Restricted Contract, except to the extent required by Section
3.3.2) to obtain such consents and approvals, and in the event that Sellers fail
to obtain any such consent or approval, Entercom shall have no right to
terminate this Agreement.
3.3.2. Notwithstanding anything to the contrary in Section
3.3.1, Sellers shall retain, until such time as any required consents shall have
been obtained by Sellers, all rights to and obligations under any Station
Contract which requires the consent of any other party thereto for assignment to
Entercom if such consent has not been obtained on the Closing Date (the
"Deferred Contract"). Until the assignment of the Deferred Contract, (i) Sellers
shall continue to use all commercially reasonable efforts and Entercom shall
cooperate with Sellers to obtain the consent and/or to remove any other
impediments to such assignment, and (ii) Sellers and Entercom agree to cooperate
in any lawful arrangement to provide (to the extent permitted without breach of
the Deferred Contract) that Entercom shall receive the benefits of such interest
after the Closing Date to the same extent as if it were Sellers; provided,
however, (y) if Entercom shall fail to receive such benefits after the Closing
Date for any leased property that is a main
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transmitter tower site or a studio site for any Station (the "Designated
Properties"), Sellers agree to make such payments as are necessary for Entercom
to receive such benefits and/or necessary to receive such consents for
assignment as long as the aggregate amount of all such payments does not exceed
Seventy Five Thousand Dollars ($75,000) for all such Designated Properties under
this Agreement and (z) Entercom shall, at its sole discretion, not be obligated
to perform the obligations under any Deferred Contract if it is not also
receiving all of the benefits thereunder. If, subsequent to the Closing, Sellers
shall obtain any consent required to assign any Deferred Contract, the Deferred
Contract for which consent to assign has been obtained shall at that time be
deemed to be conveyed, granted, bargained, sold, transferred, setover, assigned,
released, delivered and confirmed to Entercom, without need of further action by
Sellers or of future documentation.
ARTICLE IV.
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REPRESENTATIONS AND WARRANTIES
------------------------------
4.1. SELLERS' REPRESENTATIONS. Sellers hereby represent and warrant
to Entercom that:
4.1.1. CORPORATE STANDING. Tuscaloosa, SRPLI and SRRLI are
corporations, duly organized, validly existing and in good standing under the
laws of the states of their respective organizations, and are duly qualified to
do business and are in good standing in any jurisdiction where it owns or
operates a radio station and in each other jurisdiction where such qualification
is necessary, except for those jurisdictions where the failure to be so
qualified could not, individually or in the aggregate, have a material adverse
effect.
4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH. Tuscaloosa,
SRPLI and SRRLI have the corporate power and authority to execute, deliver and
perform this Agreement and such other agreements as are necessary to consummate
the transactions contemplated hereby. Subject to the receipt of the consents and
approvals required elsewhere herein, this Agreement constitutes the valid and
binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against
each in accordance with its terms, except as such enforceability may be limited
by bankruptcy and laws affecting the enforcement of creditors' rights generally
or equitable principles. Assuming the said consents and approvals are obtained,
neither such execution, delivery and performance nor compliance by each Seller
with the terms and provisions hereof will conflict with or result in a breach of
any of the terms, conditions or provisions of the organizational documents of
such entities or any judgment, order, injunction, decree, regulation or ruling
of any court or any other governmental authority to which each is subject or any
material agreement or contract to which each is a party or to which each is
subject, or constitute a material default thereunder.
4.1.3. QUALIFICATIONS AS ASSIGNOR. Sellers know of no facts
which, under the Communications Act of 1934, as amended, or the existing rules
and regulations of the Commission, would disqualify Heritage or Sellers as an
assignor of the FCC Licenses to be assigned by each under the Heritage Agreement
or hereunder, as applicable.
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4.1.4. ABSENCE OF CONFLICTING ORDERS. Neither Seller is
subject to any judgment, award, order, writ, injunction, arbitration decision or
decree which prohibits or prevents the performance of this Agreement or the
consummation of any transaction contemplated under this Agreement, and there is
no litigation, administrative action, arbitration, proceeding or investigation
pending, or to Sellers' Knowledge, threatened, against any Seller or affecting
any Seller in any federal, state or local court or before any administrative
agency or arbitrator that would adversely affect Sellers' ability to perform
their obligations under this Agreement or would hinder the consummation of the
transactions contemplated hereunder.
4.1.5. FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES.
4.1.5.1. Sellers have provided to Entercom an unaudited
balance sheet of the Stations as of November 30, 1997 (the "Balance Sheet") and
an unaudited statement of income and operating cash flows for the ten month
period ending November 30, 1997, in each case, provided to Sellers by Heritage.
To Sellers' Knowledge, the financial statements referred to in this Section
4.1.5.1 (a) present fairly in all material respects the financial condition of
its Stations as of the date and the results of operations and operating cash
flows for the period indicated and (b) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
that the financial statements referred to in this Section 4.1.5.1 do not contain
all footnotes and cash flow information from investing and financing activities
required under generally accepted accounting principles and are subject to
customary year-end adjustments).
4.1.5.2. To Sellers' Knowledge, there exist no
Liabilities of the Stations relating to, or arising out of, the business or
operations of such Stations, contingent or absolute, matured or unmatured, known
or unknown, except (a) as reflected on the Balance Sheet and (b) for Liabilities
that (i) were incurred after November 30, 1997 (the "Current Balance Sheet
Date") in the Ordinary Course of Business, or (ii) were not required to be
reflected on the Balance Sheet in accordance with generally accepted accounting
principles applied on a consistent basis.
4.1.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth and described in Schedule 4.1.6, (i) to Sellers' Knowledge, after the
Current Balance Sheet Date through the date hereof there has been no, (ii) to
Sellers' Knowledge, from the date hereof through the Heritage Agreement there
will be no, and (iii) except as may be caused by Entercom pursuant to the TBA,
after the Heritage Agreement Closing Date there will be no, Material Adverse
Effect. Since the Current Balance Sheet Date, the business of the Stations has
been conducted in the Ordinary Course of Business. After the Heritage Agreement
Closing Date, Sellers will not have, and to Sellers' Knowledge, Heritage has not
(a) incurred any extraordinary loss of, or injury to, any of its Assets as the
result of any fire, explosion, flood, windstorm, earthquake, labor trouble,
riot, accident, act of God or public enemy or armed forces, or other casualty;
(b) incurred, or become subject to, any Liability, except current Liabilities
incurred in the Ordinary Course of Business; (c) discharged or satisfied any
Encumbrance or paid any
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Liability other than current Liabilities shown in the Balance Sheet, current
Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course
of Business and Liabilities (including, without limitation, partial and complete
prepayments) arising under any credit or loan agreement between such parties and
their lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the
Assets (except for Permitted Encumbrances); (e) made any material change in any
method of accounting or accounting practice; (f) sold, leased, assigned or
otherwise transferred any of the material Assets other than obsolete Assets
which have been replaced by suitable replacements; (g) made any material
increase in compensation or benefits payable to any employee other than in the
Ordinary Course of Business; or (h) made any agreement to do any of the
foregoing.
4.1.7. ABSENCE OF LITIGATION. Except as set forth on Schedule
4.1.7, as of the date hereof, there is no material or, to Sellers' Knowledge,
immaterial, action, suit, investigation, claim, arbitration, litigation or
similar proceeding, nor any order, decree or judgment pending or, to Sellers'
Knowledge, threatened, against Sinclair, Sellers, the Assets or the Stations
before any governmental authority.
4.1.8. ASSETS. Except for the Excluded Assets, the Assets
include all of the assets or property used or useful in the businesses of the
Stations as presently operated. Except for leased or licensed Assets, at and
after the Heritage Agreement Closing Date, Sellers or one of them will be the
owners of, and will have good title to, the Assets free and clear of any
Encumbrances, except for Permitted Encumbrances (including, without limitation,
those items set forth on Schedule 4.1.8). At the Closing, Entercom shall acquire
good title to, and all right, title and interest in and to the Assets, free and
clear of all Encumbrances, except for the Permitted Encumbrances.
4.1.9. FCC MATTERS. At and after the Heritage Agreement
Closing Date, Sellers or one of them will hold the FCC Licenses listed as held
on Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and
authorizations from the Commission which have been issued to Heritage that are
required for the business and operations of the Stations. Except as set forth on
Schedule 4.1.9, such FCC Licenses are valid and in full force and effect through
the dates set forth on Schedule 2.1.1, unimpaired by any condition, other than
as set forth in the FCC Licenses. Except as set forth on Schedule 4.1.9, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses and, except for actions or proceedings affecting radio
broadcast stations or the radio industry generally, no application, complaint,
action or proceeding is pending or, to Sellers' Knowledge, threatened, that may
result in (a) the revocation, modification, non-renewal or suspension of any of
such FCC Licenses, or (b) the issuance of a cease-and-desist order. To Sellers'
Knowledge, except as set forth in Schedule 4.1.9, no facts, conditions or events
exist relating to Heritage, Sellers, or the Stations that would reasonably be
expected to cause the Commission to revoke any FCC License or not to grant any
pending applications for renewal of the FCC Licenses or to deny the assignment
of the FCC Licenses to Entercom as provided for in this Agreement.
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4.1.10. REAL PROPERTY.
4.1.10.1. At and after the Heritage Agreement Closing
Date, Sellers or one of them will have good and marketable fee simple title to
all fee estates included in the Real Property and good title to all other owned
Real Property, in each case free and clear of all Encumbrances, except for
Permitted Encumbrances.
4.1.10.2. At and after the Heritage Agreement Closing
Date, Sellers or one of them will have a valid leasehold interest in all Leased
Property listed as leased in Schedule 2.1.2. Schedule 2.1.2 lists all leases and
subleases pursuant to which any of the Leased Property is leased. At and after
the Heritage Agreement Closing Date, Sellers or one of them will be the owner
and holder of all the Leased Property purported to be granted by such leases and
subleases. At and after the Heritage Agreement Closing Date, each such lease and
sublease will be valid as to Sellers or one of them and, to Sellers' Knowledge,
will constitute a legal and binding obligation of, and will be legally
enforceable against, each party thereto and grants the leasehold interest it
purports to grant, including any rights to nondisturbance and peaceful and quiet
enjoyment that may be contained therein. At and after the Heritage Agreement
Closing Date, Sellers or one of them will be, and to Sellers' Knowledge, all
other parties will be, in compliance in all material respects with the
provisions of such leases and subleases.
4.1.10.3. The Real Property and the Leased Property
listed in Schedule 2.1.2 constitute all of the real property owned, leased or
used in the business and operations of the Stations which is material to the
business and operations of the Stations.
4.1.10.4. To Sellers' Knowledge, no portion of the Real
Property or any building, structure, fixture or improvement thereon is the
subject of, or affected by, any condemnation, eminent domain or inverse
condemnation proceeding currently instituted or pending or threatened. To
Sellers' Knowledge and to the extent that such documents are in Sellers'
possession, Sellers have delivered to Entercom true, correct and complete copies
of the following documents with respect to the Real Property and Leased
Property: (i) deeds, by which a fee interest in any of the Real Property and
Leased Property has been received; (ii) leases, by which any of the Real
Property is leased; (iii) title insurance policies or commitments; (iv) surveys;
and (v) inspection reports or other instruments or reports, including, without
limitation, any phase I or phase II environmental reports or other similar
environmental reports, surveys or assessments (including any and all amendments
and other modifications of such instruments).
4.1.11. INTELLECTUAL PROPERTY. At and after the Heritage
Agreement Closing Date, Sellers or one of them will possess adequate rights,
licenses and authority to use all Intellectual Property necessary to conduct the
business of the Stations as presently conducted. At and after the Heritage
Agreement Closing Date, Sellers or one of them will have good title to all
Intellectual Property that each owns, free and clear of any Encumbrances, except
for Permitted Encumbrances. At and after the Heritage Agreement Closing Date, no
Seller will be obligated to pay any royalty or other fees to anyone with respect
to the Intellectual Property. No Seller has, and to Sellers' Knowledge, Heritage
has not, received
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any written notice to the effect that any service rendered or to be rendered by
Heritage or any of Sellers relating to the business of the Stations may
infringe, or that such parties are otherwise infringing, on any Intellectual
Property right or other legally protectable right of another. No director,
officer or employee of Heritage or Sellers has any interest in any Intellectual
Property.
4.1.12. STATION CONTRACTS. Complete and correct copies of the
Station Contracts set forth in Schedules 2.1.5, 2.1.6 and 2.1.8 (which schedules
are true and correct in all material respects) have been made available to
Entercom and (a) at and after the Heritage Agreement Closing Date, each such
material Station Contract and, to Sellers' Knowledge, each such immaterial
Station Contract, will be in full force and effect and will constitute a legal,
valid and binding obligation of the parties thereto; (b) at and after the
Heritage Agreement Closing Date, each Seller which has become subject to a
Station Contract will not be in breach or default in any material respect of the
terms thereto; (c) at and after the Heritage Agreement Closing Date, none of the
material rights under any such Station Contract of each Seller which has become
subject thereto will be subject to termination, nor will a default occur, as a
result of the consummation of the transactions contemplated hereby, except to
the extent that failure to obtain the prior consent to assignment thereof of any
party thereto shall or could be interpreted to constitute a termination or
modification of or a default under any such Station Contract; and (d) to
Sellers' Knowledge, no other party to any such Station Contract is in breach or
default in any material respect of the terms thereunder.
4.1.13. TAXES. Each Seller has (or, in the case of returns
becoming due after the date hereof and on or before the Closing Date, will have
prior to the Closing Date) duly filed all material tax returns required to be
filed on or before the Closing Date with respect to all material taxes
applicable to the ownership or operation of the Stations by Sellers. In the case
of any tax returns which receive an extension for their date of filing, such tax
returns will be considered due on, and not considered required to be filed
before, the extended due date. To Sellers' Knowledge, all tax returns are (or,
in the case of returns becoming due after the date hereof and on or before the
Closing Date, will be) true and complete in all material respects. Sellers: (a)
have paid all taxes due to any governmental authority as indicated on the tax
returns applicable to the ownership or operation of the Stations by Sellers; or
(b) have established (or, in the case of amounts becoming due after the date
hereof but prior to the Closing Date will have established) adequate reserves
(in conformity with generally accepted accounting principles consistently
applied) for the payment of taxes applicable to the ownership or operation of
the Stations by Sellers.
4.1.14. EMPLOYEE BENEFIT PLANS.
4.1.14.1. Schedule 4.1.14 lists all Plans and Benefit
Arrangements (exclusive of severance arrangements and retention agreements)
maintained or contributed to for the benefit of the employees of the Stations
(collectively, the "Benefit Plans"). Each Benefit Plan maintained or contributed
to by Sellers, and, to Sellers' Knowledge, each Benefit Plan maintained or
contributed to by Heritage, has been maintained in material compliance with its
terms and with ERISA, the Code and other applicable laws.
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4.1.14.2. Schedule 4.1.14 sets forth a list of all
Qualified Plans maintained or contributed to by Sellers, and to Sellers'
Knowledge, all Qualified Plans maintained or contributed to by Heritage, in each
case, for the benefit of the employees of the Stations. All such Qualified Plans
and any related trust agreements or annuity agreements (or any other funding
document) have been maintained in material compliance with ERISA and the Code
(including, without limitation, the requirements for tax qualification described
in Section 401 thereof), other than any Multiemployer Plan. To Sellers'
Knowledge, any trusts established under such Plans are exempt from federal
income taxes under Section 501(a) of the Code.
4.1.14.3. Schedule 4.1.14 sets forth a list of all
funded Welfare Plans maintained or contributed to by Sellers, and to Sellers'
Knowledge, all funded Welfare Plans maintained or contributed to by Heritage, in
each case, that provide benefits to current or former employees of the Stations
or their beneficiaries. To Sellers' Knowledge, the funding under each Welfare
Plan does not exceed and has not exceeded the limitations under Sections 419A(b)
and 419A(c) of the Code. At and after the Heritage Agreement Closing Date,
Sellers will not be, and to Sellers' Knowledge, Heritage is not, subject to
taxation on the income of any Welfare Plan's welfare benefit fund (as such term
is defined in Section 419(e) of the Code) under Section 419A(g) of the Code,
which Welfare Plan has been maintained or contributed to by any such party.
4.1.14.4. Sellers have no, and to Sellers' Knowledge,
Heritage has no, post-retirement medical life insurance or other benefits
promised, provided or otherwise due now or in the future to current, former or
retired employees of the Stations.
4.1.14.5. Except as set forth in Schedule 4.1.14, at
and after the Heritage Agreement Closing Date, Sellers will have, and to
Sellers' Knowledge, Heritage has (a) filed or caused to be filed all returns and
reports on the Plans that each such party is required to file and (b) paid or
made adequate provision for all fees, interest, penalties, assessments or
deficiencies that have become due pursuant to those returns or reports or
pursuant to any assessment or adjustment that has been made relating to those
returns or reports. All other fees, interest, penalties and assessments that are
payable by or for Heritage and Sellers have been or will be timely reported,
fully paid and discharged. There will be no unpaid fees, penalties, interest or
assessments due from Sellers, and to Sellers' Knowledge, there are no unpaid
fees, penalties, interest or assessments due from Heritage or from any other
person, in each case, that are or could become an Encumbrance on any of its
Assets or could otherwise adversely affect the businesses or operations of the
Stations or the Assets. At and after the Heritage Agreement Closing Date,
Sellers or one of them will have, and to Sellers' Knowledge, Heritage has,
collected or withheld all amounts that are required to be collected or withheld
by each such party to discharge its obligations, and all of those amounts have
been paid to the appropriate governmental authority or set aside in appropriate
accounts for future payment when due. Sellers have furnished to Entercom true
and complete copies of all documents setting forth the terms and funding of each
Plan.
4.1.14.6. Except as set forth in Schedule 4.1.14, at
and after the Heritage Agreement Closing Date, none of Sellers or any ERISA
Affiliate of such parties will
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have, and none of Heritage or any ERISA Affiliate of Heritage has ever,
sponsored or maintained, had any obligation to sponsor or maintain, or had any
liability (whether actual or contingent, with respect to any of its assets or
otherwise) with respect to any Plan subject to Section 302 of ERISA or Section
412 of the Code or Title IV of ERISA (including any Multiemployer Plan). At and
after the Heritage Agreement Closing Date, none of Sellers or any ERISA
Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate
of Heritage (since January 1, 1989) has, terminated or withdrawn from or sought
a funding waiver with respect to any plan subject to Title IV of ERISA, and no
facts exist that could reasonably be expected to cause such actions in the
future; no accumulated funding deficiency (as defined in Code Section 412),
whether or not waived, exists with respect to any such plan; no reportable event
(as defined in ERISA Section 4043) has occurred with respect to any such plan
(other than events for which reporting is waived); all costs of any such plans
have been provided for on the basis of consistent methods in accordance with
sound actuarial assumptions and practices, and the assets of each such plan, as
of its last valuation date, exceeded its "Benefits Liabilities" (as defined in
ERISA Section 4001(a)(16)); and, since the last valuation date for each such
plan, no such plan has been amended or changed to increase the amounts of
benefits thereunder and, to Sellers' Knowledge, there has been no event that
would reduce the excess of assets over benefit liabilities; and except as set
forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none
of Sellers or any ERISA Affiliate of such parties will have, and none of
Heritage or any ERISA Affiliate of Heritage has ever, made or been obligated to
make, or reimbursed or been obligated to reimburse another employer for,
contributions to any Multiemployer Plan.
4.1.14.7. No claims or lawsuits are pending or, to
Sellers' Knowledge, threatened, by, against, or relating to any Benefit Plan. To
Sellers' Knowledge, the Benefit Plans are not presently under audit or
examination (nor has notice been received of a potential audit or examination)
by the Internal Revenue Service, the Department of Labor, or any other
governmental agency or entity and no matters are pending with respect to any
Qualified Plan under the Internal Revenue Service's Voluntary Compliance
Resolution program, its Closing Agreement Program, or other similar programs.
4.1.14.8. To Sellers' Knowledge, with respect to each
Plan, there has occurred no non-exempt "prohibited transaction" (within the
meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of
ERISA or breach of any fiduciary duty described in Section 404 of ERISA that
would, if successful, result in any liability for Sellers. Sellers will take no
action that would result in such a liability between the date hereof and the
Closing Date.
4.1.14.9. At and after the Heritage Agreement Closing
Date, Sellers will have no liability, and to Sellers' Knowledge, Heritage has no
liability (whether actual, contingent, with respect to any of the Assets or
otherwise) with respect to any employee benefit plan that is not a Benefit Plan
(exclusive of severance arrangements and retention agreements) or with respect
to any employee benefit plan sponsored or maintained (or which has been or
should have been sponsored or maintained) by any ERISA Affiliate of such
parties.
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4.1.14.10. At and after the Heritage Agreement Closing
Date, all group health plans of Sellers and their ERISA Affiliates will have
been, and all group health plans of Heritage and its ERISA Affiliates have been,
operated in material compliance with the requirements of Sections 4980B (and its
predecessor) and 5000 of the Code, and Sellers have provided or will have
provided before the Closing Date, to individuals entitled thereto, all required
notices and coverage pursuant to Section 4980B with respect to any "qualifying
event" (as defined therein) occurring before or on the Closing Date.
4.1.15. LABOR RELATIONS. Sellers have made available to
Entercom a true and complete list of all employees engaged in the business or
operations of the Stations as of the date set forth on the list, together with
such employee's position, salary and date of hire. Schedule 4.1.15 lists all
written employment contracts of Heritage and Sellers related to employees of the
Stations and all written agreements, plans, arrangements, commitments and
understandings pursuant to which Heritage has, or at and after the Heritage
Agreement Closing Date, pursuant to which Sellers will have, severance
obligations related to employees at the Stations. Except as set forth on
Schedule 4.1.15, no labor union or other collective bargaining unit represents
or, to Sellers' Knowledge, claims to represent, any of the employees of the
Station. Except as set forth in Schedule 4.1.15, there are no strikes, work
stoppages, grievance proceedings, union organization efforts, or other
controversies pending between Heritage or Sellers, and any union or collective
bargaining unit representing (or, to Sellers' Knowledge, claiming to represent)
the employees at the Stations. At and after the Heritage Agreement Closing Date,
Sellers will be, and Heritage is, in compliance with all laws relating to the
employment or the workplace, including, without limitation, provisions relating
to wages, hours, collective bargaining, safety and health, work authorization,
equal employment opportunity, immigration and the withholding of income taxes,
unemployment compensation, worker's compensation, employee privacy and right to
know and social security contributions, except for any noncompliance which would
not have a Material Adverse Effect. Except as set forth herein, there are no
collective bargaining agreements relating to the Stations or the business and
operations thereof.
4.1.16. ENVIRONMENTAL MATTERS.
4.1.16.1. Except as set forth in Schedule 4.1.16, to
Sellers' Knowledge (which knowledge is based on the items set forth on Schedule
4.1.16), Heritage is, and at and after the Heritage Agreement Closing Date,
Sellers will be, in material compliance with, and the Real Property and all
improvements thereon are in material compliance with, all Environmental Laws.
4.1.16.2. Except as set forth in Schedule 4.1.16, there
are no pending or, to Sellers' Knowledge, threatened, actions, suits, claims, or
other legal proceedings based on (and none of Sellers have received any written
notice of any complaint, order, directive, citation, notice of responsibility,
notice of potential responsibility, or information request from any governmental
authority arising out of or attributable to): (a) the current or past presence
at any part of the Real Property of Hazardous Materials; (b) the current or past
release or threatened
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release into the environment from the Real Property (including, without
limitation, into any storm drain, sewer, septic system or publicly owned
treatment works) of any Hazardous Materials; (c) the off-site disposal of
Hazardous Materials originating on or from the Real Property or the businesses
or Assets of the Stations; (d) any facility operations or procedures of the
Stations since Heritage's ownership thereof which do not conform to requirements
of the Environmental Laws; or (e) any violation of Environmental Laws at any
part of the Real Property arising from activities of the Stations since
Heritage's ownership thereof involving Hazardous Materials. At and after the
Heritage Agreement Closing Date, Sellers will have been, and to Sellers'
Knowledge, Heritage has been, duly issued all material permits, licenses,
certificates and approvals required under any Environmental Law.
4.1.17. INSURANCE. Schedule 4.1.17 contains a true and
complete list and brief summary of all policies of title, property, fire,
casualty, liability, life, workmen's compensation, libel and slander, and other
forms of insurance of any kind relating to the Assets or the business and
operations of the Stations. To Sellers' Knowledge, all such policies: (a) are in
full force and effect; (b) are sufficient for compliance in all material
respects by Heritage with all requirements of law and of all material agreements
to which Heritage is a party; and (c) are valid, outstanding, and enforceable
policies and Heritage is not in default in any material respect thereunder.
Between the Heritage Agreement Closing Date and the Closing Date of this
Agreement, Sellers will carry insurance relating to the Assets or the business
and operations of the Stations such that this Section 4.1.17 would be true after
substituting "Sellers" for "Heritage" in each instance. All such insurance of
Sellers shall provide for full replacement cost coverage of any tangible
property that is lost or damaged due to an insured event or cause.
4.1.18. REPORTS. All material returns, reports and statements
that the Station will be required to file with the Commission or any
governmental agency after the date of this Agreement, and to Sellers' Knowledge,
all material returns, reports and statements that the Stations have been
required to file with the Commission or any governmental agency through the date
of this Agreement, have been or will be timely filed, and all reporting
requirements of the Commission and other governmental authorities having
jurisdiction thereof have been or will be complied with by Sellers and, to
Sellers' Knowledge, by Heritage, in each case, in all material respects. All
such reports, returns and statements to be filed after the date hereof will be
complete and correct in all material respects as filed and, to Sellers'
Knowledge, all such reports, returns and statements that have been filed through
the date of this Agreement, are complete and correct in all material reports as
filed. At and after the Heritage Agreement Closing Date all documents required
by the Commission to be deposited by Sellers. and, to Sellers' Knowledge, all
documents required by the Commission to be deposited by Heritage since the
period of operation of the Stations by Heritage, in each case, in the public
file of the Stations (as defined in the rules and regulations of the Commission)
have been or will be deposited therein.
4.1.19. HERITAGE AGREEMENT. Except as set forth on Schedule
4.1.19, Sinclair and its affiliates have not waived any of their rights under
the Heritage Agreement related to the Stations. Sinclair is unaware of any
material breach or misrepresentation by Heritage or News Corp. under the
Heritage Agreement. Sinclair is not in material breach of, and has not defaulted
under, any of the terms of the Heritage Agreement
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(unless waived or consented to in writing by Heritage and described on Schedule
4.1.19). The Heritage Agreement constitutes the valid and binding obligation of
Sinclair, enforceable against Sinclair and, by assignments, against Sellers, in
accordance with its terms, except as such enforceability may be limited by
bankruptcy and laws affecting the enforcement of creditors' rights generally or
equitable principles. Sinclair is not, and, to Seller's Knowledge, Heritage and
News Corp. are not, subject to any judgment, award, order, writ, injunction,
arbitration decision or decree which prohibits the performance of the Heritage
Agreement or the consummation of any transaction contemplated under the Heritage
Agreement, and, except as disclosed on Schedule 4.1.19, there is no litigation,
administrative action, arbitration, proceeding or investigation pending or, to
Sellers' Knowledge, threatened, against Heritage, News Corp., Sinclair or
Sellers or affecting such parties in any federal, state or local court, or
before any administrative agency or arbitrator that would adversely affect the
ability of Sinclair, Sellers, Heritage or News Corp. to consummate, or that
would prohibit, the transactions contemplated under the Heritage Agreement
related to the Stations.
4.1.20. INTERPRETATION OF CERTAIN PROVISIONS. Sellers have not
relied and are not relying on the specification of any dollar amount in any
representation or warranty made in this Agreement or any Schedule hereto to
indicate that such amounts, or higher or lower amounts, are or are not material,
and agree not to assert in any dispute or controversy between the parties hereto
that specification of such amounts indicates or is evidence as to whether or not
any obligation, item or matter is or is not material for purposes of this
Agreement and the transactions contemplated hereby.
4.2. ENTERCOM'S REPRESENTATIONS. Entercom represents and warrants
to Sellers that:
4.2.1. CORPORATE STANDING. Entercom is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and at the Closing Date will have the corporate
power and authority to conduct its business as proposed to be conducted and upon
the acquisition of the Assets will be duly qualified to do business in any
jurisdiction where it owns and operates a radio station and in each other
jurisdiction where such qualification is necessary, except for those
jurisdictions where the failure to be so qualified could not, individually or in
the aggregate, have a material adverse effect.
4.2.2. AUTHORIZATION OF AGREEMENT: NO BREACH. Entercom has the
corporate power and authority to execute, deliver and perform this Agreement and
such other agreements as are necessary to consummate the transactions
contemplated hereby. Subject to the receipt of the consents and approvals
required elsewhere herein, this Agreement constitutes the valid and binding
obligation of Entercom, enforceable against Entercom in accordance with its
terms, except as such enforceability may be limited by bankruptcy and laws
affecting the enforcement of creditors' rights generally or equitable
principles. Assuming the said consents and approvals are obtained, neither such
execution, delivery and performance nor compliance by Entercom with the terms
and provisions hereof will conflict with or result in a breach of any of the
terms, conditions or provisions of the organizational documents of Entercom
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or any judgment, order, injunction, decree, regulation or ruling of any court or
any other governmental authority to which Entercom is subject or any material
agreement or contract to which Entercom is a party or to which it is subject, or
constitute a material default thereunder.
4.2.3. QUALIFICATION AS ASSIGNEE. Except as disclosed in
Schedule 4.2.3, Entercom is, and pending Closing will remain, legally,
financially and otherwise qualified under the Communications Act of 1934, as
amended (the "Communications Act") and all rules, regulations and policies of
the Commission to acquire and operate the Stations. Except as disclosed in
Schedule 4.2.3, there are no facts or proceedings which would reasonably be
expected to disqualify Entercom under the Communications Act or otherwise from
acquiring or operating any of the Stations or would cause the Commission not to
approve the assignment of the FCC Licenses to Entercom. Except as disclosed in
Schedule 4.2.3, Entercom has no knowledge of any fact or circumstance relating
to Entercom or any of Entercom's Affiliates that would reasonably be expected to
(a) cause the filing of any objection to the assignment of the FCC Licenses to
Entercom, (b) lead to a delay in the processing by the Commission of the
applications for such assignment or (c) lead to a material delay in the
processing by the Commission of the renewals of the FCC Licenses for the
Portland Stations or the Rochester Stations. Except as disclosed in Schedule
4.2.3, no waiver of any Commission rule or policy is necessary to be obtained
for the grant of the applications for the assignment of the FCC Licenses to
Entercom, nor will processing pursuant to any exception or rule of general
applicability be requested or required in connection with the consummation of
the transactions herein.
4.2.4. ABSENCE OF CONFLICTING ORDERS. Entercom is not subject
to any judgment, award, order, writ, injunction, arbitration decision or decree
which prohibits the performance of this Agreement or the consummation of any
transaction contemplated under this Agreement, and there is no litigation,
administrative action, arbitration, proceeding or investigating pending, or to
the knowledge of Entercom, threatened, against Entercom or affecting Entercom in
any federal, state or local court, or before any administrative agency or
arbitrator that would adversely affect Entercom's ability to perform its
obligations under this Agreement or would hinder the consummation of the
transactions contemplated hereunder.
4.2.5. AVAILABILITY OF FUNDS. Entercom will have available on
the Closing Date sufficient funds to enable it to consummate the transactions
contemplated hereby.
4.2.6. WARN ACT. Entercom is not planning or contemplating,
and has not made or taken, any decisions or actions concerning the employees of
the Stations after the Closing Date that would require the service of notice
under the Worker Adjustment and Retraining Act of 1988, as amended.
4.2.7. NO OUTSIDE RELIANCE. Entercom has not relied and is not
relying on any statement, representation or warranty not made in this Agreement,
any Schedule hereto or any certificate to be delivered to Entercom at the
Closing pursuant to this Agreement. Entercom is not relying on any projections
or other predictions contained or referred to in
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materials (other than the Schedules) that have been or may hereafter be provided
to Entercom or any of its Affiliates, agents or representatives, and Sellers
make no representations or warranties with respect to any such projections or
other predictions.
4.2.8. INTERPRETATION OF CONCERN PROVISIONS. Entercom has not
relied and is not relying on the specifications of any dollar amount in any
representation or warranty made in this Agreement or any Schedule hereto to
indicate that such amounts, or higher or lower amounts, are or are not material,
and agrees not to assert in any dispute or controversy between the parties
hereto that specification of such amounts indicates or is evidence as to whether
or not any obligation, item or matter is or is not material for purposes of this
Agreement and the transactions contemplated hereby.
ARTICLE V.
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CONDITIONS
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5.1. MUTUAL CONDITIONS. Performance of the obligations of the
parties under this Agreement and the Closing of the transaction provided for
herein are and shall be subject to the occurrence and concurrence of the express
conditions precedent that:
5.1.1. The Stations shall have been acquired by Sellers from
Heritage pursuant to the Heritage Agreement; and
5.1.2. The Commission has granted its consent and approval in
writing to the assignment to Entercom of the FCC Licenses as contemplated
hereby, such consent to be free of any material adverse condition, and the
Commission's consent shall have become a Final Order, provided, that if no
objection or petition to deny has been filed against the Applications and if
Entercom's lenders consent to Closing upon FCC consent prior to such consent
becoming a Final Order, then the condition set forth in this Section 5.1.2 will
be deemed to be satisfied upon the consent and approval of the Commission; and
5.1.3. The waiting period (as it may be extended) applicable
to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") shall have expired or been earlier
terminated.
5.1.4. No statute, rule or regulation, or order of any court
or administrative agency, shall be in effect which restrains or prohibits
Entercom or Sellers, or any one of them, from consummating the transactions
contemplated hereby.
5.2. ENTERCOM'S CONDITIONS. Performance of the obligations of
Entercom under this Agreement and the Closing of the transactions provided for
herein also are and shall be subject to the occurrence of each of the following
express conditions precedent, each of which may be waived by Entercom, that:
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5.2.1. The applications for the renewal of the FCC Licenses of
each of the Portland Stations and the Rochester Stations shall have been granted
without any material adverse condition, and such grants shall have become Final
Orders; and
5.2.2. The representations and warranties contained in Section
4.1 hereof shall be true and correct at and as of the Closing Date as if made on
and as of such date except to the extent that they speak as of a particular date
or time other then the Closing Date (in which case such representations and
warranties shall be true and correct as of such date or time); provided, that
the failure of such representations and warranties to be true and correct at and
as of the Closing Date shall only be a condition to Entercom's obligations
hereunder if such failures involve costs, damages and/or expenditures in excess
of $1,265,000 (as determined by a qualified independent third party), provided,
further, that if such amount is less than $1,265,000 but more than $150,000,
such amount shall be placed in escrow on the Closing Date pursuant to an
indemnification escrow agreement, the form of which is attached hereto as
Exhibit D hereto, to secure Sellers' indemnification obligations under Section
9.7.1 hereunder; and
5.2.3. All of the terms, covenants and conditions to be
complied with and performed by each Seller on or prior to the Closing Date shall
have been complied with or performed in all material respects; and
5.2.4. There shall have been no material adverse change
relating to the material FCC Licenses of any of the Stations (other than
WBBF(AM)).
5.3. SELLERS' CONDITIONS. Performance of the obligations of Sellers
under this Agreement and the Closing of the transactions provided for herein
also are and shall be subject to the occurrence of each of the following express
conditions precedent, each of which may be waived by any Seller, that:
5.3.1. The representations and warranties contained in Section
4.2 hereof shall be true and correct at and as of the Closing Date in all
material respects as if made on and as of such date except to the extent they
speak as of a particular date or time other than the Closing Date (in which case
such representations and warranties shall be true and correct in all material
respects as of such date or time); and
5.3.2. All of the terms, covenants and conditions to be
complied with and performed by Entercom on or prior to the Closing Date
(including delivery of the Purchase Price) shall have been complied with or
performed in all material respects.
5.3.3. Entercom shall have complied in all material respects
with its obligations to pay Monthly Payments (as defined in the TBA) and to
reimburse Sellers for capital expenditures for the Stations under Section 1.2
and Schedule 1.2 of the TBA.
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ARTICLE VI.
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COVENANTS AND AGREEMENTS.
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6.1. AFFIRMATIVE COVENANTS OF SELLERS. During the period from the
date of this Agreement to the Closing Date, Sellers shall:
6.1.1. Should Sellers acquire any Station or operate any
Station prior to the sale of such Station to Entercom pursuant to this
Agreement, Sellers shall conduct the business and operations of such Station at
least in accordance with the provisions of Sections 6.1.1 through and including
6.1.12 and Sections 6.2.1 through and including 6.2.12 under the Heritage
Agreement.
6.1.2. Subject to the provisions of the TBA, cooperate with
Entercom in connection with its review, analysis and monitoring of the Assets
and the operations of the Stations to the end that an efficient transfer of the
Assets may be made at Closing and the business of the Stations may continue on
an uninterrupted basis. Sellers or one of them shall obtain Entercom's consent,
such consent not to be unreasonably withheld, prior to the exercise of Sellers'
or any of their rights under the Heritage Agreement as such rights pertain to
the Stations (other than the right to consummate the acquisition of the Stations
upon satisfaction of all conditions thereto). In addition to providing
information required hereunder or reasonably requested by the other parties
hereto, Sellers agree promptly to notify Entercom of any material problems or
developments of which any Seller becomes aware with respect to any of the Assets
or the business of any of the Stations.
6.1.3. Use their reasonable best efforts to cause Heritage to
prosecute, or to prosecute with the Commission, the applications for renewal of
the FCC Licenses for the Portland Stations and the Rochester Stations, such that
the applications are granted without any material adverse condition and, to the
extent reasonably possible, on or prior to the date for expiration of such FCC
Licenses.
6.1.4. Use reasonable best efforts to enforce all of its
rights under the Heritage Agreement as such rights pertain to the Stations,
including, without limitation, causing Heritage to act in conformity with the
Heritage Agreement and requiring Heritage to conduct the business of the
Stations in the Ordinary Course of Business in accordance with the terms of the
Heritage Agreement, except where such would not have a material adverse effect
on the business and operations of any Station, and, to the extent consistent
with the foregoing, in the same manner in which the same have heretofore been
conducted with the intent of preserving the ongoing operations and business of
the Stations.
6.1.5. Use their reasonable best efforts to close the
transactions contemplated by the Heritage Agreement as they pertain to the
Stations in a timely fashion consistent with the terms of such agreement.
Sellers shall enforce their rights to the fullest extent possible under the
Heritage Agreement as they pertain to the Stations, unless otherwise directed by
Entercom.
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6.1.6. To the extent that Sinclair or Sellers receive
notifications from Heritage with respect to the Stations under the Heritage
Agreement or otherwise becomes aware of any breach of any representation,
warranty, covenant or agreement in the Heritage Agreement or the failure to
satisfy any condition in such agreement, in each case with respect to the
Stations, Sellers shall promptly notify Entercom, and thereafter use reasonable
best efforts to enforce, perform or waive any provision of the Heritage
Agreement pertaining to the Stations as may be reasonably requested by Entercom,
provided, that Sellers shall not be obligated to take any action at Entercom's
request inconsistent with their rights and obligations under the Heritage
Agreement.
6.1.7. To the extent permitted under the Heritage Agreement,
at Closing Sellers will assign any and all rights with respect to the Stations
that it may have against Heritage, News Corp., and their respective subsidiaries
to Entercom. Entercom acknowledges that the assignment of such rights by Sellers
requires the prior written consent of Heritage, which consent Heritage may
withhold in its sole discretion. In this regard, Sellers will use their
reasonable efforts (without obligation to spend any amount of money) to obtain
any consent of Heritage or News Corp. required to assign such rights to Entercom
prior to the Closing Date. The failure of Sellers to obtain such consent shall
not limit Entercom's obligation to close if all other conditions precedent to
Entercom's obligations have been satisfied or waived; however, in such case,
Sellers shall fully enforce their rights which relate to the Stations against
Heritage and News Corp. under the Heritage Agreement at Entercom's request, and
this covenant shall survive the Closing for the period that Sinclair has any
rights under the Heritage Agreement. Any proceeds received by Sellers from the
exercise of their rights which relate to the Stations against Heritage and News
Corp. and their respective subsidiaries shall be paid over to Entercom within
five (5) business days of receipt by Sellers, less any reasonable costs and
expenses of enforcement incurred by Sellers in such exercise.
6.1.8. At all times, maintain strict confidentiality with
respect to all documents and information furnished to Sellers by or on behalf of
Entercom. Nothing shall be deemed to be confidential information that: (a) is
known to Sellers at the time of its disclosure to Sellers; (b) becomes publicly
known or available other than through disclosure by Sellers; (c) is received by
Sellers from a third party not actually known by Sellers to be bound by a
confidentiality agreement with or obligation to Entercom; or (d) is
independently developed by Sellers. Notwithstanding the foregoing provisions of
this Section 6.1.8, Sellers may disclose such confidential information (a) to
the extent required or deemed advisable to comply with applicable laws; (b) to
its officers, directors, employees, representatives, financial advisors,
attorneys, accountants, and agents with respect to the transactions contemplated
hereby (so long as such parties agree to maintain the confidentiality of such
information); and (c) to any governmental authority in connection with the
transactions contemplated hereby. In the event this Agreement is terminated,
Sellers will return to Entercom all documents and other material prepared or
furnished by Entercom relating to the transactions contemplated hereunder,
whether obtained before or after the execution of this Agreement.
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6.2. NEGATIVE COVENANTS OF SELLERS. Unless Entercom has given its
prior consent in writing, which consent shall not be unreasonably withheld or
delayed, Sellers shall not, directly or indirectly, during the period from the
date of this Agreement to the Closing Date:
6.2.1. Except as set forth on Schedule 4.1.19 hereto, fail to
comply with the terms of, waive any of Sellers' rights under or consent to any
actions requiring Sinclair's or Sellers' consent under the Heritage Agreement
related to the Stations.
6.2.2. Fail to consummate the acquisition of the Stations upon
the occurrence or waiver of all conditions precedent thereto under the Heritage
Agreement.
6.3. AFFIRMATIVE COVENANTS OF ENTERCOM. During the period from the
date of this Agreement to the Closing Date (or solely in the case of Section
6.3.4, from and after the Closing Date), Entercom shall:
6.3.1. Use reasonable efforts to obtain its lenders' consent
to Closing of this Agreement upon the consent and approval of the Commission of
the Applications but prior to such consent and approval becoming a Final Order.
6.3.2. At all times prior to the Closing, maintain strict
confidentiality with respect to all documents and information furnished to
Entercom by or on behalf of Sellers. Nothing shall be deemed to be confidential
information that: (a) is known to Entercom at the time of its disclosure to
Entercom; (b) becomes publicly known or available other than through disclosure
by Entercom; (c) is received by Entercom from a third party not actually known
by Entercom to be bound by a confidentiality agreement with or obligation to
Sellers; or (d) is independently developed by Entercom. Notwithstanding the
foregoing provisions of this Section 6.3.2, Entercom may disclose such
confidential information (a) to the extent required or deemed advisable to
comply with applicable laws; (b) to its officers, directors, partners,
employees, representatives, financial advisors, attorneys, accountants, agents,
underwriters, lenders, investors and any other potential sources of financing
with respect to the transactions contemplated hereby (so long as such parties
agree to maintain the confidentiality of such information); and (c) to any
governmental authority in connection with the transactions contemplated hereby.
In the event this Agreement is terminated, Entercom will return to Sellers all
documents and other material prepared or furnished by Sellers relating to the
transactions contemplated by this Agreement, whether obtained before or after
the execution of this Agreement.
6.3.3. Take all corporate action (including, without
limitation, all shareholder action), under the laws of any state having
jurisdiction over Entercom necessary to effectuate the transactions contemplated
by this Agreement.
6.3.4. From and after the Closing Date, cause to be afforded
to representatives of Sellers reasonable access during normal business hours to
the offices, books and records, contracts and reports of the Stations, as
Sellers shall from time to time reasonably request; provided, however, that (a)
such investigation shall only be upon reasonable notice and
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shall not unreasonably disrupt the personnel or operations of Entercom or the
Stations, and (b) under no circumstances shall Entercom be required to provide
access to Sellers or any representatives of Sellers (i) any information or
materials subject to confidentiality agreements with third parties required to
be kept confidential by applicable laws, or (ii) any privileged attorney-client
communications or attorney work product. All requests for access to the offices,
books and records, contracts and reports of the Stations shall be made to such
representatives as Entercom shall designate in writing, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. Entercom agrees not to dispose of any books and records, contracts
and reports of the Stations which relate to the operations of the Stations
during the period during which the Stations were owned by Sellers without
consulting with Sellers prior to disposal thereof and taking any reasonable
action requested by Sellers with respect to retention and transfer to Sellers
thereof.
6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM.
6.4.1. DISCLOSURE SCHEDULES. Sellers and Entercom acknowledge
and agree that Sellers shall have the right from time to time after the date
hereof to update or correct solely Schedules 2.1.5, 2.1.6, 2.1.8, 2.1.9 and
4.1.17 attached hereto solely to reflect actions by Sellers after the date
hereof which are not prohibited by Section 6.1 hereof. The inclusion of any fact
or item on a Schedule referenced by a particular section in this Agreement
shall, should the existence of the fact or item or its contents, be relevant to
any other section, be deemed to be disclosed with respect to such other section
whether or not an explicit cross-reference appears in the Schedules.
6.4.2. BULK SALES LAWS.Entercom hereby waives compliance by
Sellers, in connection with the transactions contemplated hereby, with the
provisions of any applicable bulk transfer laws.
6.4.3. TAX MATTERS.Sellers and Entercom each represent,
warrant, covenant and agree with each other that for tax purposes the sale of
Assets described herein is not effective until the Closing Date. Sellers and
Entercom agree that all Tax returns and reports shall be filed consistent with
the sale of assets taking place on the Closing Date.
6.4.4. PRESERVATION OF BOOKS AND RECORDS. For a period of
three (3) years after the Closing Date, Sellers agree not to dispose of, and
agree to provide Entercom reasonable access to, any material books or records in
Sellers' possession immediately after the Closing Date that relate to the
business or operation of the Stations prior to the Closing Date.
6.5. NO CONTROL BY ENTERCOM. Subject to the provisions of the TBA,
nothing contained in this Agreement shall give to Entercom any right to control
the operations of the Stations prior to the Closing Date. Any advice, counsel or
consent given to Sellers by Entercom under this Article VI will not mitigate,
detract from or otherwise affect Sellers' representations, warranties or
obligations under this Agreement. Any advice, counsel or
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consent given to Entercom by Sellers under this Article VI will not mitigate,
detract from or otherwise affect Entercom's representations, warranties or
obligations under this Agreement.
ARTICLE VII.
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PREPARATION FOR CLOSING
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7.1. APPLICATION TO COMMISSION. The parties hereto bind themselves
to use all reasonable efforts, and to cooperate with each other, in seeking the
consent and approval of the Commission to the assignment of all FCC Licenses, as
herein provided; and Sellers and Entercom agree that each shall diligently and
promptly prepare, sign and file with the Commission within five (5) business
days from the date of this Agreement any and all applications requisite or
desirable to procure such consent and approval (the "Applications"); and
diligently and promptly to prepare and submit to the Commission all information,
data, exhibits, amendments, resolutions, statements and other material necessary
or proper in connection with the Applications; and diligently to pursue the
grant of a Final Order approving such Applications by the Commission. With
respect to the foregoing, Sellers hereby agree, commit and bind themselves to
prepare and deliver to Entercom on or before five (5) days from the date of this
Agreement Sellers' portions of all applications and documents necessary for
filing with the Commission to obtain the consent and approval of the Commission
as required to permit the consummation of the transactions contemplated by this
Agreement.
7.2. INSPECTION BY ENTERCOM. To the extent permitted under the
Heritage Agreement, during the period from the date of this Agreement to the
Heritage Agreement Closing Date, and between the period from the Heritage
Agreement Closing Date and the Closing Date, Sellers shall afford engineers,
attorneys, accountants and other consultants and/or representatives of Entercom
free access during normal business hours to the employees, offices, studios,
transmitter site, equipment, records and other documents pertaining to the
Stations and furnish Entercom with all information concerning said Stations as
Entercom may reasonably request, including but not limited to applications,
responses to the Commission inquiries, and other documents filed by Sellers with
the Commission. Without limiting the foregoing, Entercom shall have the right,
subject to the limitations set forth above and at its sole expense, to perform
such phase I and phase II environmental site assessments of any real property
for the Stations included within the Assets, and upon receipt of such
assessments agrees to deliver a copy of each to Sellers. No right of termination
for Entercom shall arise as a result of any issue identified in such
environmental site assessments (unless a separate cause for termination under
other provisions of this Agreement may provide such a right); however, following
the Closing Date, if Entercom performs remediation for any issues specifically
identified in such environmental site assessments requiring remediation under
any Environmental Law, Sellers shall reimburse Entercom for the costs and
expenses of such remediation, up to a maximum aggregate amount of $250,000,
subject to the limitations on indemnification set forth in Section 9.7.4.
7.3. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and
no later than five (5) business days after the date hereof, the parties hereto
shall
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take all steps reasonably necessary to file and shall participate in the filing
of all requisite documents and notifications required to be filed pursuant to
the HSR Act. The parties will jointly request early termination of any required
waiting period under the HSR Act unless mutually agreed otherwise. The parties
agree diligently to take and fully cooperate in the taking of, all necessary and
proper steps, and provide any additional information reasonably requested in
order to obtain promptly the expiration of the waiting period under the HSR Act.
ARTICLE VIII.
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CLOSING
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8.1. CLOSING. Closing shall take place at the time and place agreed
to by the parties hereto. It is expressly contemplated hereunder that Entercom
shall have no right to close on the acquisition of less than all the Stations
without the consent of Sellers. In the absence of agreement thereon and except
as modified elsewhere herein, the Closing shall take place by mail at 10:00
a.m., Eastern Time, at the offices of Latham & Watkins, 1001 Pennsylvania
Avenue, N.W., Suite 1300, Washington, D.C. 2004, on a date selected by Entercom
within ten (10) business days after the later of: (a) the satisfaction or waiver
of each condition to closing contained herein (other than such conditions as can
only be satisfied at the Closing); and (b) the expiration of any period of
extension for Closing provided elsewhere in this Agreement. If such date falls
on a Saturday, Sunday or legal holiday in the State of New York, then such
Closing shall take place as provided herein on the next business day.
8.2. ADJUSTMENTS.
8.2.1. Except as otherwise provided in the TBA, and subject
to the terms and conditions of Section 8.2.2, at least five (5) days prior to
the Closing Date, Sellers shall make a good faith estimate of the adjustment to
the Purchase Price customary in radio broadcast station transactions for
Proration Items (the "Proration Amount") to reflect that all Proration Items of
all Stations shall be apportioned between Entercom and Sellers in accordance
with the principle that Sellers shall receive the benefit of all revenues,
refunds, deposits (other than deposits for Program Contracts which shall be
prorated based on the percentage of the term that the program was aired on such
Stations before the Closing Date and the percentage available to be aired on and
after the Closing Date) and prepaid expenses, and shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the businesses or
operations of such Stations for the period prior to the Closing Date, and
Entercom shall receive the benefit of all revenues, refunds, deposits and
prepaid expenses, and shall be responsible for all expenses, costs and
liabilities allocable to the conduct of the businesses or operations of such
Stations from and after the Closing Date; provided, however, that there shall be
no adjustment or proration for any negative or positive net trade balance except
to the extent that the negative net trade balance for the Stations exceeds
$50,000. Determinations pursuant to this Section 8.2.1, shall be made in
accordance with generally accepted accounting principles consistently applied
for the period prior to the Closing Date.
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8.2.2. Within ninety (90) days after the Closing Date,
Entercom shall deliver to Sellers in writing and in reasonable detail a good
faith final determination of the Proration Amount determined as of the Closing
Date under Section 8.2.1 (the "Final Proration Amount"). Sellers shall assist
Entercom in making such determination, and Entercom shall provide Sellers with
reasonable access to the properties, books and records relating to the Stations
for the purpose of determining the Final Proration Amount. Sellers shall have
the right to review the computations and workpapers used in connection with
Entercom's preparation of the Final Proration Amount. If Sellers disagree with
the amount of the Final Proration Amount determined by Entercom, Sellers shall
so notify Entercom in writing within thirty (30) days after the date of receipt
of Entercom's Final Proration Amount, specifying in detail any point of
disagreement; provided however, that if Sellers fail to notify Entercom in
writing of Sellers' disagreement within such thirty (30) day period, Entercom's
determination of the Final Proration Amount shall be final, conclusive and
binding on Sellers and Entercom. After the receipt of any notice of
disagreement, Entercom and Sellers shall negotiate in good faith to resolve any
disagreements regarding the Final Proration Amount. If any such disagreement
cannot be resolved by Sellers and Entercom within thirty (30) days after
Entercom has received notice from Sellers of the existence of such disagreement,
Entercom and Sellers shall jointly select a nationally recognized independent
public accounting firm (which has not performed any service for either Entercom
or Sellers or any of their respective subsidiaries at anytime during the two (2)
year period prior to the date such firm is selected (the "Accounting Firm")), to
review Entercom's determination of the Final Proration Amount and to resolve as
soon as possible all points of disagreement raised by Sellers. All
determinations made by the Accounting Firm with respect to the Final Proration
Amount shall be final, conclusive and binding on Entercom and Sellers. The fees
and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by Entercom and one-half by Sellers.
Upon determination of the Final Proration Amount, the
appropriate party owing any prorations shall pay such amounts in cash, within
two (2) business days following the final determination of the Final Proration
Amount. Any amounts paid pursuant to this Section 8.2.2 shall be by wire
transfer of immediately available funds for credit to the recipient at a bank
account identified by such recipient in writing.
Entercom and Sellers agree that prior to the date of
the final determination of the Final Proration Amount pursuant to this Section
8.2.2 (by the Accounting Firm or otherwise), neither party will destroy any
records pertaining to, or necessary for, the final determination of the Final
Proration Amount.
8.3. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing,
Sellers or one of them, as the case may be, shall deliver to Entercom the
following items and documents in form satisfactory to counsel for Entercom and
properly executed, unless Entercom shall waive in whole or in part in writing
such delivery and then only to the extent of such waiver:
8.3.1. One or more Bills of Sale and assignments and other
instruments of transfer and conveyance, substantially in the form attached
hereto as Exhibit E, transferring to
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Entercom the Assets to be sold, transferred or assigned hereunder and the rights
and interests under the Station Contracts being assigned to Entercom hereunder,
copies of all consents from third parties to the assignment of Station Contracts
received prior to the Closing Date (if any), and estoppel certifications
received prior to the Closing Date (if any) by the other parties to such Station
Contracts that Sellers are not then in default under the terms of the Station
Contract to which such other party is a party.
8.3.2. An assignment of all right, title and interest of
Sellers in and to the FCC Licenses and all pending applications relating to the
Stations before the Commission, substantially in the form attached hereto as
Exhibit E.
8.3.3. All keys to and actual possession of all of the Assets,
in the same condition as the same now is, except for ordinary wear and tear
thereof, unless disposed of or otherwise altered as permitted by this Agreement.
8.3.4. Certified copies of resolutions of the Board of
Directors and shareholders (if required by law) of each of Sellers, duly
authorizing the execution, delivery and performance of this Agreement and all
documents to be executed and delivered by each Seller at the Closing and
thereafter, and certified copies of resolutions of the Board of Directors of
Sinclair, duly authorizing the execution, delivery and performance of the SCI
Guarantee.
8.3.5. Certificates signed by authorized officers of each
Seller (each certificate being applicable to each Seller only), to the effect
that no act or omission by each Seller, or state of facts contrary to the
agreements, representations and warranties made herein by each Seller has been
taken or has occurred and that, subject to Section 5.2.2 of this Agreement, said
representations and warranties are true and correct at and as of the Closing
Date as if made on and as of the time of Closing Date, except to the extent that
said representations and warranties speak as of a particular date or time other
than the Closing Date (in which case such representations and warranties shall
be true and correct as of such date or time).
8.3.6. The consents of any public authorities or third persons
that may be required in connection with the performance of this Agreement.
8.3.7. All books, records, public files, contracts, leases,
Commission filings, correspondence, files and other documents in Sellers'
possession relating to and necessary or appropriate to the operation of the
Stations, excluding however, accounting records relating to Sellers' period of
ownership (provided Entercom is given copies thereof).
8.3.8. A special warranty deed in recordable form transferring
to Entercom a fee simple interest in any owned real property included within the
Assets and a commitment to issue extended coverage policies of title insurance
(ATLA owners and Mortgagee's policy-Form 1970, if available or Form 1984 or 1990
with 1970 endorsements), for the benefit of insuring good and marketable title
to such real property free and clear of all liens and encumbrances issued by a
title insurance company reasonably acceptable to Entercom and in the amount
allocated to such real property hereunder, subject to standard title exceptions
and
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survey exceptions, none of which will impair or interfere with the continued use
of such real property as such is currently used. All fees and expenses for the
issuance of such title insurance policies shall be paid for by Entercom.
8.3.9. To the extent Sellers have obtained such consent, the
consent of Heritage and/or News Corp., as necessary, to the assignment of the
rights related to the Stations under the Heritage Agreement to Entercom.
8.3.10. Instructions to the Escrow Agent to deliver the
original Letter of Credit to Entercom promptly after the Closing.
8.3.11. Opinions of Thomas & Libowitz, P.A., counsel to
Sellers, and of Fisher, Wayland, Cooper, Leader & Zaragoza, regulatory counsel
to Sellers, substantially in the forms attached hereto as Exhibits F and G.
8.4. CLOSING DELIVERIES TO SELLERS. At the Closing, Entercom shall
deliver to Sellers the Purchase Price as set forth in Section 2.5 allocated
between Sellers as Sellers shall direct and deliver the following items and
documents in form satisfactory to counsel for Sellers and properly executed
unless each Seller waives in whole or part in writing a delivery and then only
to the extent of such waiver:
8.4.1. One or more Agreements whereby Entercom assumes and
agrees to pay when due any Liabilities of each Seller specifically required to
be assumed by Entercom hereunder, substantially in the form attached hereto as
Exhibit E.
8.4.2. Certified copies of the resolutions of the Board of
Directors of Entercom approving and ratifying this Agreement and all
transactions contemplated by this Agreement.
8.4.3. A certificate signed by the President or any Vice
President of Entercom to the effect that with respect to any matter which would
prevent Entercom from consummating the Closing, no act or omission of Entercom
or state of facts contrary to the agreements, representations and warranties
made herein by Entercom has been taken or has occurred and that said
representations and warranties are true and correct at and as of the Closing
Date in all material respects as if made on and as of Closing Date, except to
the extent that said representations and warranties speak as of a particular
date or time other than the Closing Date (in which case such representations and
warranties shall be true and correct in all material respects as of such date or
time).
8.4.4. An opinion of John C. Donlevie, General Counsel to
Entercom, substantially in the form attached hereto as Exhibit H.
8.5. COVENANTS OF FURTHER ASSURANCE. At and after the time of
Closing, upon request of Entercom or Sellers, as the case may be, the parties
shall take such reasonable action and deliver to the party so requesting such
further instruments of assignment,
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conveyance or transfer or other documents of further assurance as in the opinion
of counsel for either Sellers or Entercom may be reasonably necessary to
evidence the full and effective transfer, conveyance and assignment of the
Assets and possession thereof to Entercom.
8.6. DAMAGE TO PROPERTY. If, at the time of Closing, any of the
real or tangible personal property included in the Assets shall have suffered
loss or damage for which Entercom is not responsible under the term of the TBA,
Sellers shall use their reasonable efforts to repair, replace or restore the
same prior to Closing. In the event that such repair, replacement or restoration
cannot be completed prior to the date scheduled for Closing, then, except as
provided immediately below, Closing shall occur and Sellers shall assign to
Entercom their rights to all insurance proceeds relating to such loss or damage.
In the event such loss or damage is uninsured or so material as to prevent one
of the Stations (other than WBBF(AM)) from using its studios or any of its
transmitter facilities in the normal course, consistent with past practices,
Closing shall be deferred until the completion of such repair, replacement or
restoration by Sellers to the extent that the Station's or Stations' studios and
transmitter facilities are again useable in the normal course, consistent with
past practices, and such delay shall not give rise to a right to terminate this
Agreement as provided in Section 9.1.4 hereof.
8.7. TAXES ON TRANSACTION. All sales, purchase, transfer, use or
documentary taxes, if any, payable by reason of this Agreement or any of the
transactions contemplated hereby or the sale, transfer or delivery of any of the
Assets to Entercom, whether or not imposed on Entercom or Sellers, shall be paid
one-half by Entercom and one-half by Sellers promptly when due.
ARTICLE IX.
TERMINATION, DEFAULT AND INDEMNIFICATION
9.1. TERMINATION BY REASON OTHER THAN DEFAULT. This Agreement may
be terminated by any party hereto not then in default hereunder at the time of
such termination upon written notice to the other party if:
9.1.1. The Commission denies or designates for hearing any of
the Applications or any portion thereof by Final Order; or
9.1.2. Events occur which give rise to a specific right
hereunder to terminate this Agreement by the party seeking to terminate; or
9.1.3. Other than as a result of a default by the party
seeking to terminate, any material condition set forth herein to the obligation
of the party seeking to terminate this Agreement to complete the transaction has
not been satisfied or complied with by the Closing Date and has not been waived
by the party seeking to terminate; or
9.1.4. By either party, subject to Section 8.6 hereof, if the
Commission does not grant its consent and approval to the Applications and the
waiting period required under
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the HSR Act has not expired or been terminated by the date that is six months
after the date of this Agreement and the TBA has not commenced by such six-month
anniversary, provided, that if an issue has been raised before the Commission,
the DOJ or the FTC concerning either Sellers, or any of their predecessors, on
the one hand, or Entercom, on the other hand, and such issue has delayed the
consent and approval of the Commission or the expiration or termination of the
waiting period contemplated by the foregoing clause, then the party to which
such issue relates shall not be permitted to terminate the Agreement pursuant to
this provision on such six-month anniversary date. If the TBA has commenced
within the six-month period set forth above, the period for termination by
either party pursuant to this Section 9.1.4 shall be one (1) year, provided,
that on such one-year anniversary date, either party may, subject to Section 8.6
hereof, terminate this Agreement even if an issue has been raised before the
Commission concerning such party and such issue has delayed the consent and
approval of the Commission.
9.2. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT. If this
Agreement is duly terminated by either party as provided in Section 9.1, then
the Letter of Credit shall be returned to Entercom and all obligations of either
party to the other shall cease and both parties shall be fully and finally
released herefrom.
9.3. DEFAULT. The following shall constitute a default hereunder:
9.3.1. If any of the representations or warranties of a party
contained herein is inaccurate or breached in any material respect; or
9.3.2. If any of the obligations to be performed hereunder by
a party hereto is not performed during the period or at or before the time
specified herein for such performance.
9.4. REMEDIES OF SELLERS.
In the event of a default by Entercom, which is not waived by
Sellers, Sellers shall have the following remedies:
9.4.1. Prior to Closing, Sellers may, as their sole remedy, by
written notice to Entercom terminate this Agreement in which event Seller shall
be entitled to receive the proceeds of the Letter of Credit as liquidated
damages in full and final settlement of all claims under this Agreement, and
there shall be no other or further obligations, liabilities or remedies of the
parties hereunder.
9.4.2. In the event Closing occurs hereunder, Sellers' remedy
for any default by Entercom shall be indemnification pursuant to Section 9.7
hereof.
9.5. ENTERCOM'S REMEDIES. In the event of a default by either
Seller hereunder, which is not waived by Entercom, Entercom shall have the
following remedies:
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9.5.1. Prior to Closing, subject to the provisions regarding
failures of representations and warranties contained in Section 5.2.2 hereof,
Entercom may by written notice to Sellers terminate this Agreement in which
event Entercom shall be entitled to recover from Sellers, jointly and severally,
any damages Entercom sustained as a result of the default by such breaching
Seller hereunder.
9.5.2. Prior to Closing, Entercom may seek specific
performance by Sellers of Sellers' obligations hereunder and shall also be
entitled to any other remedy available at law or in equity, including without
limitation the recovery of any damages (including attorneys fees and costs)
incurred by Entercom as a result of the default by Sellers hereunder. Each
Seller covenants that under such circumstances it shall not assert in defense of
an action seeking specific performance of this Agreement in favor of Entercom
that Entercom has available adequate remedies at Law.
9.5.3. In the event Closing occurs hereunder, Entercom's
remedy for any default by Sellers shall be indemnification pursuant to Section
9.7 hereof.
9.6. LIQUIDATED DAMAGES NOT A PENALTY. With respect to the
liquidated damages as described and provided for in Section 9.4.1 hereof,
Sellers and Entercom hereby acknowledge and agree that the damage that may be
suffered by Sellers in the event of a default by Entercom hereunder is not
readily ascertainable and that such liquidated damages as of the date hereof are
a reasonable estimate of such damages and are intended to compensate Sellers for
any such damage and are not to be construed as a penalty.
9.7. INDEMNIFICATION.
9.7.1. BY SELLERS. Subject to Sections 9.7.4 and 10.3, from
and after the Closing Date, Sellers shall, jointly and severally, indemnify,
defend and hold Entercom and its officers, directors, employees and affiliates
harmless from, against and with respect to any and all loss, damage, claim,
obligation, assessment, cost, liability, and reasonable expense (including,
without limitation, reasonable attorney's fees and reasonable costs and expenses
incurred in investigating, preparing, defending against or prosecuting any
litigation or claim, action, suit, proceeding or demand) of any kind or
character (a "Loss") incurred, suffered, sustained or required to be paid by any
of them and resulting from, related to or arising out of:
(a) any breach of any of the covenants, representations
or warranties made by Sellers in or pursuant to this Agreement, or in
any agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing hereunder;
(b) any failure by Sellers to perform or observe, or to
have performed or observed, in full, any covenant, agreement or
condition to be performed or observed by them pursuant to this Agreement
or in any agreement, document or instrument executed and delivered by or
on behalf of them in connection with the Closing hereunder;
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(c) any and all Liabilities of Sellers, except for
Liabilities to be assumed or retained by Entercom under the terms of
this Agreement; or
(d) Sellers' operation or ownership of the Assets prior
to the Adjustment Time, including any and all obligations and
liabilities arising under the FCC Licenses or the Station Contracts
which accrue or relate to a period of time prior to the Adjustment Time;
or
9.7.2. BY ENTERCOM. If Closing does not occur due to a default
by Entercom in its obligation to complete such Closing hereunder, Sellers'
remedy shall be liquidated damages pursuant to Section 9.4 hereof. Provided
Closing occurs hereunder, subject to Section 10.3, Entercom shall indemnify,
defend and hold Sellers and their respective officers, directors, employees and
affiliates harmless from, against and with respect to any Loss (as defined in
Section 9.7.1) incurred, suffered, sustained or required to be paid by any of
them and resulting from, related to or arising out of:
(e) any breach of any of the covenants, representations
or warranties made by Entercom in or pursuant to this Agreement or in
any agreement, document or instrument executed and delivered pursuant
hereto or in connection with the Closing hereunder;
(f) any failure by Entercom to perform or observe, or
to have performed or observed, in full, any covenant, agreement or
condition to be performed or observed by it pursuant to this Agreement
or in any agreement, document or instrument executed and delivered by or
on behalf of it in connection with the Closing hereunder; or
(g) any and all Liabilities of Entercom except for
Liabilities to be assumed or retained by Sellers under the terms of this
Agreement; or
(h) Entercom's operation or ownership of the Assets
after the Adjustment Time, including any and all Liabilities arising
under the FCC Licenses or the Station Contracts assumed by Entercom
which accrue after the Adjustment Time or which relate to or arise out
of events occurring after the Adjustment Time.
9.7.3. PROCEDURES. Any party seeking indemnification under
this Agreement (the "Indemnified Party") shall promptly give the party from whom
indemnification is sought (the "Indemnifying Party") written notice of any claim
or the commencement of any action or proceeding for which the Indemnified Party
may seek indemnification, and the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting from such claim, unless injunctive relief is sought against the
Indemnified Party in which case the Indemnified Party shall have the right to
join in any defense. The Indemnified Party's failure to give the Indemnifying
Party notice under this clause shall not preclude the Indemnified Party from
seeking indemnification from the Indemnifying Party except to the extent that
the Indemnified Party's failure has materially prejudiced the Indemnifying
Party's ability to defend the claim or litigation. The Indemnifying Party shall
not settle any claim
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for which the Indemnified Party seeks indemnification or consent to entry of any
judgment in litigation arising from such a claim without obtaining a written
release of the Indemnified Party from all liability in respect of such claim or
litigation. If the Indemnifying Party shall not assume the defense of any such
claim or litigation resulting therefrom, or if injunctive relief is sought
against the Indemnified Party, the Indemnified Party may defend against or
settle such claim or litigation in such manner as it may deem appropriate, and
in such cases, upon a written demand therefore, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of all reasonable
expenses, legal or otherwise, incurred by the Indemnified Party in connection
with the defense against or settlement of such claim or litigation. In addition,
if the Indemnifying Party shall not assume the defense of any such claim or
litigation resulting therefrom, or if injunctive relief is sought against the
Indemnified Party, and if no settlement of the claim or litigation is made, upon
written demand therefor, the Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect to such
claim or in such litigation and for all reasonable expenses, legal or otherwise,
incurred by the Indemnified Party in the defense against such claim or
litigation.
9.7.4. LIMITS ON INDEMNIFICATION. Notwithstanding any other
provision hereof, Entercom shall not be entitled to make a claim against Sellers
for indemnification under this Agreement until the aggregate amount of such
claims by Entercom exceeds One Hundred Fifty Thousand Dollars ($150,000) (the
"Threshold"), provided, that once the Threshold has been exceeded, Entercom
shall be entitled to seek from Sellers, jointly and severally, the full amount
of such claims. The amount of the Threshold shall have no bearing on any
determination as to what constitutes "material" for purposes of this Agreement.
In addition, notwithstanding any other provision of this Agreement to the
contrary, in no event shall a Loss include a party's incidental, consequential
or punitive damages, regardless of the theory of recovery.
ARTICLE X.
----------
GENERAL PROVISIONS
------------------
10.1. EXPENSES OF THE PARTIES. Except as otherwise expressly
provided herein, all expenses involved in the preparation, authorization and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants in connection
therewith and in connection with applications to the Commission hereunder, shall
be borne solely by the party who shall have incurred the same, and the other
party shall have no liability in respect thereof. The foregoing notwithstanding,
the parties agree to pay in equal shares (i) any filing fees of the Commission
relating to the filing of the Applications, (ii) fees related to notifications
under the HSR Act or to any other governmental agency and (iii) fees and
expenses of the Escrow Agent under the Escrow Agreement and the Indemnification
Escrow Agreement. In addition, (y) assuming Sellers obtain the consent of
Geraghty & Miller to allow Entercom and its lenders to rely upon the phase I
environmental site assessment performed for the Real Property and identified on
Schedule 4.1.16, Entercom agrees to pay one-half of the total cost of such phase
I environmental site assessment performed by Geraghty & Miller and (z) Entercom
shall pay all of the cost involved
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in the update by Geraghty & Miller of such phase I environmental site assessment
(as contemplated by Section 4.1.16.1), provided that Entercom shall receive a
dollar-for-dollar credit against any amount paid by Entercom pursuant to clause
(y) above.
10.2. BROKERS. Each party hereto represents and warrants to the
other party hereto that it has not incurred any Liability, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other party will have any Liability, and each party hereto
agrees to indemnify and hold the other party hereto harmless against and in
respect to any such Liability based in any way on any agreement, arrangement or
understanding claimed to have been made by such party with any third party.
10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The
provisions hereof which by their terms are to be performed and observed after
the Closing Date and the several representations, warranties, indemnities and
agreements of Entercom and Sellers herein contained shall survive the Closing
Date hereunder for one (1) year following the Closing Date. No claim for
indemnification may be made pursuant to Article IX after the survival period set
forth in this Section 10.3 (except that all claims which are properly asserted
prior to the expiration of the survival period set forth in this Section 10.3
shall survive with respect to such claims until the final resolution thereof).
10.4. AMENDMENT AND WAIVER. This Agreement cannot be changed or
terminated orally. Any amendment of modification hereof must be in writing
signed by the party against whom enforcement is sought. No waiver of compliance
with any provision or condition hereof, and no consent provided for herein,
shall be effective unless evidenced by an instrument in writing duly executed by
the party sought to be charged with such waiver or consent.
10.5. ASSIGNMENT. Entercom shall have the right to assign all or
any portion of its rights under this Agreement to any entity under common
control with Entercom or a Qualified Intermediary under Section 1031 of the
Code, provided, that no such assignment shall relieve Entercom of its
obligations hereunder. Other than as expressly set forth above, no party may
assign all or any portion of its rights under the Agreement without the prior
written consent of the other parties hereto.
10.6. EFFECT OF THIS AGREEMENT. This Agreement, together with the
exhibits and schedules hereto and a letter agreement, among Entercom and SCI,
dated of even date herewith, sets forth the entire understanding of the parties
and supersedes any and all prior written or oral agreements, arrangements or
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by either party
which is not embodied in this Agreement or the letter agreement referred to
above, and neither party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not embodied
herein unless same shall have been made subsequent hereto, shall be in writing
and shall be signed by the party to be charged therewith. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns.
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10.7. HEADINGS. The article or section headings of this Agreement
are for convenience of reference only and do not form a part of and do not in
any way modify, interpret or construe the intention of the parties.
10.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts shall be construed as one and the same
instrument.
10.9. GOVERNING LAW. The construction and performance of this
Agreement shall be governed by the laws of the State of New York, excluding
choice of law provisions thereunder.
10.10. NOTICES. Any notice, report, demand, waiver or consent
required or permitted hereunder shall be in writing and shall be given by hand
delivery, by prepaid registered or certified mail, with return receipt
requested, by an established national overnight courier providing proof of
delivery for next business day delivery or by telecopy addressed as follows:
If to Sellers: David D. Smith, President
- ------------- Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 467-5043
with copies to: Robert Quicksilver, General Counsel
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 662-4707
Steven A. Thomas, Esq.
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, MD 21202
Telecopy Number: (410) 752-2046
If to Entercom: Joseph M. Field, President
- -------------- Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5620
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with copies to: John C. Donlevie, General Counsel
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5620
Joseph D. Sullivan, Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Telecopy Number: (202) 637-2201
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail, or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Either party may change its address for the purpose of
notice by giving notice of such change in accordance with the provisions of this
section.
10.11. STATION EMPLOYEES. Subject to the terms of the TBA, Sellers
agree that for a period of one year after the Commencement Date of the TBA,
neither they nor any of their affiliates, successors or assignees will employ or
solicit for employment, or counsel others to solicit for employment, any current
employee of the Stations that Entercom employs after the Closing; provided, that
if Entercom terminates any employee of the Stations, such restrictions shall not
apply to any such terminated employees.
10.12. SECTION 1031 ASSET EXCHANGE. Entercom may elect to effect
the acquisition of all or part of the Assets as part of a deferred like-kind
exchange under Section 1031 of the Code, in lieu of buying such assets
hereunder; provided, that the consummation of this Agreement is not predicated
or conditioned on such exchange. If Entercom so elects, it shall provide notice
to Sellers of its election, and thereafter (i) may at any time at or prior to
Closing assign its rights under this Agreement to a "qualified intermediary" as
defined in Treas. Reg. ss. 1.1031(k)-1(g)(4), subject to all of Sellers' rights
and obligations hereunder and (ii) shall promptly provide written notice of such
assignment to all parties hereto; provided, that no such assignment shall
relieve Entercom of its obligations hereunder. Notwithstanding the assignment of
Entercom's rights hereunder, the parties acknowledge and agree that the
representations, warranties and covenants of Sellers hereunder are for the
benefit of Entercom and shall remain enforceable by Entercom against Sellers in
accordance with the terms hereof. Sellers shall cooperate with all reasonable
requests of Entercom and the "qualified intermediary" in arranging and effecting
the exchange as one which qualifies under Section 1031 of the Code; provided,
that Sellers shall incur no additional costs, expenses, delays or liabilities in
connection with this transaction as a result of or in connection with the
exchange. Without limiting the generality of the foregoing, if Entercom has
given notice of its intention to effect the acquisition of all or part
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<PAGE>
of the Assets as part of a tax-deferred exchange, Sellers shall (i) promptly
provide Entercom with written acknowledgment of such notice and (ii) at Closing,
accept payment for all or that portion of the Assets for which like-kind
exchange treatment is sought by Entercom from the "qualified intermediary"
rather than from Entercom (which payment shall discharge the obligation of
Entercom hereunder to make payment for such assets) and transfer, assign and
convey such assets to Entercom.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their duly authorized corporate officers on the date first
written above.
TUSCALOOSA:
TUSCALOOSA BROADCASTING, INC.
By:
----------------------------------------
Title:
-------------------------------------
SRPLI:
SINCLAIR RADIO OF PORTLAND LICENSEE, INC.
By:
----------------------------------------
Title:
-------------------------------------
SRRLI:
SINCLAIR RADIO OF ROCHESTER LICENSEE, INC.
By:
----------------------------------------
Title:
-------------------------------------
ENTERCOM
ENTERTAINMENT COMMUNICATIONS, INC.
By:
----------------------------------------
Title:
-------------------------------------
================================================================================
TIME BROKERAGE AGREEMENT
BY AND AMONG
ENTERTAINMENT COMMUNICATIONS, INC.,
TUSCALOOSA BROADCASTING, INC.,
SINCLAIR RADIO OF PORTLAND LICENSEE, INC.
AND
SINCLAIR RADIO OF ROCHESTER LICENSEE, INC.
DATED AS OF JANUARY 26, 1998
================================================================================
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
-------------------------------
Schedule 1.1 Programming
Schedule 1.2 Compensation
Schedule 2.1 Programming Policy Statement
Schedule 4.1 Excluded Contracts
Schedule 11.1 Time Broker's Actions and Proceedings
Schedule 11.2 Licensee's Actions and Proceedings
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. SALE OF TIME.....................................................1
Section 1.1. Broadcast of Programming.........................1
Section 1.2. Payment..........................................1
Section 1.3. Term.............................................2
ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2
Section 2.1. Compliance with Standards........................2
Section 2.2. Political Broadcasts.............................2
Section 2.3. Handling of Communications.......................2
Section 2.4. Preemption.......................................3
Section 2.5. Broadcasting Obligations of Licensee.............3
Section 2.6. Rights in Programs...............................4
Section 2.7. "Payola" and "Plugola"...........................4
Section 2.8. Advertising and Programming......................4
Section 2.9. Format and Transmitter Location..................4
Section 2.10. Compliance with Laws.............................4
Section 2.11. Certifications...................................5
ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES........................5
Section 3.1. Time Broker's Employees..........................5
Section 3.2. Licensee's Employees.............................5
Section 3.3. Time Broker's Expenses...........................5
Section 3.4. Operating Expenses...............................6
Section 3.5. Employee Matters.................................6
ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................8
Section 4.1. Assignment.......................................8
Section 4.2. Proration........................................9
Section 4.3. Accounts Receivable..............................9
ARTICLE V. OPERATION OF STATION............................................10
ARTICLE VI. GRANT OF LICENSES...............................................10
Section 6.1. License to Use Station Facilities...............10
Section 6.2. License of Intellectual Property................11
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ARTICLE VII. INDEMNIFICATION.................................................11
Section 7.1. Indemnification Rights..........................11
Section 7.2. Procedures......................................11
ARTICLE VIII. DEFAULT.........................................................12
Section 8.1. Time Broker Events of Default...................12
Section 8.2. Licensee's Events of Default....................12
Section 8.3. Cure Periods....................................12
Section 8.4. Other Defaults..................................13
ARTICLE IX. TERMINATION.....................................................13
Section 9.1. Termination.....................................13
Section 9.2. Certain Matters Upon Termination................14
ARTICLE X. REMEDIES .......................................................15
ARTICLE XI. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE PARTIES................................................15
Section 11.1. Representations and Warranties of Time Broker..15
Section 11.2. Representations, Warranties and Covenants of
Licensee......................................16
ARTICLE XII. MISCELLANEOUS...................................................17
Section 12.1. Modification and Waiver........................17
Section 12.2. No Waiver; Remedies Cumulative.................17
Section 12.3. Construction...................................17
Section 12.4. Headings.......................................17
Section 12.5. Successors and Assigns.........................17
Section 12.6. Force Majeure..................................17
Section 12.7. Broker.........................................18
Section 12.8. Counterpart Signatures.........................18
Section 12.9. Notices........................................18
Section 12.10. Entire Agreement...............................19
Section 12.11. Severability...................................19
Section 12.12. No Joint Venture...............................19
Section 12.13. Damage to Stations.............................20
Section 12.14. Noninterference................................20
Section 12.15. Regulatory Changes.............................20
ii
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TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement (this "Agreement") is made as of the 26th
day of January, 1998, by and among Entertainment Communications, Inc., a
Pennsylvania corporation ("Time Broker"), and Tuscaloosa Broadcasting, Inc., a
Maryland corporation ("Tuscaloosa"), Sinclair Radio of Portland Licensee, Inc.,
a Maryland corporation ("SRPLI") and Sinclair Radio of Rochester Licensee, Inc.,
a Maryland corporation ("SRRLI") (Tuscaloosa, SRPLI and SRRLI are sometimes
collectively referred to herein as "Licensee").
Upon the consummation of the transactions contemplated by that certain
Asset Purchase Agreement, dated July 16, 1997, among Sinclair Broadcast Group,
Inc. ("Sinclair") and various subsidiaries of Heritage Media Corporation ("HMC")
(control of which subsidiaries, on August 20, 1997, was transferred to William
G. Evans, Trustee) (HMC is sometimes collectively referred to with its
subsidiaries as "Heritage"), SRPLI will become the licensee of broadcast
stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon and
KKRH(FM), Salem, Oregon (collectively, the "Portland Stations"), and SRRLI will
become the licensee of broadcast stations WKLX(FM), Rochester, New York,
WBEE(FM), Rochester, New York, WBBF(AM), Rochester, New York and WQRV(FM), Avon,
New York (collectively, the "Rochester Stations" and together with the Portland
Stations, the "Stations"). Time Broker and Licensee desire to enter into an
agreement providing for the programming and sale, upon the acquisition by
Licensee of the Stations from Heritage, of substantially all of the broadcast
time of the Stations to Time Broker, subject to and in compliance with the rules
and policies of the Federal Communications Commission (the "FCC").
Simultaneously herewith, Time Broker and Licensee are entering into an
Asset Purchase Agreement (the "Purchase Agreement") providing for the
acquisition by Time Broker of the Stations.
Accordingly, in consideration of the foregoing and of the mutual
promises, covenants, and conditions set forth below, the parties agree as
follows:
ARTICLE I.
SALE OF TIME
Section 1.1. Broadcast of Programming. Effective upon the date (the
"Commencement Date") that is the later to occur of (a) the date that Licensee
acquires the Stations from Heritage or (b) the date that is ten (10) business
days after the expiration or early termination of any waiting period applicable
to the transfer of the Stations to Time Broker under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), Licensee shall
broadcast on the Stations, or cause to be broadcast on the Stations, programs
which are presented to it by Time Broker as described in greater detail on
Schedule 1.1 (the "Programming").
Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of
the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"),
subject to adjustment as set forth in Sections 2.4 and 2.5 below. All payments
shall be made by wire
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transfer of immediately-available funds by the last business day of each
calendar month, in arrears, to which such payment pertains.
Section 1.3. Term. This Agreement shall commence on the Commencement
Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date
(as defined in the Purchase Agreement) under the Purchase Agreement, (ii) the
date the Purchase Agreement is terminated, or (iii) the date this Agreement is
terminated pursuant to Section 9.1 hereof.
ARTICLE II.
PROGRAMMING AND OPERATING STANDARDS AND PRACTICES
Section 2.1. Compliance with Standards. All Programming delivered by
Time Broker during the term of this Agreement shall be in accordance with
applicable statutes, FCC requirements and the programming policies set forth on
Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming
containing matter which the Licensee believes is unsuitable or not consistent
with the needs and interests of its service area or may be violative of any
right of any third party, or which may constitute a "personal attack" as that
term is and has been defined by the FCC or which Licensee reasonably determines
is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and
not broadcast during the safe harbor for indecent programming established by the
FCC) or obscene by the FCC or any court or other regulatory body with authority
over Licensee or the Station.
Section 2.2. Political Broadcasts. Time Broker shall maintain and
deliver to Licensee all records and information required by the FCC to be placed
in the public inspection files of the Stations pertaining to the broadcast of
political programming and controversial issue advertisements, in accordance with
the provisions of Sections 73.1212 and 73.3526 of the FCC's rules, and agrees to
broadcast sponsored programming addressing political issues or controversial
subjects of public importance, in accordance with the provisions of Section
73.1212 of the FCC's rules. Time Broker shall consult and cooperate with
Licensee and adhere to all applicable statutes and the rules, regulations and
policies of the FCC, as announced from time to time, with respect to the
carriage of political advertisements and programming and the charges permitted
therefor. Time Broker shall promptly provide to Licensee such documentation
relating to such programming as Licensee is required to maintain in its public
inspection files or as Licensee shall reasonably request. Licensee shall be
responsible for the maintenance of the public inspection files of the Stations.
Section 2.3. Handling of Communications. Time Broker shall cooperate
with Licensee in promptly responding to all mail, cables, telegrams or telephone
calls directed to the Stations in connection with the Programming provided by
Time Broker or any other matter relevant to its responsibilities hereunder.
Promptly upon receipt, Time Broker shall provide copies of all such
correspondence to Licensee. Time Broker shall promptly advise Licensee of any
public or FCC complaint or inquiry known to Time Broker concerning such
Programming, and shall provide Licensee with copies of any letters to Time
Broker from the public, including complaints concerning such Programming. Upon
Licensee's request, Time Broker shall provide Licensee with such information as
will allow Licensee to respond to such complaints and inquiries. Notwithstanding
the foregoing, Licensee shall handle all matters or inquiries relating
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<PAGE>
to FCC complaints and any other matters required to be handled by Licensee under
the rules and regulations of the FCC.
Section 2.4. Preemption. Licensee may, from time to time, preempt
portions of the Programming to broadcast emergency information or programs it
deems would better serve the public interest. Time Broker shall be notified at
least one week in advance of any preemption of any of the Programming for the
purpose of broadcasting programs Licensee deems necessary to better serve the
public interest unless such advance notice is impossible or impractical, in
which case Licensee shall notify Time Broker promptly upon making such
determination. In the event of any such preemption, Time Broker shall be
entitled to a credit against any other amounts due Licensee under this Agreement
in an amount equal to the product of (a) the Monthly Payment and (b) the result
of dividing the number of hours so affected by the aggregate number of hours
available for Programming during such month. Licensee represents and covenants
that preemption pursuant to this Section 2.4 shall only occur to the extent
Licensee deems necessary to carry out its obligations as an FCC licensee, and
expressly agrees that its right of preemption shall not be exercised for the
commercial advantage of Licensee or others.
Section 2.5. Broadcasting Obligations of Licensee. During the term of
this Agreement, except as set forth in Sections 2.1 and 2.4 and this Section
2.5, Licensee will broadcast the Programming in its entirety (including
commercials), without interruption, deletion or addition of any kind:
i. Licensee may temporarily refrain from broadcasting the
Programming from the main transmitter of each Station between the hours of 12:30
a.m. and 5:30 a.m. (or at such other time in the event that weather conditions
or contractual arrangements relating to transmitter sites dealing with the
exposure of humans to RF radiation so require or as may otherwise be required
under compelling circumstances that cannot be rescheduled between the hours of
12:30 a.m. and 5:30 a.m.) in order to perform normal, customary and routine
maintenance on the Station's main transmitting facilities; provided, that
Licensee shall provide written notice to Time Broker of its intent to refrain
from broadcasting the Programming from the main transmitter of each Station at
least forty-eight (48) hours in advance, except when an emergency requires such
suspension, and provided further that Licensee shall use its best efforts to
minimize the impact, frequency and duration of such interruptions, including
without limitation by way of use of any auxiliary transmitter that may be
available for the applicable Station; and
ii. Licensee may temporarily cease broadcasting the Programming from
the main transmitter of each Station as a result of a technical malfunction,
natural disaster, act of public enemy, act of God, or any other cause beyond the
control of Licensee; provided that in any such case, Licensee will act
expediently and use its best efforts to resume the broadcast of the Programming
from the main transmitter of each Station as quickly as the applicable
circumstances will allow, and will use its best efforts to broadcast the
Programming from any auxiliary transmitter that may be available for the
applicable Station.
In the event of any interruption pursuant to this Section (other than
(a) interruption pursuant to Section 2.5(i) occurring between the hours of 12:30
a.m. and 5:30 a.m. and (b)
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interruption pursuant to Section 2.5(ii)), if Licensee is not able to broadcast
the Programming from an available auxiliary transmitter, Time Broker shall be
entitled to a credit against the Monthly Payment or any other sums due
hereunder, in an amount equal to the product of (a) the Monthly Payment and (b)
the result of dividing the number of hours so affected by the aggregate number
of hours available for Programming during such month.
Section 2.6. Rights in Programs. All right, title and interest in and
to the Programming, and the right to authorize the use of the Programming in any
manner and in any media whatsoever, shall be and remain vested at all times
solely in Time Broker.
Section 2.7. "Payola" and "Plugola". Time Broker agrees that it will
not accept any gift, gratuity or other consideration, including, but not limited
to, a commission, discount, bonus, material supplies or other merchandise,
services or labor (collectively, the "Consideration"), directly or indirectly,
from any person or company for the playing of records, the presentation of any
programming or the broadcast of any commercial announcement over the Stations
unless the payor is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance with
the Communications Act of 1934, as amended (the "Communications Act") and the
FCC requirements. It is further understood and agreed that no commercial
message, plugs, or undue reference shall be made in programming presented over
the Stations to any business venture, profit-making activity or other interest
(other than non-commercial announcements for bona fide charities, church
activities or other public service activities) unless the payor is identified in
the program for which Consideration was provided as having paid for or furnished
such Consideration, in accordance with the Communications Act and the FCC
requirements. In addition, Time Broker agrees that it will take steps, including
the continuation of Licensee's system for periodic execution of affidavits,
reasonably designed to assure that it, its employees and agents comply with this
Section 2.7.
Section 2.8. Advertising and Programming. Beginning with the
Commencement Date, Time Broker shall be solely responsible for any expenses
incurred in connection with and shall be entitled to all revenue from the sale
of advertising or program time in the Programming. Except as otherwise provided
herein, Time Broker does not assume any obligation of Licensee under any
contract or advertising arrangement entered into by Licensee on or after the
Commencement Date. Licensee shall indemnify Time Broker for the amount of any
lost revenue caused by any sale of advertising time made by Licensee that would
lower the Station's lowest unit charge for political advertising.
Section 2.9. Format and Transmitter Locations. During the term of this
Agreement, except as otherwise consented to in writing by Licensee or as
otherwise provided in the following sentence, Time Broker agrees that it will
not make any material changes in the Stations' existing programming formats or
seek to change the location of any of the Stations' studio or transmitting
facilities. Notwithstanding the foregoing, (i) the parties expressly agree that
Time Broker, in its sole discretion, is permitted during the term of this
Agreement to exchange the programming formats on KKSN(AM) and KFXX(AM) (which is
owned and operated by Time Broker) (it being understood that, should this
Agreement terminate other than as a result of the Closing (as defined in the
Purchase Agreement) under the Purchase Agreement,
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Time Broker shall, promptly upon such termination, change the programming
formats on each such station back to their programming formats substantially as
they exist on the date of this Agreement) and (ii) Licensee agrees that it will
not unreasonably withhold consent to any request by Time Broker to change the
programming format for WBBF(AM).
Section 2.10. Compliance with Laws. At all times during the term of
this Agreement, Time Broker and Licensee shall comply in all material respects
with all applicable federal, state and local laws, rules and regulations.
Section 2.11. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of
the FCC's rules, Licensee certifies that it maintains ultimate control over the
Station's facilities, including specifically control over station finances,
personnel and programming, and Time Broker certifies that this Agreement
complies with the provisions of Section 73.3555(a) of the FCC's rules.
ARTICLE III.
RESPONSIBILITY FOR EMPLOYEES AND EXPENSES
Section 3.1. Time Broker's Employees. Time Broker shall employ and be
responsible for the payment of salaries, taxes, insurance and all other costs
related to all personnel used in the production of the Programming. Except as
provided in Section 3.5 with respect to Transferred Employees, Time Broker will
not incur any liability on account of Licensee's employees arising and accruing
prior to the Commencement Date including, without limitation, any such liability
on account of unemployment insurance contributions, termination and severance
payments, accrued sick leave or accrued vacation.
Section 3.2. Licensee's Employees. Licensee shall employ and be
responsible for the payment of salaries, taxes, insurance and all other costs
related to the personnel necessary to fulfill its obligations as Licensee and
under this Agreement, and to produce Licensee's programming on the Stations
subject to reimbursement as provided in Schedule 1.2. Time Broker shall have no
authority and shall not supervise persons in the employ of Licensee after the
Commencement Date. Licensee acknowledges that its employees may have access to
certain confidential information of Time Broker. Licensee shall, therefore,
inform its employees of the confidential nature of such information and require
that each such employee keep such information confidential.
Section 3.3. Time Broker's Expenses. Time Broker shall pay for all
costs associated with the production and delivery of the Programming, including
but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any
expenses incurred in connection with its sale of advertising time hereunder
(including without limitation sales commissions) in connection with the
Programming and (iii) the salaries, taxes, insurance and related costs for all
of Time Broker's personnel used in the production of the Programming and all of
Time Broker's sales personnel (including salespeople, traffic personnel, and
programming staff).
Section 3.4. Operating Expenses. Licensee shall be responsible for the
payment when due of all fees and expenses relating to operation and maintenance
of the Stations to the extent necessary for Licensee to maintain the licensed
transmitting capability of the
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Stations and to fulfill its obligations as an FCC licensee, including, without
limitation, salaries, benefits and similar expenses for Licensee's employees,
Licensee's federal, state and local taxes, rent, utilities (excluding
telephone), maintenance and repairs at each of the Station's transmitter and
studio sites, any capital expense at each of the Station's transmitter and
studio sites, insurance on the Stations' equipment, insurance deductibles on
claims on the Stations' equipment, and ad valorem property taxes, subject to
reimbursement as provided in Schedule 1.2.
Section 3.5. Employee Matters.
3.5.1 On the Commencement Date, Time Broker shall offer employment to each of
the employees of the Stations (including those on leave of absence, whether
short-term, long-term, family, maternity, disability, paid, unpaid or other),
other than those employees that are retained by Licensee pursuant to Section 3.2
above during the term of this Agreement, at a comparable salary, position and
place of employment as held by each such employee immediately prior to the
Commencement Date (such employees who are given such offers of employment are
referred to herein as the "Transferred Employees"). Nothing in this Section
3.5.1 is intended to guarantee employment for any Transferred Employee for any
length of time after the Commencement Date.
3.5.2 Except as provided otherwise in this Section 3.5, Licensee
shall pay, discharge and be responsible for (a) all salary and wages arising out
of or relating to the employment of the employees of the Stations prior to the
Commencement Date and (b) any employee benefits arising under the Benefit Plans
(as defined in the Purchase Agreement) of Licensee and their Affiliates during
the period prior to the Commencement Date. From and after the Commencement Date,
Time Broker shall pay, discharge and be responsible for all salary, wages and
benefits arising out of or relating to the employment of the Transferred
Employees by Time Broker on and after the Commencement Date. Time Broker shall
be responsible for all severance Liabilities (as such term is defined in the
Purchase Agreement), and all COBRA Liabilities for any Transferred Employees of
the Stations terminated on or after the Commencement Date.
3.5.3 Time Broker shall cause all Transferred Employees as of the
Commencement Date to be eligible to participate in the "employee welfare benefit
plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2)
of ERISA, respectively) of Time Broker in which similarly situated employees of
Time Broker are generally eligible to participate; provided, however, that all
Transferred Employees and their spouses and dependents shall be eligible for
coverage immediately after the Commencement Date (and shall not be excluded from
coverage on account of any preexisting condition) to the extent provided under
such plans with respect to Transferred Employees.
3.5.4 For purposes of any length of service requirements, waiting
periods, vesting periods or differential benefits based on length of service in
any such plan for which a Transferred Employee may be eligible after the
Commencement Date, Time Broker shall ensure that, to the extent permitted by
law, service by such Transferred Employee with Heritage, Licensee or any
Affiliate of Heritage or Licensee shall be deemed to have been service with the
Time Broker. In addition, Time Broker shall ensure that each Transferred
Employee receives credit under any welfare benefit plan of Time Broker for any
deductibles or co-payments paid by
6
such Transferred Employee and his or her dependents for the current plan year
under a plan maintained by Heritage or Licensee or any Affiliate of Heritage or
Licensee. Time Broker shall grant credit to each Transferred Employee for all
sick leave in accordance with the policies of Time Broker applicable generally
to its employees after giving effect to service for Heritage or Licensee as
service for Time Broker. To the extent taken into account in determining
prorations under Section 4.2 hereunder, Time Broker shall assume and discharge
Licensee's liabilities for the payment of all unused vacation leave accrued by
Transferred Employees as of the Commencement Date. To the extent any claim with
respect to such accrued vacation leave is lodged against Licensee, with respect
to any Transferred Employee, Time Broker shall indemnify, defend and hold
harmless Licensee from and against any and all losses, directly or indirectly,
as a result of, or based upon or arising from the same, up to the amount of the
proration credit received by Time Broker under Section 4.2 for such items.
3.5.5 [Intentionally omitted]
3.5.6 As soon as practicable following the Commencement
Date, Time Broker shall establish and maintain a defined contribution plan or
plans (which may be a preexisting plan or plans) (the "Time Broker's Plan")
intended to be qualified under Section 401(a) and 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), for the benefit of the Transferred
Employees. Effective as of the Commencement Date, Licensee shall cause
appropriate amendments to be made to its defined contribution plan or plans (the
"Licensee's Plan") to provide that the Transferred Employees shall be fully
vested in their accounts under the Licensee's Plan. As soon as practicable after
the Commencement Date, Time Broker shall take all necessary action to qualify
Time Broker's Plan under the applicable provisions of the Code (including but
not limited to Section 401), if it is not yet so qualified, and Time Broker and
Licensee shall make any and all filings and submissions to the appropriate
governmental agencies required to be made by them in connection with the
transfer of assets described hereafter. As soon as practicable following the
earlier of the receipt of a favorable determination letter from the Internal
Revenue Service regarding the qualified status of both the Licensee's Plan and
the Time Broker's Plan (each as amended to the date of transfer) or sooner, if
Licensee and Time Broker so agree, Licensee shall cause to be transferred to
Time Broker's Plan, in cash, all of the individual account balances of
Transferred Employees under the Licensee's Plan, including any outstanding plan
participant loan receivables allocated to such accounts.
3.5.7 Subject to Section 3.2, Time Broker acknowledges
and agrees that Time Broker's obligations pursuant to this Section 3.5 are in
addition to, and not in limitation of, Time Broker's obligation to assume the
employment contracts set forth on Schedule 2.1.8 to the Purchase Agreement.
3.5.8 Except as otherwise provided in this Section 3.5
or in any employment, severance or retention agreements of any Transferred
Employees, all Transferred Employees shall be at-will employees, and Time Broker
may terminate their employment or change their terms of employment at will. No
employee (or beneficiary of any employee) of Seller may sue to enforce the terms
of this Agreement, including specifically this Section 3.5, and no employee or
beneficiary shall be treated as a third party beneficiary of this Agreement.
Except to the extent provided for herein, Time Broker may cover the Transferred
Employees
7
under existing or new benefit plans, programs, and arrangements, and may amend
or terminate any such plans, programs, or arrangements at any time.
3.5.9 Upon the Closing (as defined in the Purchase
Agreement) of the Purchase Agreement, Time Broker shall offer employment to each
of the employees of the Stations that have been retained during the term of this
Agreement by Licensee pursuant to Section 3.2. Such offer of employment will be
at a comparable salary, position and place of employment as held by each such
employee immediately prior to the Closing Date (as defined in the Purchase
Agreement) (such employees who are given such offers of employment are referred
to herein as the "Closing Date Transferred Employees"). Nothing in this Section
3.5.9 is intended to guarantee employment for any such Closing Date Transferred
Employee for any length of time after the Closing Date (as defined in the
Purchase Agreement). Upon the Closing (as defined in the Purchase Agreement) of
the Purchase Agreement, the provisions of Sections 3.5.2 through and including
3.5.8 of this Agreement shall also apply to such Closing Date Transferred
Employees after substituting (i) "Closing Date Transferred Employees" for
"Transferred Employees," in each instance, and (ii) "Closing Date" for
"Commencement Date," in each instance.
ARTICLE IV.
ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS
Section 4.1. Assignment. On the Commencement Date, Licensee shall
assign to Time Broker all Station Contracts (as defined in the Purchase
Agreement) other than those contracts and other agreements identified on
Schedule 4.1 (the "Excluded Contracts"). All such Station Contracts to be
assigned hereunder are referred to collectively as the "Assigned Contracts."
Time Broker shall assume, pay, perform, and discharge all liabilities arising on
or after the Commencement Date under the Assigned Contracts (including, without
limitation, Trade-out Agreements) pursuant to their terms (except for
liabilities for any breaches thereunder by Licensee or Heritage occurring prior
to the Commencement Date). Licensee has provided Time Broker with true and
complete copies, including amendments, of the Assigned Contracts. The Assigned
Contracts are freely assignable, or, if consent of the other contracting party
to the assignment is required, Licensee shall make reasonable best efforts to
obtain all such consents prior to the Commencement Date. Subject to and in
compliance with the provisions of Section 3.3 of the Purchase Agreement, to the
extent that any such consents are not obtained prior to the Commencement Date,
during the period between the Commencement Date and the date that Licensee
obtains such consent, the parties shall cooperate to cause Time Broker to
receive the benefit of the Assigned Contract in exchange for performance by Time
Broker of all of Licensee's obligations under such Assigned Contract (including
but not limited to the payment to Licensee of all amounts due under the Assigned
Contract on and after the Commencement Date for services provided by Licensee).
Section 4.2. Proration. All expenses and income arising under the
Assigned Contracts shall be prorated between Licensee and Time Broker as of the
Commencement Date in a manner such that the costs and benefits thereunder
through the date before the Commencement Date shall be for the account of
Licensee and, thereafter, during the term of this Agreement, for the account of
Time Broker. With respect to any items of salary, accrued vacation or other
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benefits relating to Transferred Employees, such prorations shall also include
an amount payable for applicable payroll taxes. Such proration shall include an
adjustment for Trade-out Agreements (as defined in the Purchase Agreement) which
are included in the Assigned Contracts only to the extent that any Net Negative
Trade Balance (as defined below) for the Stations exceeds $50,000. "Net Negative
Trade Balance" means the extent, if any, to which the value (at current rates
for time on each Station as of the Commencement Date) of unfulfilled obligations
of the Station under Trade-out Agreements exceed the stated consideration yet to
be received by the Station pursuant to such Trade-out Agreements. Such
prorations shall be completed and any necessary payments on account of such
prorations paid within sixty (60) days of the Commencement Date. If any
disagreement with respect to the proration of such income and expenses cannot be
resolved by the parties, Licensee and Time Broker will select a certified public
accountant knowledgeable in the broadcast industry to resolve the dispute. The
parties will use their best efforts in good faith to cause to occur as
expeditiously as possible the appointment of the certified public accountant,
and once appointed, the resolution of the dispute. The resolution of such
accountant shall be binding on the parties and subject to judicial enforcement.
Payment of the cost of the accountant shall be shared equally between Time
Broker and Licensee.
Section 4.3. Accounts Receivable. All cash accounts receivable for
broadcasts on the Stations which occur prior to the Commencement Date (the
"Accounts Receivable") shall belong to Licensee and all Accounts Receivable for
Programming which occurs thereafter shall belong to Time Broker. Within ten
business (10) days following the Commencement Date, Licensee shall deliver to
Time Broker a schedule of Cash Accounts Receivable for the Stations as of the
Commencement Date, by accounts and the amounts then owing (the "Schedule of
Accounts Receivable"). Time Broker agrees to use its reasonable efforts (with at
least the care and diligence that Time Broker uses to collect its own accounts
receivable) to collect for Licensee its Accounts Receivable as shown on the
Schedule of Accounts Receivable delivered by Licensee for a period of one
hundred fifty (150) days following the Commencement Date; provided, that Time
Broker's obligation to collect the Accounts Receivable shall survive the Closing
Date (as defined in the Purchase Agreement) to the extent necessary for Time
Broker to collect the Accounts Receivable for a period of one hundred fifty
(150) days following the Commencement Date. All payments received by Time Broker
from any customer whose name appears in the Schedule of Accounts Receivable
shall be first applied to the oldest balance then due on the Accounts Receivable
unless the account debtor indicates in writing that payment is to be applied
otherwise due to a dispute over an Account Receivable. Time Broker shall keep
accurate records of the payment received by it on such Accounts Receivable and
Licensee shall have access at reasonable times to Time Broker's records to
verify such status of the Accounts Receivable. On the fifth day following the
last day of each month during such one hundred fifty (150) day period (or, if
any such day is a Saturday, Sunday or holiday, on the next day on which banking
transactions are resumed), Time Broker shall remit to Licensee collections
received by Time Broker with respect to the Accounts Receivable. Any Accounts
Receivable that have not been collected within such one hundred fifty (150) day
period shall be reassigned, without recourse to Time Broker, to Licensee,
together with all records in connection therewith, whereupon Licensee may pursue
collection thereof in such manner as it, in its sole discretion, may determine.
Time Broker shall not make any referral or compromise of any Accounts
9
Receivable to a collection agency or attorney for collection and shall not
compromise for less than full value any Account Receivable without the prior
written consent of Licensee. Except to remit collected Accounts Receivable in
accordance herewith, Time Broker shall have no liability or obligation to
Licensee with respect to the collection of its accounts and shall not be
obligated to take any action to collect such accounts.
ARTICLE V.
OPERATION OF STATION
Notwithstanding any provision of this Agreement to the contrary,
Licensee shall retain full authority and power with respect to the management
and operation of the Stations during the term of this Agreement. Licensee shall
employ the General Manager of the Stations and such other personnel as Licensee
determines may be necessary to fulfill its obligations as a licensee under the
Communications Act and its obligations in accordance with Section 3.2 hereof.
Licensee shall retain full authority and control over the policies, programming
and operations of the Stations, including, without limitation, the decision
whether to preempt Programming in accordance with Section 2.4 hereof. Licensee
shall have ultimate responsibility to effectuate compliance with the
Communications Act and with FCC rules, regulations and policies. In no event
shall Time Broker or its employees represent, depict, describe or portray Time
Broker as the licensee of the Stations.
ARTICLE VI.
GRANT OF LICENSES
Section 6.1. License to Use Station Facilities. Effective as of
the Commencement Date, Licensee grants Time Broker permission to access and use
all of the studio and office space and other facilities of the Stations
("Station Facilities") and all equipment and furnishings contained therein
("Station Equipment") as reasonably necessary for the production and
broadcasting of the Programming and sales and administration relating thereto,
in accordance with the terms set forth in this Article VI. Time Broker shall not
remove from the Station Facilities or modify any Station Equipment owned by or
leased or licensed to Licensee without Licensee's prior written consent, such
consent not to be unreasonably withheld. Licensee shall not license the use of
the Station Facilities to any other party during the term of this Agreement; and
Time Broker's use of the Station Facilities shall be exclusive except for
Licensee's right to use such facilities as it deems appropriate in connection
with the satisfaction of its obligations as the Licensee of the Station,
including the use of such facilities and adequate office space for the employees
of Licensee that are required for Licensee to comply with its obligations under
Sections 3.2 and 5 hereof. Time Broker shall use due care in the use of any
property of Licensee. Time Broker shall indemnify Licensee for any damage
(normal wear and tear excepted) to Licensee's property caused by Time Broker or
any employee, contractor, agent or guest of Time Broker. Time Broker shall have
the right to install any additional equipment at the Station Facilities deemed
by Time Broker to be necessary to deliver the Programming. If this Agreement
shall terminate other than pursuant to the Closing under the Purchase Agreement,
Time Broker shall, promptly after such termination, remove all such equipment
and make all repairs necessitated by such removal.
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Section 6.2. License of Intellectual Property. Effective as of the
Commencement Date and subject to the terms of any existing license agreement,
Licensee grants Time Broker the right to use all intellectual property owned by
or licensed to Licensee and used solely in the operation of the Stations
(including, but not limited to, logos, jingles, promotional materials, call
signs and goodwill). Time Broker shall own all trademarks, service marks, trade
names, characters, formats, jingles, promotional materials, logos and
positioning statements which Time Broker develops for the Programming during the
term of this Agreement.
ARTICLE VII.
INDEMNIFICATION
Section 7.1. Indemnification Rights. Each party will indemnify and hold
harmless the other party, and the directors, officers, partners, employees,
agents and affiliates of such other party, from and against any and all
liability, including without limitation reasonable attorneys' fees arising out
of or incident to (i) any breach by such party of a representation, warranty or
covenant made herein, (ii) the programming produced or furnished by such party
hereunder, or (iii) the conduct of such party, its employees, contractors or
agents (including negligence) in performing its or their obligations hereunder.
Without limiting the generality of the foregoing, each party will indemnify and
hold harmless the other party, and the directors, officers, partners, employees,
agents and affiliates of such other party, from and against any and all
liability for libel, slander, infringement of trademarks, trade names, or
program titles, violation of rights of privacy, and infringement of copyrights
and proprietary rights resulting from the programming produced or furnished by
it hereunder. The parties' indemnification obligations hereunder shall survive
any termination or expiration of this Agreement.
Section 7.2. Procedures. Any party seeking indemnification under this
Agreement (the "Indemnified Party") shall promptly give the party from whom
indemnification is sought (the "Indemnifying Party") written notice of any claim
or the commencement of any action or proceeding for which the Indemnified Party
may seek indemnification, and the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting from such claim, unless injunctive relief is sought against the
Indemnified Party in which case the Indemnified Party shall have the right to
join in any defense. The Indemnified Party's failure to give the Indemnifying
Party notice under this clause shall not preclude the Indemnified Party from
seeking indemnification from the Indemnifying Party except to the extent that
the Indemnified Party's failure has materially prejudiced the Indemnifying
Party's ability to defend the claim or litigation. The Indemnifying Party shall
not settle any claim for which the Indemnified Party seeks indemnification or
consent to entry of any judgment in litigation arising from such a claim without
obtaining a written release of the Indemnified Party from all liability in
respect of such claim or litigation. If the Indemnifying Party shall not assume
the defense of any such claim or litigation resulting therefrom, or if
injunctive relief is sought against the Indemnified Party, the Indemnified Party
may defend against or settle such claim or litigation in such manner as it may
deem appropriate, and in such cases, upon a written demand therefore, the
Indemnifying Party shall promptly reimburse the Indemnified Part for the amount
of all reasonable expenses, legal or otherwise, incurred by the Indemnified
Party in connection with the defense against or settlement of such claim or
litigation. In addition, if the Indemnifying Party shall not assume the defense
of any such claim or litigation resulting therefrom, or if
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injunctive relief is sought against the Indemnified Party, and if no settlement
of the claim or litigation is made, upon written demand therefor, the
Indemnifying Party shall promptly reimburse the Indemnified Party for the amount
of any judgment rendered with respect to such claim or in such litigation and
for all reasonable expenses, legal or otherwise, incurred by the Indemnified
Party in the defense against such claim or litigation.
ARTICLE VIII.
DEFAULT
Section 8.1. Time Broker Events of Default. The occurrence of any
of the following, after the expiration of the applicable cure periods, if any,
will be deemed to be an Event of Default by Time Broker under this Agreement:
(a) Time Broker's failure to timely pay any Monthly Payment provided for in
Section 1.2 or other payments required hereunder; (b) except as otherwise
provided for in this Agreement, the failure of Time Broker to supply the
Programming; (c) any termination of this Agreement by Time Broker other than as
permitted in Section 9.1; or (d) the issuance by the FCC of an order designating
an evidentiary hearing which arises out of, relates to or is attributable solely
to the acts or omissions of Time Broker under this Agreement but excluding
issues which are based upon Licensee's conduct hereunder for which Time Broker
may be held responsible.
Section 8.2. Licensee's Events of Default. The occurrence of any
of the following, after the expiration of the applicable cure periods, if any,
will be deemed to be an Event of Default by Licensee under this Agreement: (a)
except as otherwise provided for in this Agreement, the failure of Licensee to
broadcast the Programming; (b) any termination of this Agreement by Licensee
other than as permitted in Section 9.1; or (c) the issuance by the FCC of an
order designating an evidentiary hearing which arises out of, relates to or is
attributable solely to the acts or omissions of Licensee under this Agreement or
during any period prior to the Commencement Date during which Licensee owns the
Stations, but excluding issues which are based upon Time Broker's conduct
hereunder for which Licensee may be held responsible.
Section 8.3. Cure Periods. The cure periods before any event
listed in Sections 8.1 or 8.2 shall become an Event of Default are as follows:
(a) Payment by Time Broker. The Monthly Payment or other
payments required hereunder to be paid to Licensee must be received by Licensee
within five (5) business days after Licensee gives written notice of non-payment
to Time Broker.
(b) Certain Matters. There shall be no cure period for
(i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c)
hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii)
a termination by Licensee described in Section 8.2(b) hereof.
(c) Programs and Broadcast Matters. With respect to Time
Broker's failure to provide the Programming referred to in Section 8.1(b) hereof
or Licensee's failure to broadcast the Programming referred to in Section 8.2(a)
hereof, the period allowed for cure shall be three business days from the giving
of written notice of such failure to the defaulting party by the non-defaulting
party.
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Section 8.4. Other Defaults. For any other breach of a
representation, warranty or covenant made herein that is not listed in Sections
8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article
VII hereof.
ARTICLE IX.
TERMINATION
This Agreement shall automatically terminate upon the expiration
of the term of this Agreement as set forth in Section 1.3. In addition, this
Agreement shall terminate as provided below.
Section 9.1. Termination. In addition to other remedies available
at law or equity, this Agreement may be terminated by either Licensee or Time
Broker by written notice to the other, specifying an effective date of
termination which is not less than seven (7) days nor more than ninety (90) days
from the date such notice is given, if the party seeking to terminate is not
then in material default or breach hereof, upon either:
(a) an uncured Event of Default, or
(b) as provided in Section 12.15, or
(c) upon the event that the party not seeking to terminate
makes a general assignment for the benefit of creditors, files or has
filed against it a petition for bankruptcy, reorganization or an
arrangement for the benefit of creditors, or for the appointment of a
receiver, trustee or similar creditors' representative for the
property or assets of such party under any federal or state insolvency
law, which if filed against such party has not been dismissed within
sixty (60) days thereof.
In the event that the non-defaulting party does not exercise such right of
termination by giving such written notice within sixty (60) days of the
occurrence of an uncured Event of Default, then the Event of Default giving rise
to such right of termination shall be deemed waived and the Agreement shall
continue in full force and effect.
Section 9.2. Certain Matters Upon Termination.
(a) Upon any termination of this Agreement, Licensee shall
have no further obligation to provide to Time Broker any broadcast time or
broadcast transmission facilities and Time Broker shall have no further
obligations to make any payments to Licensee under Section 1.2 hereof. Upon any
termination, Time Broker shall be responsible for all debts and obligations of
Time Broker to third parties based upon the purchase of air time and use of
Licensee's transmission facilities including, without limitation, accounts
payable, barter agreements and unaired advertisements, but not for Licensee's
federal, state and local income and business franchise tax liabilities or taxes
levied upon Licensee's personal property. Notwithstanding anything herein to the
contrary, to the extent that any invoice, bill or statement submitted to
Licensee after the termination of this Agreement or any payment made by Time
Broker prior to the termination of this Agreement relates to expenses incurred
in operating the
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Stations, for periods both before and after the termination of this Agreement,
such expenses shall be prorated between Licensee and Time Broker in accordance
with the principle that Time Broker shall be responsible for expenses allocable
to the period prior to the termination of this Agreement and Licensee shall be
responsible for expenses allocable to the period on and after the termination of
this Agreement. Such proration shall include an adjustment for Time Broker's
Trade-out Agreements only to the extent that Time Broker's Net Negative Trade
Balance exceeds $50,000. Each party agrees to reimburse the other party for
expenses paid by the other party to the extent appropriate to implement the
proration of expenses pursuant to the preceding sentence.
(b) If this Agreement terminates other than as a result of
the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign
to Licensee and Licensee shall assume all Assigned Contracts (including those
employment contracts assumed by Time Broker pursuant to this Agreement) and all
renewals, replacements or other contracts entered in the ordinary course of
business relating to the Stations and customary for radio stations of similar
type between the Commencement Date and the date of termination of this Agreement
("Supplemental Contracts") in effect on the date of such termination or
expiration; (ii) be responsible for only those obligations under the Assigned
Contracts and Supplemental Contracts arising on or after the Commencement Date
and prior to the termination of this Agreement and, (iii) terminate, and
Licensee shall hire, all Transferred Employees in accordance with the principles
set forth in Section 3.5, except that, for purposes of this Section 9.2(b)(iii),
"Transferred Employees" shall not include any employees hired by Time Broker
pursuant to Section 3.5 who also perform substantial services for other stations
in the applicable market operated by Time Broker.
(c) Notwithstanding anything in Section 7.1 to the contrary,
no expiration or termination of this Agreement shall terminate the obligation of
each party to indemnify the other for claims under Article VII hereof or limit
or impair any party's rights to receive payments due and owing hereunder on or
before the date of such termination.
ARTICLE X.
REMEDIES
In addition to a party's rights of termination hereunder (and in
addition to any other remedies available to it or provided under law), in the
event of an uncured Event of Default with respect to either party, the other may
seek specific performance of this Agreement, in which case the defaulting party
shall waive the defense in any such suit that the other party has an adequate
remedy at law and interpose no opposition, legal or otherwise, as to the
propriety of specific performance as a remedy hereunder.
ARTICLE XI.
CERTAIN REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PARTIES
Section 11.1. Representations and Warranties of Time Broker. Time
Broker hereby represents and warrants to Licensee as follows:
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11.1.1 Corporate Organization. Time Broker is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its jurisdiction of organization and is duly qualified to do business in and is
in good standing in any jurisdiction where it owns or operates a radio station
and in each other jurisdiction where such qualification is necessary, except for
those jurisdictions where the failure to be so qualified could not, individually
or in the aggregate, have a material adverse effect on the ability of Time
Broker to perform its obligations hereunder.
11.1.2 Authorization of Agreement; No Breach. Time Broker has the
corporate power and authority to execute, deliver and perform this Agreement.
This Agreement constitutes the valid and binding obligation of Time Broker,
enforceable against Time Broker in accordance with its terms, except as such
enforceability may be limited by bankruptcy and laws affecting the enforcement
of creditors' rights generally or equitable principles. Assuming the consents
and approvals required elsewhere herein are obtained, neither such execution,
delivery and performance nor compliance by Time Broker with the terms and
provisions hereof will conflict with or result in a breach of any of the terms,
conditions or provisions of the organizational documents of Time Broker or any
judgment, order, injunction, decree, regulation or ruling of any court or any
other governmental authority to which Time Broker is subject or any material
agreement or contract to which Time Broker is a party or to which it is subject,
or constitute a material default thereunder.
11.1.3 Actions and Proceedings. Except as disclosed in Schedule
11.1, Time Broker is not subject to any judgment, award, order, writ,
injunction, arbitration decision or decree which prohibits the performance of
this Agreement or the consummation of any transaction contemplated under this
Agreement, and there is no litigation, administrative action, arbitration,
proceeding or investigation pending, or to the knowledge of Time Broker,
threatened, against Time Broker or affecting Time Broker in any federal, state
or local court, or before any administrative agency or arbitrator that would
adversely affect Time Broker's ability to perform its obligations under this
Agreement or would prohibit the consummation of the transactions contemplated
hereunder.
11.1.4 Qualifications. Time Broker is qualified in accordance with
the Communications Act and the rules and policies of the FCC to enter into this
Agreement and provide Programming on the Stations in accordance with its terms.
Between the date hereof and the termination of this Agreement, either by the
Closing of the Purchase Agreement or the earlier termination in accordance with
Article IX hereof, Time Broker will not take any action that Time Broker knows,
or has reason to believe, would disqualify it from providing programming on the
Stations pursuant to this Agreement.
Section 11.2. Representations, Warranties and Covenants of
Licensee. Licensee hereby represents, warrants and covenants to Time Broker as
follows:
11.2.1 Corporate Organization. Tuscaloosa, SRPLI and SRRLI are
corporations, duly organized, validly existing and in good standing under the
laws of the states of their respective organizations, and are duly qualified to
do business and are in good standing in any jurisdiction where they own or
operate a radio station and in each other jurisdiction where such qualification
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is necessary, except for those jurisdictions where the failure to be so
qualified could not, individually or in the aggregate, have a material adverse
effect on the ability of Tuscaloosa, SRPLI or SRRLI to perform their obligations
hereunder.
11.2.2 Authorization of Agreement; No Breach. Tuscaloosa, SRPLI
and SRRLI have the corporate power and authority to execute, deliver and perform
this Agreement. This Agreement constitutes the valid and binding obligation of
each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with
its terms, except as such enforceability may be limited by bankruptcy and laws
affecting the enforcement of creditors' rights generally or equitable
principles. Assuming the consents and approvals required elsewhere herein are
obtained and that this Agreement is filed with the FCC, neither such execution,
delivery and performance nor compliance by Tuscaloosa, SRPLI and SRRLI with the
terms and provisions hereof will conflict with or result in a breach of any of
the terms, conditions or provisions of the organizational documents of such
entities or any judgment, order, injunction, decree, regulation or ruling of any
court or any other governmental authority to which each is subject or any
material agreement or contract to which each is a party or to which they are
subject, or constitute a material default thereunder.
11.2.3 Actions and Proceedings. Except as disclosed in Schedule
11.2, none of Tuscaloosa, SRPLI or SRRLI is subject to any judgment, award,
order, writ, injunction, arbitration decision or decree which prohibits or
prevents the performance of this Agreement or the consummation of any
transaction contemplated under this Agreement, and there is no litigation,
administrative action, arbitration, proceeding or investigation pending, or to
the knowledge of Tuscaloosa, SRPLI or SRRLI, threatened, against each or
affecting each in any federal, state or local court or before any administrative
agency or arbitrator that would adversely affect Tuscaloosa's, SRPLI's or
SRRLI's ability to perform their obligations under this Agreement or would
prohibit the consummation of the transactions contemplated hereunder.
11.2.4 Maintenance of Current Operations. The Stations'
transmission equipment shall be maintained by Tuscaloosa, SRPLI and SRRLI in a
condition consistent with good engineering practices and in compliance in all
material respects with the Communications Act and all other applicable rules,
regulations and technical standards of the FCC.
11.2.5 Other Agreements. During the term of this Agreement,
Tuscaloosa, SRPLI and SRRLI will not enter into any other time brokerage,
program provision, local management or similar agreement with any third party
with respect to the Stations.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in writing signed by the party against whom the waiver is sought to be
enforced, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
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Section 12.2. No Waiver; Remedies Cumulative. Except as otherwise
provided herein, no failure or delay on the part of Licensee or Time Broker in
exercising any right or power hereunder shall operate as a waiver thereof, nor
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, shall preclude any
other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Licensee and Time Broker herein provided are
cumulative and are not exclusive of any rights or remedies which they may
otherwise have.
Section 12.3. Construction. The construction and performance of this
Agreement shall be governed by the laws of the State of New York, excluding
choice of law provisions thereunder, and the obligations of the parties hereto
are subject to all federal, state or municipal laws or regulations now or
hereafter in force and to the regulations of the FCC and all other governmental
bodies or authorities presently or hereafter duly constituted.
Section 12.4. Headings. The headings contained in this Agreement are
included for convenience only and no such heading shall in any way alter the
meaning of any provision.
Section 12.5. Successors and Assigns. Any party may assign all or any
part of this Agreement or the rights and obligations hereunder to a person or
entity controlling, controlled by or under common control with such party,
provided that any such assignment shall not relieve such party of its
obligations hereunder. Except as otherwise provided herein, this Agreement and
the rights and obligations hereunder may not be assigned by any party hereto
without the prior written consent of the other parties hereto, which consent
shall not be unreasonably withheld. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Section 12.6. Force Majeure. The parties acknowledge and agree that a
party will not be liable for any failure to timely perform any of its
obligations under this Agreement if such failure is due, in whole or in part,
directly or indirectly, to accidents, fires, floods, governmental actions, war,
civil disturbances, other causes beyond such party's control or any other
occurrence which would generally be considered an event of force majeure.
Section 12.7. Broker. The parties agree to indemnify and hold each
other harmless against any claims from any broker or finder based upon any
agreement, arrangement, or understanding alleged to have been made by the
indemnifying party.
Section 12.8. Counterpart Signatures. This Agreement may be signed in
one or more counterparts.
Section 12.9. Notices. Any notice, report, demand, waiver or consent
required or permitted hereunder shall be in writing and shall be given by hand
delivery, by prepaid registered or certified mail, with return receipt
requested, by an established national overnight courier providing proof of
delivery for next business day delivery or by telecopy addressed as follows:
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If the notice is to Time Broker:
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Attention: Joseph M. Field, President
Telecopy Number: (610) 660-5641
With copies to:
John C. Donlevie, General Counsel
Entertainment Communications, Inc.
401 City Avenue, Suite 409
Bala Cynwyd, PA 19004
Telecopy Number: (610) 660-5641
Joseph D. Sullivan, Esq.
Latham & Watkins
1001 Pennsylvania Ave., N.W., Suite 1300
Washington, D.C. 20004
Telecopy Number: (202) 637-2201
If the notice is to Licensee:
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Attention: David Amy, Chief Financial Officer
Telecopy Number: (410) 467-5043
With copies to:
Robert E. Quicksilver, General Counsel
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telecopy Number: (410) 662-4707
Steven A. Thomas, Esq.
Thomas & Libowitz
100 Light Street, 11th Floor
Baltimore, MD 21202-1053
Telecopy Number: (410) 752-2046
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail; or
(iii) the date of telecopy transmission as indicated on the
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telecopier transmission report provided that any telecopy transmission shall not
be effective unless a paper copy is sent by overnight delivery on the date of
the telecopy transmission. Either party may change its address for the purpose
of notice by giving notice of such change in accordance with the provisions of
this Section.
Section 12.10. Effect of this Agreement. This Agreement and the
Purchase Agreement, together with the exhibits and schedules hereto and thereto
and a letter agreement among Time Broker and Sinclair Communications, Inc. dated
of even date herewith, set forth the entire understanding of the parties and
supersede any and all prior written or oral agreements, arrangements or
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by either party
which is not embodied in this Agreement, the Purchase Agreement or the letter
agreement referenced above and neither party shall be bound by, or be liable
for, any alleged representation, promise, inducement or statement of intention
not embodied herein unless same shall have been made subsequent hereto in
writing and signed by the party to be charged therewith. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns.
Section 12.11. Severability. Except as expressly set forth in Section
12.15, if any provision contained in this Agreement is held to be invalid,
illegal or unenforceable in any respect by any court or other authority, then
such provision shall be deemed limited to the extent that such court or other
authority deems it reasonable and enforceable, and as so limited shall remain in
full force and effect. In the event that such court or other authority shall
deem any such provision wholly unenforceable, this shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had not been contained herein.
Section 12.12. No Joint Venture. The parties agree that nothing herein
shall constitute a joint venture or agency between them. The parties acknowledge
that call letters, trademarks and other intellectual property shall at all times
remain the property of the respective parties and that neither party shall
obtain any ownership interest in the other party's intellectual property by
virtue of this Agreement (subject to Section 6.2).
Section 12.13. Damage to Stations. In the event of damage or
destruction to any of the Stations (other than damage or destruction caused by
Time Broker), Licensee shall proceed to repair, replace or restore the
applicable Station to its former condition as promptly as is commercially
reasonable. If Time Broker causes damage or destruction to any of the Stations,
Time Broker shall proceed to repair, replace or restore the applicable Station
to its former condition as promptly as is commercially reasonable. If Time
Broker must undertake repairs, replacements or restorations pursuant to the
previous sentence, Licensee shall reimburse Time Broker for the cost of such
repairs, replacements or restorations out of the proceeds from any insurance
policies maintained by Licensee that are received by Licensee as a result of
such damage or destruction. Licensee shall use reasonable efforts to effect the
maximum possible recovery for such damage or destruction under such insurance
policies.
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Section 12.14. Noninterference. During the term of this Agreement,
neither Licensee nor any of their employees shall take any actions that might
impair the operations of Time Broker conducted hereunder, except to the extent
expressly contemplated by this Agreement or as otherwise required by law.
Section 12.15. Regulatory Changes. In the event of any order or decree
of an administrative agency or court of competent jurisdiction, including
without limitation any material change or clarification in FCC rules, policies,
or precedent, that would cause this Agreement to be invalid or violate any
applicable law, and such order or decree has become effective and has not been
stayed, the parties will use their respective best efforts and negotiate in good
faith to modify this Agreement to the minimum extent necessary so as to comply
with such order or decree without material economic detriment to either party,
and this Agreement, as so modified, shall then continue in full force and
effect. In the event that the parties are unable to agree upon a modification of
this Agreement so as to cause it to comply with such order or decree without
material economic detriment to either party, then this Agreement shall be
terminated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Time
Brokerage Agreement as of the date first above written.
ENTERTAINMENT COMMUNICATIONS, INC.
____________________________________
By:
Title:
TUSCALOOSA BROADCASTING, INC.
____________________________________
By:
Title:
SINCLAIR RADIO OF PORTLAND LICENSEE , INC.
____________________________________
By:
Title:
SINCLAIR RADIO OF ROCHESTER LICENSEE , INC.
___________________________________
By:
Title:
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SCHEDULE 1.1
PROGRAMMING
The Programming shall consist of one hundred sixty-six (166) hours per
week on each of the Stations in an entertainment format to be chosen by Time
Broker, subject to Article II of this Agreement. The Programming shall include
(a) news and weather information; (b) public service announcements; (c) an
announcement in form sufficient to meet the station identification requirements
of the FCC at the beginning of each hour; (d) an announcement at the beginning
of each segment of Programming to indicate that program time has been purchased
by Time Broker; and (e) any other announcement that may be required by
applicable law or regulation. Time Broker shall maintain and deliver to Licensee
copies of all programming information, including, without limitation,
information concerning portions of the Programming that are responsive to issues
of public importance identified to Time Broker by Licensee, necessary for
Licensee to maintain its FCC public inspection file, and all other records
required to be kept by FCC rule or policy. Time Broker shall have the sole and
exclusive right to sell advertising to be included in the Programming and shall
be entitled to retain all the revenues derived from the sale thereof, provided,
however, that Licensee shall be entitled to sell such time as it deems necessary
to comply with the political advertising rules of the FCC in the event the
Programming does not comply with such rules.
Notwithstanding any other provision of this Agreement, Time Broker
recognizes that Licensee has certain obligations to broadcast programming to
meet the needs and interests of the communities of license for the Stations.
Licensee shall have the right to air specific programming on issues of local
importance to the communities. Nothing in this Agreement shall abrogate the
unrestricted authority of Licensee to discharge its obligations to the public
and to comply with the laws, rules and policies of the FCC with respect to
meeting the ascertained needs and interests of the public. Accordingly, Licensee
may air or cause Time Broker to produce and present under Licensee's supervision
two (2) hours a week on each of the Stations such public affairs programming
that responds to the needs and interests of listeners in each such Station's
community of license. Such public affairs programming shall be presented between
6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as
the public interest may require.
<PAGE>
SCHEDULE 1.2
COMPENSATION
(A) Beginning on the Commencement Date, Time Broker shall pay a monthly
fee (the "Monthly Payment") in the amount of the Monthly Projected Broadcast
Cash Flow (as defined below) for the Stations. The "Monthly Projected Broadcast
Cash Flow" for the Stations shall be the broadcast cash flow for the Stations
that is projected by the parties in good faith for the term of this Agreement,
and is expressly agreed to equal $631,500 per month.
In the event that the Commencement Date occurs on a day other than
the first day of a month, the initial Monthly Payment shall be an amount equal
to the Monthly Payment as determined above multiplied by a ratio, the numerator
of which is the number of days between the Commencement Date and the end of the
month in which the Commencement Date occurs and the denominator of which is the
number of days in the month in which the Commencement Date occurs. In the event
that the day in which the term of this Agreement ends is not the last day of a
month, the Monthly Payment for the month in which such day occurs shall be
similarly prorated.
(B) Except as otherwise provided in this Agreement (specifically
including Paragraph (C) to this Schedule 1.2 below), Time Broker shall reimburse
Licensee for all of its ordinary and customary expenses (excluding only
Licensee's federal, state and local income taxes) incurred in operating the
Stations (the "Operating Expenses"), including but not limited to, rent,
utilities (excluding telephone expenses incurred by Licensee), maintenance and
repairs at each of the Stations' studio and transmitter sites, insurance on the
Stations' equipment, insurance deductibles on claims on the Stations' equipment
payable in respect of damage to the Stations' equipment caused by Time Broker,
and ad valorem property taxes. Licensee shall bill Time Broker for such
Operating Expenses on a monthly basis by delivery of a statement in reasonable
detail with back-up invoices, payment for which shall be due within thirty (30)
days of such billing.
(C) During the term of this Agreement, Licensee shall make all capital
expenditures required to maintain the Stations consistent with past practice of
the Stations and as required to make the Stations operate in full compliance
with all FCC rules and regulations. At the Closing of the Purchase Agreement,
Time Broker shall reimburse Licensee for all costs of such capital expenditures.
<PAGE>
SCHEDULE 2.1
PROGRAMMING POLICY STATEMENT
Time Broker agrees to cooperate with Licensee in the broadcasting of
programs of the highest possible standard of excellence and for this purpose to
observe the following regulations in the preparation, writing and broadcasting
of its programs. Further, Time Broker agrees that all material broadcast on the
Stations shall comply with all federal, state and local applicable laws, rules
and regulations.
I. No Plugola or Payola. The broadcast of any material for which any
money, service or other valuable consideration is directly or
indirectly paid, or promised to or charged or accepted by, the
Time Broker, from any person, shall be prohibited, unless, at the
time the same is broadcast, it is announced as paid for or
furnished by such person.
II. Political Broadcasting. Within thirty (30) days of the
Commencement Date, Time Broker shall distribute to all parties
making requests for the purchase of political time on the
Stations, and provide Licensee with, a written political
advertising disclosure statement which fully and accurately
discloses how the Time Broker sells programming and advertising
time and which makes parties purchasing political programming and
advertising time fully aware of the lowest unit charge provisions
of Section 315 of the Communications Act. In addition, at least
thirty (30) days before the start of any primary or election
campaign, Time Broker will clear with the Stations' general
manager the rate Time Broker will charge for the time to be sold
to candidates to make certain that the rate charged is in
conformance with the applicable law and station policy.
III. Required Announcements. Time Broker shall broadcast (i)
announcements in a form satisfactory to Licensee at the beginning
of each hour to identify the Stations and (ii) any other
announcements that may be required by law, regulation, or
Licensee's station policy.
IV. No Illegal Announcements. No announcements, broadcasts or
promotions prohibited by federal, state or local law shall be
made over the Stations. This prohibition specifically includes,
but is not limited to, any and all unlawful programming or other
broadcast material concerning tobacco or alcohol related
products. The airing of any broadcast material concerning
contests, lotteries or games must be conducted in accordance with
all applicable law, including FCC rules and regulations. Any
obscene, indecent, or fraudulent programming is prohibited. All
sponsored programming or other broadcast material must be
identified in accordance with applicable law, including FCC rules
and regulations.
<PAGE>
V. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act and the rules and
regulations of the FCC, Licensee reserves the right to reject or
terminate any programming (including advertising) proposed to be
presented or being presented over the Stations which is in
conflict with station policy or which in Licensee's or its
general manager's reasonable judgment would not serve the public
interest.
In any case where questions of policy or interpretation arise, Time
Broker should submit the same to Licensee for decision before making any
commitments in connection therewith.
<PAGE>
SCHEDULE 4.1
EXCLUDED CONTRACTS
[To be provided by Sinclair]
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Purchase Agreement") is entered
into as of February 3, 1998 by and between Montecito Broadcasting Corporation, a
Delaware corporation ("MBC"), Jamie Kellner, Douglas Gealy and Thomas Allen, the
sole stockholders of MBC (collectively the "MBC Sellers") and Sinclair
Communications, Inc., a Maryland corporation ("Buyer").
R E C I T A L S:
A. On this same date MBC acquired all of the issued and
outstanding capital stock (the "Company Stock") of Channel 33, Inc., a Nevada
corporation (the "Company"), which owns and operates television station KFBT-TV,
Channel 33, Las Vegas, Nevada (the "Station"), pursuant to licenses issued by
the Federal Communications Commission ("FCC").
B. MBC acquired the Company Stock pursuant to consummation (the
"Consummation") of that certain Stock Purchase Agreement dated September 17,
1997 (the "Koker Agreement") by and among Acme Television Holdings, LLC
("Acme"), a predecessor-in-interest of MBC, the Company, and the selling
shareholders named therein (collectively, the "Sellers").
C. Acme and Buyer entered into a certain Letter Agreement (the
"Letter Agreement") dated September 15, 1997 setting forth certain undertakings
of Buyer to become effective upon the Consummation of the Koker Agreement,
including exercise of a certain option to enter into this Purchase Agreement.
D. Acme and Buyer entered into a certain Option Agreement (the
"Option Agreement") dated September 25, 1997 whereby Acme granted to Buyer an
option to enter into a Time Brokerage Agreement ("TBA") with the Company upon
consummation of the Koker Agreement, to become effective when all necessary
regulatory approval had been obtained (the "TBA Effective Date").
E. Acme has assigned to MBC, and MBC has thereby assumed, all of
Acme's rights and obligations under the Koker Agreement, the Letter Agreement
and the Option Agreement.
F. MBC consummated the Koker Agreement with loan funds (the
"Loan") provided by The Chase Manhattan Bank and one or more other lenders
(collectively, the "Lender") pursuant to a loan agreement (the "Loan Agreement")
dated February 3, 1998, and Buyer agreed to certain undertakings in the Letter
Agreement and Option Agreement with respect to the Loan Agreement and the
payments to be made to the Lender pursuant to the Loan Agreement.
<PAGE>
G. The MBC Sellers desire to sell, and Buyer desires to purchase,
all of the issued and outstanding stock of MBC (the "MBC Stock") on the terms
and conditions set forth herein.
In consideration of the above recitals and the mutual agreements and
covenants contained in this Purchase Agreement, the parties to this Purchase
Agreement, intending to be bound legally, hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
1.1.Terms Defined in this Section. The following terms, as used in
this Purchase Agreement, have the meanings set forth in this Section:
(a) "Accounts Receivable" means the right of MBC or the
Company as of the TBA Effective Date to payment for the sale of advertising time
and other goods and services provided by the Station prior to the TBA Effective
Date.
(b) "Affiliate" means (i) any Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with another Person; (ii) an officer or director of an
affiliate within the meaning of (i) above; or (iii) any Person that owns more
than fifty percent (50%) of voting control of another Person. For purposes of
(i) above, (A) a Person shall be deemed to control another Person if such Person
(1) has sufficient power to enable such Person to elect a majority of the board
of directors of a corporation, or (2) owns a majority of the beneficial
interests in income and capital of such other Person; and (B) a general partner
shall be deemed to control a limited partnership if such general partner owns a
majority of that portion of the beneficial interests in income and capital of
such limited partnership owned by all general partners of such limited
partnership.
(c) "Assets" means the assets owned or held by MBC and the
Company and include those assets necessary for the operation of the Station as
presently conducted, all as specified in Section 2.2(a).
(d) "Closing" means the consummation of the purchase and sale
of the MBC Stock pursuant to this Purchase Agreement in accordance with the
provisions of Section 8.
(e) "Closing Date" means the date on which the Closing occurs,
as determined pursuant to Section 8.
(f) "Communications Act" means the Communications Act of 1934,
as amended.
(g) "Consents" means the consents, permits, or approvals of
government authorities and other third parties necessary to transfer the MBC
Stock to Buyer and to maintain and preserve all contract, lease and other rights
of MBC or the Company existing
<PAGE>
currently and as of the Closing Date in connection with the consummation of the
transactions contemplated by this Purchase Agreement.
(h) "Contracts" means all contracts, leases, nongovernmental
licenses, and other agreements (including leases for personal or real property
and employment agreements), written or oral (including any amendments and other
modifications thereto), to which MBC or the Company is a party or that are
binding upon MBC or the Company, and (i) that are in effect on the date of this
Purchase Agreement or (ii) that are entered into by MBC or the Company between
the date of this Purchase Agreement and the Closing Date as permitted by the
terms hereof.
(i) "FAA" means the Federal Aviation Administration.
(j) "FCC" means the Federal Communications Commission.
(k) "FCC Consent" means action by the FCC granting its consent
to the transfer of control of MBC and the Company as contemplated by this
Purchase Agreement.
(l) "FCC Licenses" means those licenses, permits, and
authorizations issued by the FCC to the Company in connection with the business
and operations of the Station.
(m) "Final Order" means an action by the FCC that has not been
reversed, stayed, enjoined, set aside, annulled, or suspended, and with respect
to which no requests are pending for administrative or judicial review,
reconsideration, appeal, or stay, and the time for filing any such requests and
the time for the FCC to set aside the action on its own motion have expired.
(n) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(o) "Intangibles" means all copyrights, trademarks, trade
names, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by MBC or
the Company or under which MBC or the Company is licensed or franchised and that
are used or useful in the business and operations of the Station, together with
any additions thereto between the date of this Purchase Agreement and the
Closing Date.
(p) "GAAP" means generally accepted accounting principles as
consistently applied in the United States.
(q) "Licenses" means all licenses, permits, construction
permits, and other authorizations issued by the FCC, the FAA, or any other
federal, state, or local governmental authorities to MBC or the Company which
are in effect as of the date of this
<PAGE>
Purchase Agreement as are necessary in connection with the conduct of the
business or operations of the Station as presently conducted together with any
additions thereto between the date of this Purchase Agreement and the Closing
Date.
(r) "Material Contract" means any material contract, lease,
nongovernmental license, agreement, or commitment, except for any contract,
lease, non-governmental license, agreement, or commitment the obligations under
which will be performed prior to Closing.
(s) "Person" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership, or other entity or organization.
(t) "Programming Contract" means a contract for the
acquisition of programming to be aired on the Station in exchange for payment of
consideration.
(u) "Station" means television station KFBT-TV, Channel 33,
Las Vegas, Nevada.
(v) "Stock" means, as the case may be, all the issued and
outstanding shares of capital stock of MBC or the Company.
(w) "Tangible Personal Property" means all property owned by
MBC or the Company as of the date of the Consummation plus any replacements or
substitutions thereof, listed on Schedule 2.2(a)(1) attached hereto.
(x) "Taxes" (and with correlative meaning "Taxes" and
"Taxable") means all federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, capital transfer, employment, withholding and other taxes and
assessments, together with any interest, additions or penalties with respect
thereto and any interest in respect of such addition, or penalties, and "Tax"
means any one of such Taxes.
(y) "Tax Returns" means all federal, state, local and foreign
income, franchise, sales, use, occupation, property, excise, alternative or
add-on minimum, social security, employees' withholding, unemployment,
disability, transfer, capital stock and other tax returns and tax reports, and
"Tax Return" means any one of such Tax Returns, franchise tax returns,
declarations of estimated tax, tax reports and other tax statements and other
similar filings required to be filed.
(z) "TBA Effective Date" means the date upon which the Buyer
commences certain sales and programming activities with respect to the Station
pursuant to the TBA.
<PAGE>
1.12.Terms Defined Elsewhere in this Agreement. For purposes
of this Agreement, the following terms have the meanings set forth in the
sections indicated:
Term Section
Buyer Preamble
Claimant Section 10.4(a)
Company Preamble
DOJ Section 6.4
FTC Section 6.4
Indemnifying Party Section 10.4
Leases Section 2.2(a)(ii)
Purchase Price Section 2.3
MBC Sellers Preamble
MBC Stock Recitals
Studio Lease Section 2.2(a)(ii)
Tower Lease Section 2.2(a)(ii)
0.3.Clarifications. Words used herein, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender and any other number as the context requires. Use of the word
"including" herein shall be deemed and construed to mean "including but not
limited to." Except as specifically otherwise provided in this Purchase
Agreement in a particular instance, a reference to a Section or Schedule is a
reference to a Section of this Purchase Agreement or a Schedule hereto, and the
terms "hereof," "herein" and other like terms refer to this Agreement as a
whole, including the Schedules hereto, and not solely to any particular part
hereof.
SECTION 1. EXCHANGE OF CONSIDERATION.
1.1.Agreement to Sell and Buy. Subject to the terms and
conditions set forth in this Agreement, the MBC Sellers hereby agree to sell,
transfer, and deliver to Buyer on the Closing Date, and Buyer hereby agrees to
purchase on the Closing Date, the MBC Stock, free and clear of any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
or encumbrances of any nature whatsoever, except those permitted or identified
hereunder.
1.2.Assets and Liabilities at Closing.
(aa) Assets of the Company at Closing. The Assets owned
by MBC or the Company at the Closing shall include the following:
(i) the Tangible Personal Property listed on
Schedule 2.2(a)(i);
<PAGE>
(ii) the Leases ("Leases") listed on Schedule
2.2(a)(ii), specifically, including a certain Broadcast Facilities Lease (the
"Studio Lease") assigned to MBC on October 16, 1997, and a certain Tower Lease
(the "Tower Lease") assigned to MBC on October 16, 1997;
(iii) the Licenses listed on Schedule 2.2(a)(iii).
(i) the Contracts listed on Schedule 2.2(a)(iv);
(ii) the Intangibles listed on Schedule 2.2.(a)(v)
of MBC or the Company relating to the Station and those intangibles that are not
specifically listed on Schedule 2.2(a)(v), including the goodwill of the
Station, if any;
(iii) all of MBC's and the Company's proprietary
information, technical information and data, machinery and equipment warranties,
maps, computer discs and tapes, plans, diagrams, blueprints, and schematics,
including filings with the FCC relating to the business and operation of the
Station; and
(iv) all books and records of the Station
including, but not limited to, financial statements, Tax Returns, program logs,
executed copies of Contracts, and all records required by the FCC to be kept by
the Station.
(ab) Liabilities of MBC and the Company at Closing.
(v) At the Closing, MBC and the Company shall have
no liabilities or obligations other than (A) liabilities and obligations
incurred in the ordinary course of business at the Station; (B) liabilities or
obligations arising under Contracts after the Closing Date as permitted
hereunder or under the TBA; and (C) liabilities for taxes that are not yet due
and payable for any period of time subsequent to the Closing Date.
(vi) The liabilities and obligations of MBC and
the Company at Closing shall not include: (A) any obligations or liabilities
under any Contract (including any Programming Contract) (i) not identified in
Schedule 2.2(a)(iv) or (ii) entered into after the date hereof unless permitted
hereunder or by the TBA, (B) any credit agreements, promissory notes, note
purchase agreements, indentures, capital leases or other financing arrangements,
(C) any obligations or liabilities, if any, related to any litigation,
arbitration proceeding or proceeding before or by any court, arbitration panel,
commission, agency or other administrative or regulatory body or authority based
solely on a breach by MBC or the MBC Sellers of their respective obligations
under this Purchase Agreement for matters occurring prior to the Closing Date;
and (D) any liability incurred after the TBA Effective Date arising from Buyer's
acts or omissions pursuant to the TBA.
<PAGE>
43.Consideration to be Paid to MBC Sellers.
(ac) Purchase Price. The purchase price for the MBC
Stock (the "Purchase Price") shall be Thirty Three Million Dollars
($33,000,000). The Purchase Price shall be paid as follows:
(iv) Deposits.
(A) MBC acknowledges receipt from Buyer of One
Million Dollars ($1,000,000) referred to in the Letter Agreement as the LMA
Option Grant Price. At the Consummation of the Koker Agreement, MBC shall borrow
$33,000,000 pursuant to the Loan Agreement. MBC shall refund to Buyer, on behalf
of Acme, the sum of $1,000,000: provided, that the payments due to MBC upon the
execution of this Agreement described in Section 2.3(c), shall be deducted from
such refund and shall be paid to MBC, with the balance, if any, paid to Buyer.
(B) Buyer shall pay MBC quarterly payments as
follows:
QUARTERLY PAYMENT DATE AGGREGATE AMOUNT
(DOLLARS)
June 30, 1998 $190,000
September 30, 1998 $190,000
December 31, 1998 $190,000
March 31, 1999 $190,000
June 30, 1999 $190,000
September 30, 1999 $190,000
December 31, 1999 $190,000
March 31, 2000 $190,000
June 30, 2000 $190,000
September 30, 2000 $190,000
December 31, 2000 $190,000
(v) Balance. The payments referred to in
Section 2.3(a)(i)(B) hereof shall constitute a credit to Buyer at Closing
against the Purchase Price. The remaining balance of the Purchase Price shall be
paid by the Buyer by wire transfer of same day Federal funds at the time of
Closing, and such balance shall be paid directly to The Chase Manhattan Bank, as
agent for the Lender, pursuant to the Loan Agreement.
(ad) Operating Payments. From the date hereof until
the TBA Effective Date, Buyer shall make a payment to MBC on the last day of
each calendar month equal to the amount certified by MBC by which the monthly
expenses, exclusive of debt service, of the Station exceed the monthly income.
(ae) Transaction Expenses. Upon execution of this
Purchase Agreement, Buyer shall pay to MBC: (i) the sum of $275,000 which
represents the transaction
<PAGE>
costs as of the date hereof, including professional fees, incurred by MBC in
connection with the Koker Agreement, the Consummation, the Letter Agreement, the
Option Agreement, the TBA, this Purchase Agreement and the Loan Agreement as of
the date hereof; (ii) all fees, costs, expenses and other monetary obligations
of MBC arising under the Loan Agreement and due and payable on the Closing Date;
and (iii) deposits payable on the Closing Date by MBC for the Leases.
(af) Monthly Extension Fees. Until the Closing Date,
the Buyer shall pay to MBC a monthly closing extension fee of $200,000
commencing on March 1, 1998 and continuing on the first day of each month
thereafter.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF MBC
AND THE MBC SELLERS.
The MBC Sellers and MBC, jointly and severally, represent and
warrant to Buyer as follows:
0.4.Organization and Authority of MBC. MBC is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. MBC has the requisite power and authority to execute, deliver and
perform this Purchase Agreement and the documents contemplated hereby according
to their respective terms.
0.5.Authorization and Binding Obligation. The execution,
delivery and performance of this Purchase Agreement by MBC has been duly
authorized by all necessary corporate or other action on the part of MBC. This
Purchase Agreement has been duly executed and delivered by MBC and each MBC
Seller and constitutes the legal, valid, and binding obligation of MBC and each
MBC Seller, enforceable against it or him in accordance with its terms except as
the enforceability of this Purchase Agreement may be affected by bankruptcy,
insolvency, or similar laws affecting creditors' rights generally and by
judicial discretion in the enforcement of equitable remedies.
0.6.Compliance with Laws. MBC is in compliance in all
material respects with all laws, rules, policies, and regulations including, but
not limited to, federal, state and local and the FCC's rules and policies.
0.7.Licenses. The Company is the holder of the Licenses
included in Schedule 2.2(a)(iii) to this Purchase Agreement, all of which are in
full force and effect. The FCC Licenses constitute all of the licenses issued by
the FCC under the Communications Act of 1934, as amended (the "Act"), and the
current rules, regulations, and policies of the FCC for the operation of the
Station as currently conducted. There is not pending or, to MBC's or the MBC
Sellers' knowledge, threatened, any petition, complaint, objection (whether
formal or informal), order to show cause, investigation, or other action by or
before the FCC or any court to revoke, cancel, rescind, modify, or refuse to
renew any of the FCC Licenses. Except as disclosed on Schedule 3.4 and other
than proceedings of general applicability to the broadcasting industry, there is
not now pending or, to MBC's or the MBC Sellers' knowledge, threatened, any
other
<PAGE>
petition, complaint, objection (whether formal or informal), investigation,
order to show cause, notice of violation, notice of apparent liability, or
notice of forfeiture or other proceeding by or before the FCC or any court
against the Company with respect to any matter affecting the Station which would
have a materially adverse effect on the operation of the Station.
0.8.MBC Stock. As of the date hereof, no shares of the
capital stock of MBC are held in the treasury. There are no outstanding options,
conversion rights, warrants, or other present or future rights in existence to
acquire or to vote any of MBC's shares of capital stock. The MBC Stock
represents all the issued and outstanding shares of capital stock of MBC and all
such shares have been duly and validly issued and are fully paid and
nonassessable and are not subject to any preemptive rights. There are no voting
trust agreements or other contracts, agreements, or arrangements restricting or
affecting voting or dividend rights or transferability with respect to the MBC
Stock. MBC has not violated any federal, foreign, state, or local law,
ordinance, rule, or regulation in connection with the offer for sale or sale and
issuance of its outstanding shares of capital stock or any other securities. The
MBC Sellers own the MBC Stock free and clear of any mortgages, liens, claims,
charges, encumbrances, assessments, or other security or adverse interests of
any kind or nature whatsoever.
0.9.Company Stock. To MBC and the MBC Sellers'
knowledge, (a) as of the date hereof, no shares of the capital stock of the
Company are held in the treasury; (b) there are no outstanding options,
conversion rights, warrants, or other present or future rights in existence to
acquire or to vote any of the Company's shares of capital stock; (c) the Company
Stock represents all the issued and outstanding shares of capital stock of the
Company, and all such shares have been duly and validly issued and are fully
paid and nonassessable and are not subject to any preemptive rights; (d) there
are no voting trust agreements or other contracts, agreements, or arrangements
restricting or affecting voting or dividend rights or transferability with
respect to the Company Stock; (e) the Company has not violated any federal,
foreign, state, or local law, ordinance, rule, or regulation in connection with
the offer for sale or sale and issuance of its outstanding shares of capital
stock or any other securities; and (f) MBC owns the Company Stock free and clear
of any mortgages, liens, claims, charges, encumbrances, assessments, or other
security or adverse interests of any kind or nature whatsoever.
<PAGE>
0.10.Absence of Conflicting Agreements. The execution,
delivery and performance by MBC and the MBC Sellers of this Purchase Agreement
and the documents contemplated hereby (with or without the giving of notice, the
lapse of time, or both): (a) subsequent to the receipt of the Consents, do not
require the consent of any third party, (b) will not conflict with, result in a
breach of, or constitute a default under any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instruments, and (c) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of any
Contract or other contract or agreement of MBC Sellers.
0.11.Consents. Except for the FCC Consent provided for
in Section 6.1 and the HSR Filing provided for in Section 6.4, no consent,
approval, permit, or authorization of, or declaration to, or filing with any
governmental or regulatory authority or any other third party is required (a) to
consummate this Purchase Agreement and the transactions contemplated hereby, or
(b) to permit the MBC Sellers to assign or transfer the MBC Stock to Buyer.
0.12.Brokers. Neither MBC nor any of the MBC Sellers nor
any person or entity acting on their behalf has incurred any liability for any
finders' or brokers' fees or commissions in connection with the transactions
contemplated by this Purchase Agreement.
0.13.MBC Balance Sheet. Annexed hereto as Schedule 3.10
is a balance sheet of MBC which is true and complete in all material respects
and presents fairly the financial condition of MBC as of the date hereof (in the
"Before Closing" column) and pro forma immediately following MBC's acquisition
of the Company Stock (in the "After Closing" column).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to MBC as follows:
0.14.Organization, Standing, and Authority. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland and has the requisite power and authority to
execute, deliver, and perform this Purchase Agreement and the documents
contemplated hereby according to their respective terms and to own the Stock.
0.15.Authorization and Binding Obligation. The
execution, delivery and performance of this Purchase Agreement by Buyer have
been duly authorized by all necessary action on the part of Buyer. This Purchase
Agreement has been duly executed and delivered by Buyer and constitutes a legal,
valid, and binding, obligation of Buyer, enforceable against Buyer in accordance
with its terms except as the enforceability of this Purchase Agreement may be
affected by bankruptcy or similar laws affecting creditors' rights generally and
by judicial discretion in the enforcement of equitable remedies.
<PAGE>
0.16.Absence of Conflicting Agreements and Required
Consents. Subject to the receipt of the Consents, the execution, delivery and
performance by Buyer of this Purchase Agreement and the documents contemplated
hereby (with or without the giving of notice, the lapse of time, or both): (a)
do not require the consent of any third party; (b) will not conflict with the
articles of incorporation of Buyer; (c) will not conflict with, result in a
breach of, or constitute a default under, any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality; and (d) will not conflict with, constitute grounds
for termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of, any agreement, instrument, license or permit to which Buyer is a party or by
which Buyer may be bound.
0.17.Qualification as a Broadcast Licensee. At the time
the Application referred to in Section 6.1 hereof is filed, Buyer will be
qualified under the Communications Act and all other applicable federal, state
and local laws, rules, regulations, and policies to acquire the MBC Stock from
Sellers.
0.18.Financial Qualifications. Buyer has on hand or
access to the financial resources necessary to fulfill Buyer's obligations under
this Purchase Agreement.
0.19.Brokers. Neither Buyer nor any person or entity
acting on its behalf has incurred any liability for any finders' or brokers'
fees or commissions in connection with the transactions contemplated by this
Purchase Agreement
SECTION 4. OPERATION OF STATION PRIOR TO CLOSING.
MBC covenants and agrees that between the date hereof and the TBA
Effective Date, or, in the event the TBA does not become effective, the Closing
Date, MBC shall cause the Company to conduct its business in the ordinary course
in accordance with its past practices (except where such conduct would conflict
with the following covenants or with other obligations of MBC under this
Purchase Agreement), and, except as contemplated by this Purchase Agreement or
with the prior written consent of Buyer, MBC shall cause the Company to act in
accordance with the following:
0.20.Contracts. Neither MBC nor the Company will renew,
extend, amend, terminate, or waive any material right under any Material
Contract or enter into any contract or commitment or incur any obligation
(including obligations relating to the borrowing of money or the guaranteeing of
indebtedness and obligations arising from the amendment of any existing
Contract, regardless whether such Contract is a Material Contract) that will be
binding on MBC or the Company after Closing except for (a) cash time sales
agreements and production agreements made in the ordinary course of business
consistent with the Company's past practices, (b) any Programming Contract or
network affiliation agreement made with the consent of Buyer, (c) other
Contracts entered into in the ordinary course of business consistent with the
Company's past practices that do not involve consideration in excess of $25,000
for any individual Contract or, in the aggregate, $150,000 for all such
Contracts, or (d) any Contract which can be
<PAGE>
terminated upon 30 days notice without penalty. Prior to the Closing Date, MBC
shall cause the Company to deliver to Buyer a list of all Contracts entered into
between the date of this Purchase Agreement and prior to the Closing Date and
shall make available to Buyer copies of all such Contracts, except Contracts
made by Buyer.
0.21.Encumbrances. MBC and the Company will not create,
assume, or permit to exist any mortgage, pledge, lien, or other charge or
encumbrance affecting any of the Assets, except for (a) those in existence on
the date of this Purchase Agreement, (b) those created in connection with
financing provided by the Lender which shall be paid on or before the Closing
Date, (c) liens for current taxes not yet due and payable, or (d) those
otherwise permitted under the Loan Agreement with respect to a capital facility:
provided, that such capital facility must be approved by Buyer, which approval
shall not be unreasonably withheld.
0.22.Employee Obligations. On the Closing Date, neither
MBC nor the Company shall have any liability or obligation to any of their
employees, including, without limitation, any accrued but unpaid vacation or
leave or any severance obligation.
0.23.Dispositions. Neither MBC nor the Company will
sell, assign, lease, or otherwise transfer or dispose of any of the Assets
except in the ordinary course of business or in connection with the acquisition
of replacement property of equivalent kind and value. Neither MBC nor the
Company shall pay any dividend or make any similar distribution during the term
of this Purchase Agreement.
0.24.Mergers. Neither MBC nor the Company will
reorganize, liquidate or merge or consolidate with any other entity.
0.25.Insurance. MBC and the Company shall maintain in
full force and effect policies of insurance of the same type, character, and
coverage as the policies currently carried with respect to the business,
operations, and Assets of the Company.
0.26.Indebtedness and Obligations. MBC and the Company
shall not incur any indebtedness for borrowed money except pursuant to or
permitted by the Loan Agreement. MBC and the Company shall pay all their
obligations as they become due and satisfy any existing indebtedness so that, as
of the Closing Date, MBC and the Company shall have no current or long-term
liabilities relating to the period between the Consummation and the Closing Date
except those liabilities incurred under or permitted by the Loan Agreement in
accordance with the provisions of Section 5.2 hereof. The Loan shall be
discharged at or prior to Closing. Notwithstanding anything herein to the
contrary, neither MBC nor Company shall incur any long-term indebtedness (other
than the Loan) without the prior consent of Buyer, which consent shall not be
unreasonably withheld.
0.27.Amendments. Neither MBC nor the Company shall
amend, change, or modify its Certificate of Incorporation or Bylaws, except with
the written consent of Buyer.
<PAGE>
0.28.Securities. Neither MBC nor the Company will (a)
issue, sell, or otherwise dispose of any of its Stock; (b) acquire (through
redemption or otherwise) any of its Stock; (c) grant any options, warrants, or
other rights to acquire any of its Stock; or (d) issue, sell, or otherwise
dispose of any stock options, bonds, notes, or other securities.
0.29.Licenses. Neither MBC nor the Company shall cause
or permit, by any act or failure to act, any of the Licenses included in
Schedule 2.2(a)(iii) to expire or to be revoked, suspended, or modified in a
material adverse manner, or take any action that could reasonably be expected to
cause the FCC or any other governmental authority to institute proceedings for
the suspension, revocation, or material adverse modification of any of the
Licenses: provided, that this covenant shall not apply to any act or omission of
Buyer pursuant to or in performance of the TBA. MBC and the Company shall
prosecute with due diligence any applications to any governmental authority
necessary for the operation of the Station and pay any and all amounts owed to
the FCC and every other government authority prior to Closing, other than any
fees associated with the sale of the MBC Stock to the Buyer or any transfer fees
required to be paid as a result of the sale to the Buyer, it being the
understanding that the Buyer will pay said fees.
0.30.No Inconsistent Action. Neither MBC, the MBC
Sellers nor the Company shall take any action that is inconsistent with its
obligations under this Purchase Agreement in any material respect or that could
reasonably be expected to hinder or delay the consummation of the transactions
contemplated by this Purchase Agreement. MBC shall conduct and maintain the
business and operation of the Station and the Company such that the
representations and warranties set forth in Section 3 of the Koker Agreement
shall not become any less accurate or complete in any material respect. MBC
shall deliver to Buyer at the Closing revised schedules advising Buyer of any
material change occurring after the Consummation with respect to the
representations and warranties contained in Section 3 of the Koker Agreement.
0.31.Maintenance of Assets. The Company shall maintain
all of the Assets in good condition (ordinary wear and tear excepted),
consistent with their overall condition on the date of this Purchase Agreement,
and use, operate and maintain all of the Assets in a reasonable manner, and the
Company shall maintain inventories of spare parts and expendable supplies at
levels consistent with past practices. If any insured or indemnified loss,
damage, impairment, confiscation, or condemnation of or to any of the Assets
occurs, the Company shall repair, replace, or restore the Assets to their prior
condition as represented in this Purchase Agreement as soon thereafter as
possible, and MBC shall use the proceeds of any claim under any property damage
insurance policy or other recovery solely to repair, replace, or restore any of
the Assets that are lost, damaged, impaired, or destroyed.
0.32.Consents. MBC and the Company shall cooperate with
Buyer to obtain all Consents and estoppel certificates from private parties
without any change in the terms or conditions of any Contract. MBC and the
Company shall promptly advise Buyer of any difficulties experienced in obtaining
any such Consents and of any conditions proposed, considered, or requested for
any such Consents.
<PAGE>
0.33.Books and Records. The Company shall maintain its
books and records in accordance with past practices.
0.34.Notification. MBC and the Company shall promptly
notify Buyer in writing of any unusual or material developments with respect to
the business or operations of the Company and of any material change in any of
the information contained in the representations and warranties contained in
Section 3 of the Koker Agreement.
0.35.Restrictions on Conduct of Other Business. From the
date on which the Purchase Agreement is executed, neither MBC nor the Company
shall conduct any business other than the operation of the Station.
0.36.Compliance with Laws. MBC and the Company shall
comply in all material respects with all laws, rules, policies, and regulations
including, but not limited to, federal, state and local and the FCC's rules and
policies.
0.37.Programming. From the date of execution of this
Purchase Agreement until the TBA Effective Date, or the Closing Date, if the TBA
does not become effective, the Company shall not (a) make any material changes
in the Station's programming policies, except such changes as the Company deems
to be required by the public interest or (b) enter into any Programming Contract
without Buyer's written consent, .
0.38.Preservation of Business. From the date of
execution of this Purchase Agreement until the TBA Effective Date, MBC and the
Company shall use commercially reasonable efforts to preserve the business and
organization of the Station and to preserve the audience of the Station and the
Station's present relationships with suppliers, advertisers, and others having
business relations with them, to the end that the business, operations, and
prospects of the Station shall be preserved at the TBA Effective Date or the
Closing Date, in the event that the TBA does not become effective.
0.39.Tax Matters. MBC, the MBC Sellers and the Company
shall timely file (taking into account all applicable extensions) all federal,
state, local, foreign and other Tax Returns required by law to be filed for
which the due date is on or before the Closing Date. MBC, the MBC Sellers and
the Company shall pay in full or establish adequate reserves for all Taxes and
other charges incurred or due to federal, state or local, foreign or any other
taxing authorities prior to the Closing Date.
0.40.Risk of Loss. The risk of any loss, damage,
impairment, confiscation, or condemnation of any of the assets of MBC and the
Company from any cause whatsoever shall be borne by MBC at all times prior to
the Closing Date.
0.41.Control of the Station. Prior to Closing, Buyer
shall not, directly or indirectly, control, supervise, or direct, or attempt to
control, supervise or direct the operations of the Station; those operations,
including complete control and supervision of all of the Station's programs,
employees, and policies, shall be the sole responsibility of MBC and the
Company.
<PAGE>
Buyer's operations of pursuant to the TBA shall not be deemed in any way to
constitute control of the Station.
0.42.Related Party Transactions. Prior to Closing,
neither MBC nor the Company shall enter into any agreement or other transaction
with any party which is an Affiliate of MBC or the Company or in any way related
to the MBC Sellers, except with the written consent of Buyer.
SECTION 5. GOVERNMENTAL CONSENTS.
05.1.FCC Consent.
(ag) Prior FCC Approval. The sale of the MBC Stock
as contemplated by this Purchase Agreement is subject to the prior consent of
the FCC.
(ah) FCC Application. Within ten (10) business
days after notice to MBC by Buyer that (i) Buyer has been advised by Buyer's FCC
counsel that the transaction contemplated herein is reasonably likely to be
approved upon application to the FCC for consent and approval thereof or (ii)
Buyer has divested its existing television station in the Las Vegas, Nevada DMA,
MBC and Buyer shall prepare and file with the FCC an appropriate application
(the "Application") to secure FCC Consent. The parties shall thereafter
prosecute the Application with all reasonable diligence and otherwise use
commercially reasonable efforts to obtain a grant of the Application as
expeditiously as practicable. Each party agrees to comply with any condition
imposed on it by the FCC Consent, except that no party shall be required to
comply with a condition if compliance with the condition would have a material
adverse effect upon it, including divestiture of any broadcast station licensed
to Buyer or its Affiliates. Buyer and MBC shall oppose any petitions to deny or
other objections filed with respect to the Application and any requests for
reconsideration or judicial review of the FCC Consent. Each party shall provide
the other party with copies of any and all documents received or sent with
respect to the Application.
(ai) Extension of Time. If the Closing shall not
have occurred for any reason within the original effective period of the FCC
Consent, and neither party shall have terminated this Purchase Agreement under
Section 9, the parties shall jointly request an extension of the effective
period of the FCC Consent. No extension of the effective period of the FCC
Consent shall limit the exercise by either party of its right to terminate the
Purchase Agreement under Section 9.
05.12.Confidentiality. Except as necessary for the
consummation of the transaction contemplated by this Purchase Agreement,
including Buyer's obtaining of financing related hereto, and except as and to
the extent required by law, each party will keep confidential any information
obtained from the other party in connection with the transactions contemplated
by this Purchase Agreement. The aforesaid shall apply from the date of this
Purchase Agreement forward unless such information is or becomes publicly
available without any breach by any party under this Section. If this Purchase
Agreement is terminated, each party will return to the other
<PAGE>
party all information obtained by such party from the other party in connection
with the transactions contemplated by this Purchase Agreement.
05.13.Cooperation. Buyer and MBC shall cooperate fully
with each other and their respective counsel and accountants in connection with
any actions required to be taken as part of their respective obligations under
this Purchase Agreement, and Buyer and MBC shall execute such other documents as
may be reasonably necessary to the implementation and consummation of this
Purchase Agreement and otherwise use commercially reasonable efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
under this Purchase Agreement. Notwithstanding the foregoing, and except as
otherwise expressly provided in this Purchase Agreement, Buyer and MBC shall
have no obligation (a) to expend funds to obtain any of the Consents except to
pay any required filing or transfer fees; or (b) to agree to any adverse change
in any License or Contract in order to obtain a Consent required with respect
thereto.
05.14.HSR Act Filing. MBC and Buyer agree to (a) file,
or cause to be filed, with the U.S. Department of Justice ("DOJ") and Federal
Trade Commission ("FTC") all filings, if any, that are required in connection
with the transactions contemplated hereby under the HSR Act within fifteen (15)
business days of the date that the Application for FCC Consent has been filed
with the FCC; (b) submit to the other party, prior to filing, their respective
HSR Act filings to be made hereunder, and to discuss with the other any comments
the reviewing party may have; (c) cooperate with each other in connection with
such HSR Act filings, which cooperation shall include furnishing the other with
any information or documents that may be reasonably required in connection with
such filings; (d) promptly file, after any request by the FTC or DOJ, any
information or documents requested by the FTC or DOJ; and (e) furnish each other
with any correspondence from or to, and notify each other of any other
communications with, the FTC or DOJ that relates to the transactions
contemplated hereunder, and to the extent practicable, to permit each other to
participate in any conferences with the FTC or DOJ.
SECTION 6. CONDITIONS TO OBLIGATIONS OF BUYER AND MBC.
056.1.Conditions to Obligations of Buyer. All
obligations of Buyer at the Closing hereunder are subject at Buyer's option to
the fulfillment prior to or at the Closing Date of each of the following
conditions:
(aj) Representations and Warranties. All
representations and warranties of MBC and the MBC Sellers contained in this
Purchase Agreement shall be true and complete in all material respects at and as
of the Closing Date as though made at and as of that time.
(ak) Covenants and Conditions. MBC, the MBC
Sellers and the Company shall have performed and complied in all material
respects with all covenants, agreements, and conditions required by this
Purchase Agreement to be performed or complied with by them prior to or on the
Closing Date. The representations and warranties of the Company contained in the
Koker Agreement shall be true and complete in all material respects
<PAGE>
as of the Closing Date of the transaction contemplated herein, unless such
representation or warranty was not true and complete at the time of Consummation
of the Koker Agreement.
(al) Consents. All Consents shall have been
obtained and delivered to Buyer (other than any Consent required under any
Contract listed on Schedule 2.2(a)(iv) that is not a Material Contract) without
any adverse change in the terms or conditions of any Contract or any License.
(am) FCC Consent. The FCC Consent shall have been
granted without the imposition on Buyer of any material adverse conditions, and
the FCC Consent shall have become a Final Order: provided, that Buyer may waive
the condition that the FCC Consent become a Final Order if no petition to deny
or other challenge is filed to the FCC Application referenced in Section 6.1 of
this Purchase Agreement.
(an) Governmental Authorizations. The Company
shall be the holder of all FCC Licenses and there shall not have been any
modification, revocation, or non-renewal of any License that could have an
adverse effect on the Station or the conduct of its business and operations. No
proceeding shall be pending the effect of which could reasonably result in the
revocation, cancellation, suspension, adverse modification or expiration of any
FCC License material to the operation of the Station.
(ao) HSR Act. The waiting period under the HSR Act
shall have expired without action by the DOJ or the FTC to prevent the Closing.
(ap) Tax, Lien and Judgment Searches. Buyer shall
have obtained searches for tax, lien and judgment filings in the Secretary of
State's records of the State of Nevada, and in the records of Clark County,
Nevada, made no earlier than ten (10) days prior to the Closing Date showing the
absence of any liens or encumbrances on the MBC Stock, the Company Stock or the
Assets, except liens expressly permitted by this Purchase Agreement or the Loan
Agreement. All liens or encumbrances arising under the Loan Agreement shall be
terminated at the Closing of the transactions contemplated in this Purchase
Agreement.
(aq) Deliveries. MBC and the MBC Sellers shall
have made or stand willing to make at the Closing all the deliveries to Buyer
described in Section 8.2.
(ar) Adverse Change. Between the date of this
Purchase Agreement and the Closing Date, there shall have been no material
adverse change in the business, Assets, properties, financial condition, or
business prospects of the Station, unless such change is the result of Buyer's
acts or omissions in performance of the TBA.
056.12.Conditions to Obligations of MBC. All obligations
of MBC and the MBC Sellers at the Closing hereunder are subject at MBC's option
to the satisfaction by Buyer prior to or at the Closing Date of each of the
following conditions:
<PAGE>
(as) Representations and Warranties. All
representations and warranties of Buyer contained in this Purchase Agreement
shall be true and complete in all material respects on and as of the Closing
Date as though made on and as of that time.
(at) Covenants and Conditions. Buyer shall have
performed and complied in all material respects with all covenants, agreements,
and conditions required by this Purchase Agreement to be performed or complied
with by it prior to or on the Closing Date.
(au) Deliveries. Buyer shall have made or stand
willing to make all the deliveries described in Section 8.3.
(av) FCC Consent. The FCC Consent shall have been
granted without the imposition on MBC of any conditions that need not be
complied with by MBC under Section 6.1 hereof, and Buyer shall have complied
with any conditions imposed on it by the FCC Consent.
(aw) HSR Act. The waiting period under the HSR Act
shall have expired without action by the DOJ or the FTC to prevent the Closing.
SECTION 7. CLOSING AND CLOSING DELIVERIES.
056.7.1.Closing.
(ax) Closing Date.
(vii) Except as provided below in this Section
9.1(a) or as otherwise agreed to by Buyer and the MBC Sellers, the Closing shall
take place after the FCC Consent has become a Final Order: provided, that if the
requirement of a Final Order is waived by Buyer pursuant to Section 7. 1 (d) of
this Agreement, the Closing shall take place at 10:00 a.m. within ten (10) days
after the FCC Consent becomes effective.
(viii) If there is in effect on the date on
which the Closing would otherwise occur pursuant to this Section 8.1 (a) any
judgment, decree, or order that would prevent or make unlawful the Closing on
that date, the Closing shall be postponed until a date within the effective
period of the FCC Consent (as it may be extended pursuant to Section 6.1), to be
agreed upon by Buyer and the MBC Sellers, when such judgment, decree, or order
no longer prevents or makes unlawful the Closing. If the Closing is postponed
pursuant to this paragraph, the date of the Closing shall thereafter be mutually
agreed to by the MBC Sellers and Buyer.
(ay) Closing Place. The Closing shall be held at
the offices of Dickstein Shapiro Morin & Oshinsky LLP in Washington, D.C., or
any other place that is agreed upon by Buyer and the MBC Sellers.
<PAGE>
056.7.1.2.Deliveries by MBC and MBC Sellers. On the Closing
Date, MBC or the MBC Sellers shall deliver to Buyer the following items, in form
and substance reasonably satisfactory to Buyer and its counsel:
(az) Stock. Certificates representing all of the
MBC Stock, which shall be either duly endorsed or accompanied by stock powers
duly executed in favor of Buyer;
(ba) Officer's Certificate. A certificate, dated
as of the Closing Date, executed by a duly appointed officer of MBC certifying:
(i) that the representations and warranties of MBC contained in Section 3 of
this Purchase Agreement are true and complete in all material respects as of the
Closing Date as though made on and as of that date; (ii) that MBC has in all
material respects performed and complied with all of its obligations, covenants,
and agreements in this Purchase Agreement to be performed and complied with by
MBC on or prior to the Closing Date, and (iii) that the condition set forth in
Section 7.1(b) is satisfied;
(bb) Opinion. The opinions of MBC's and the
Company's counsel substantially in the form of Exhibit A annexed hereto;
(bc) Secretary's Certificate. A certificate, dated
as of the Closing Date, executed by MBC's Secretary certifying to the
authenticity of the resolutions, as attached to such certificate, duly adopted
by MBC's Board of Directors authorizing and approving the execution of this
Purchase Agreement and the consummation of the transactions contemplated
thereby;
(bd) Estoppel Certificates. Estoppel certificates
of the lessors of the Studio Lease and the Tower Lease;
(be) Performance of Company Obligations. Evidence
reasonably satisfactory to Buyer that all MBC and Company obligations and
liabilities due or payable by MBC prior to Closing (other than permitted
liabilities described in Section 2.2(b)) including any order of the FCC, shall
have been satisfied in full;
(bf) Resignations. Written resignations, effective
on the Closing Date, of officers and directors of MBC and the Company;
(bg) Release. A release from each of the MBC
Sellers stating that the Stock of such MBC Seller is free and clear of any and
all liens and encumbrances, and that such MBC Seller has no further claim with
respect to the MBC Stock except for payment hereunder;
(bh) Corporate, Financial and Tax Records. All
corporate records (including minute books and stock books and registers), and
financial and tax records of MBC and the Company for a period of three years
predating the Closing;
<PAGE>
(bi) Licenses, Contracts, Business Records, Etc..
Originals or, if not available, true copies of all (1) Licenses, including any
modifications and amendments thereto, (2) all applications, reports, technical
information and engineering studies relating to the Station, (3) all files
required to be maintained by the FCC at the Station or in the Station's public
inspection file, (4) all Contracts, and other operational data or other
information maintained by the Company in the ordinary course, (5) all
blueprints, schematics, working drawings, plans, projections, statistics,
engineering records relating to the Station, and (6) all other business files
and records in the possession of MBC relating to the Station; and
056.7.1.23.Deliveries by Buyer. On the Closing Date,
Buyer shall deliver the following items in form and substance reasonably
satisfactory to MBC and its counsel:
(bj) Payment. The payment described in Section
2.3(a)(ii);
(bk) Opinion. The opinion of Buyer's counsel
substantially in the form set forth at Exhibit B;
(bl) Secretary's Certificate. A certificate, dated
as of the Closing Date, executed by Buyer's secretary, certifying to the
authenticity of resolutions duly adopted by Buyer's Board of Directors
authorizing and approving the execution of this Purchase Agreement and the
consummation of the transactions contemplated thereby; and
(bm) Officer's Certificate. A certificate, dated
as of the Closing Date, executed by a duly appointed officer of Buyer certifying
(i) that the representations and warranties of Buyer contained in Section 4 of
this Purchase Agreement are true and complete in all material respects as of the
Closing Date as though made on and as of that
<PAGE>
date; and (ii) that Buyer has in all material respects performed and complied
with all of its obligations, covenants, and agreements in this Purchase
Agreement to be performed and complied with by Buyer on or prior to the Closing
Date.
SECTION 8. TERMINATION.
8.1.Termination by MBC. This Purchase Agreement may be
terminated by MBC, if MBC is not then in material breach of any of its
obligations hereunder, upon ten (10) days written notice to Buyer, upon the
occurrence of any one of the following:
(bn) Conditions. If, on the date that would
otherwise be the Closing Date, any of the conditions precedent to the
obligations of MBC and the MBC Sellers set forth in Section 7.2 of this Purchase
Agreement have not been satisfied or waived in writing by MBC;
(bo) Judgments. If there shall be in effect on the
date that would otherwise be the Closing Date any judgment, decree, or order
that would prevent or make unlawful the Closing;
(bp) TBA. In the event that the TBA has become
effective and thereafter Buyer has breached any of its material obligations
thereunder, and, upon notice specifying such breach, Buyer fails to cure such
breach within forty (40) days of such notice; or
(bq) Expiration. If the transaction contemplated
herein has not closed within three (3) years from the date of the Purchase
Agreement.
8.12.Termination by Buyer. This Purchase Agreement may
be terminated by Buyer, if Buyer is not then in material breach of its
obligations hereunder, upon ten (10) days written notice to MBC, upon the
occurrence of any of the following:
(br) Conditions. If on the date that would
otherwise be the Closing Date any of the conditions precedent to the obligations
of Buyer set forth in Section 7.1 of this Purchase Agreement has not been
satisfied or waived in writing by Buyer: provided, that Buyer may not terminate
because of any breach of a representation or warranty by MBC or the MBC Sellers
if such breach is caused by the conduct of Buyer under the TBA;
(bs) Judgments. If there shall be in effect on the
date that would otherwise be the Closing Date any judgment, decree, or order
that would prevent or make unlawful the Closing.
(bt) TBA. In the event that the TBA has become
effective and thereafter the Company, MBC or the MBC Sellers have breached any
of their material obligations
<PAGE>
thereunder, and, upon notice specifying such breach, the Company or MBC or the
MBC Sellers, as the case may be, fails to cure such breach within forty (40)
days of such notice; or
(bu) Time Limit. If the transaction contemplated
herein has not closed within three (3) years from the date of this Purchase
Agreement.
73.3.Right to Cure. Notwithstanding anything herein to the
contrary, no material breach shall be deemed to have occurred until the party in
breach has been notified in writing by the other party and provided twenty (20)
days to cure such breach: provided, that, in the event a cure would reasonably
require more than twenty (20) days, the party in breach shall be afforded an
additional twenty (20) days if such party timely initiates reasonable efforts to
effect a cure and provides the other party with satisfactory evidence that the
cure will be effectuated during the extended period; and provided further, that
a party in breach can pay the other party a sum certain if the payment of such
sum will cure the breach prior to or at the Closing; provided further, that the
Closing Date will be extended to allow a party in breach to effect a cure in
accordance with this Section. This right to cure provided in this Section shall
not be applicable to any payment due from the Buyer to MBC.
73.4.MBC's Rights on Buyer's Termination. If this Purchase
Agreement is terminated by MBC because of Buyer's breach of a material
obligation hereunder, MBC shall be entitled to payment from the Buyer of all
sums then due and payable hereunder (not including the Purchase Price) plus any
and all remedies available to MBC at law or equity: provided, that any payments
made by Buyer under Section 2.3(a)(i)(B) hereof shall constitute a credit
against any damages awarded to MBC.
73.5.Buyer's Rights on MBC's Termination. If this Purchase
Agreement is terminated by Buyer because of the Company's, MBC's or the MBC
Sellers' breach of a material obligation hereunder, Buyer shall have the right
of specific performance as its exclusive remedy, except as otherwise set forth
below. The parties recognize that this Purchase Agreement contemplates the sale
of unique assets and that monetary damages would not be adequate to compensate
Buyer for its injury. If any action is brought by Buyer to enforce this Purchase
Agreement, MBC, the Company and the MBC Sellers shall each waive the defense
that there is an adequate remedy at law. Notwithstanding the above, if specific
performance is not available, or if a breach by MBC, the Company or the MBC
Sellers of any of their obligations under this Purchase Agreement causes the FCC
Licenses to be revoked, forfeited or materially impaired, Buyer shall be
reimbursed all payments made by Buyer under Section 2.3(c) hereof and may also
pursue any and all remedies available to it in law or equity against MBC.
73.6.Litigation Expenses. In the event either party files a
lawsuit or other formal legal proceeding for any remedy available under this
Purchase Agreement, the prevailing party shall be entitled to reimbursement from
the other party of all reasonable legal fees and expenses incurred thereby.
73.7.Return of Deposits. In the event (i) the transaction
contemplated by this Purchase Agreement has not closed within three (3) years of
the date hereof and neither party is in material breach, or (ii) the parties
mutually agree to terminate this Agreement, upon
<PAGE>
sale of the FCC Licenses and other Assets of the Station or the Stock of MBC or
the Company, MBC shall, after payment of all sums due under the Loan, pay to
Buyer from all monies retained the amount of all of Buyer's payments made
pursuant to Section 2.3 hereof.
73.8.Condition of MBC. Notwithstanding any other provision
of this Purchase Agreement or any related document described in Section 11.8
hereof, and except for the representations and warranties contained in Section 3
hereof, Buyer acknowledges (i) that the MBC Sellers have not and do not assume
any individual liability hereunder, and (ii) Buyer is aware of the financial
condition of MBC at the time of execution of this Purchase Agreement, including
MBC's lack of significant capital other than the Loan and that, but for the
provisions of Section 2.3 hereof, MBC may not have sufficient reserves to pay
its debts in the ordinary course as they come due. In consideration of the
foregoing and of MBC's and the MBC Sellers' willingness to enter into the
transaction contemplated hereby, Buyer expressly waives against all or any one
of the MBC Sellers, any demand, claim, action, suit, charge, proceeding,
assessment or judgment, whether based in contract, tort, or any other common law
or statutory cause of action, except to the extent that the MBC Sellers may be
liable pursuant to Section 3 hereof for breach of the representations and
warranties contained therein.
SECTION 9. INDEMNIFICATION.
79.1.Survival. All representations and warranties of Buyer,
MBC and the MBC Sellers herein and all covenants of Buyer and MBC herein with
respect to periods prior to Closing shall be deemed continuing representations,
warranties and covenants, and shall survive the Closing. Any investigations by
or on behalf of any party hereto shall not constitute a waiver as to enforcement
of any representation, warranty, or covenant contained in this Purchase
Agreement. No notice or information delivered by either party shall affect the
other party's right to rely on any representation, warranty, or covenant made by
such party or relieve such party of any obligations under this Purchase
Agreement as the result of a breach of any of its representations and
warranties.
79.2.Indemnification by MBC Sellers. After the Closing, and
regardless of any investigation made at any time by or on behalf of Buyer or any
information Buyer may have, the MBC Sellers jointly and severally hereby agree
to indemnify and hold Buyer harmless against and with respect to, and shall
reimburse Buyer for any and all losses, liabilities, or damages resulting from
any material breach of any warranty or representation of the MBC Sellers
contained in Section 3 of this Purchase Agreement, and any and all out-of-pocket
costs and expenses, including reasonable legal fees and expenses, incident to
any action, suit, proceeding, claim, demand, assessment, or judgment incident to
the foregoing or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this indemnity.
79.3.Indemnification by Buyer. After the Closing, and
regardless of any investigation made at any time by or on behalf of MBC or any
information MBC may have, Buyer hereby agrees to indemnify and hold MBC harmless
against and with respect to, and shall reimburse MBC for:
<PAGE>
(bv) any and all losses, liabilities, or damages
resulting from any material breach of any warranty or representation or
nonfulfillment of any covenant by Buyer contained herein or in any certificate,
document, or instrument delivered to MBC hereunder; and
(bw) any and all out-of-pocket costs and expenses,
including reasonable legal fees and expenses, incident to any action, suit,
proceeding, claim, demand, assessment, or judgment incident to the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
79.34.Procedure for Indemnification. The procedure for
indemnification shall be as follows:
(bx) Notice. The party claiming indemnification
(the "Claimant") shall promptly give notice to the party from which
indemnification is claimed (the "Indemnifying Party") of any claim, whether
between the parties or brought by a third party, specifying in reasonable detail
the factual basis for the claim. If the claim relates to an action, suit, or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within five (5) business days after receipt of written notice of
such action, suit, or proceeding was given to Claimant: provided, that no delay
in providing such notice shall excuse any party's indemnification obligations
hereunder, unless such delay prejudices the Indemnifying Party and then the
Indemnifying Party's obligations shall be reduced only to the extent of such
prejudice.
(by) Investigation and Payment. With respect to
claims solely between the parties, following receipt of notice from the Claimant
of a claim, the Indemnifying Party shall have thirty (30) days to make such
investigation of the claim as the Indemnifying Party deems necessary or
desirable. For purposes of such investigation, the Claimant agrees to make
available to the Indemnifying Party and its authorized representatives the
information relied upon by the Claimant to substantiate the claim. If the
Claimant and the Indemnifying Party agree at or prior to the expiration of the
30-day period (or any mutually agreed upon extension thereof) to the validity
and amount of such claim, the Indemnifying Party shall immediately pay to the
Claimant the full amount of the claim. If the Claimant and the Indemnifying
Party do not agree within the 30-day period (or any mutually agreed upon
extension thereof), the Claimant may seek appropriate remedy at law or equity.
(bz) Third Party Claims. With respect to any claim
by a third party as to which the Claimant is entitled to indemnification under
this Purchase Agreement, the Indemnifying Party shall have the right at its own
expense, to participate in or assume control of the defense of such claim, and
the Claimant shall cooperate fully with the Indemnifying Party, subject to
reimbursement for actual out-of-pocket expenses incurred by the Claimant as the
result of any request by the Indemnifying Party. If the Indemnifying Party
elects to assume control of the defense of any third-party claim, the Claimant
shall have the right to participate in the defense of such claim at its own
expense. If the Indemnifying Party fails to assume control or otherwise
participate in the defense of any third-party claim within ten (10) business
days of receiving notice under subsection (a) of this section (unless some
action is required prior to such
<PAGE>
date), it shall be bound by the results obtained in good faith by the Claimant
with respect to such claim.
(ca) Expeditious Action. If a claim, whether
between the parties or by a third party, requires immediate action, the parties
will make every reasonable effort to reach a decision with respect thereto as
expeditiously as possible.
(cb) Coverage. The indemnification rights provided
in Section 10.2 and Section 10.3 shall extend to the members, partners,
shareholders, officers, directors, employees, representatives, and affiliated
entities of any Claimant: provided, that for the purpose of the procedures set
forth in this Section 10.4, any indemnification claims by such parties shall be
made by and through the Claimant.
79.345.Special Indemnity with Respect to the Koker
Agreement. In the event that either party hereto learns of a material breach of
any representation or warranty contained in Section 3 of the Koker Agreement
(such breach having occurred at or before the Consummation thereof), such party
shall notify the other party, and MBC shall assert a claim against the Sellers
for indemnity pursuant to the Koker Agreement. On or before the Closing Date,
any proceeds derived therefrom shall be first allocated to remedy the material
breach giving rise to such claim, with any remaining amount held in a segregated
account for the benefit of the Lenders, or, at Closing, for Buyer.
79.346.Time Limits. Notwithstanding anything in this
Purchase Agreement to the contrary, neither party shall indemnify or otherwise
be liable to the other party with respect to any claim for any breach of a
representation or warranty, or for the breach of any covenant contained in this
Purchase Agreement, unless notice of the claim is received within three years
after the Closing Date.
SECTION 10. MISCELLANEOUS
79.10.1.Fees and Expenses. Buyer shall pay any and all
filing fees, transfer taxes, document stamps, or other charges levied by any
governmental entity on the fulfillment of the terms and conditions of this
Purchase Agreement, including but not limited to (i) fees associated with the
transfer of Stock from MBC to Buyer; (ii) fees charged by the FCC in connection
with obtaining the FCC Consent; (iii) filing fees payable in connection with any
HSR Act filing, to the extent required; and (iv) the costs and expenses of title
reports, surveys, environmental surveys and tax, lien and judgment searches.
79.10.2.Notices. All notices, demands, and requests required
or permitted to be given under the provisions of this Purchase Agreement shall
be in writing and shall be addressed as follows:
_______If to MBC or Thomas Allen
MBC Sellers: Montecito Broadcasting Corporation
2101 East Fourth Street
<PAGE>
Suite 200A
Santa Ana, CA 92705
with copies (which shall not constitute notice) to:
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, NW
Washington, DC 20037-1526
If to Buyer: Robert Quicksilver, Esq.
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, MD 21211
with a copy (which shall not constitute notice) to:
Steve Thomas, Esq.
Thomas & Libowitz
100 Light Street
Suite 1100
Baltimore, MD 21202
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.2.
Notices shall be sent by registered or certified mail, postage prepaid and
return receipt requested, by overnight courier service, charges prepaid, or by
hand, and shall be deemed to have been received on the date of hand-delivery or
the date receipt shown on the return receipt.
0.3.Assignment. MBC shall not assign its rights and
obligations under this Purchase Agreement without the express written consent of
Buyer, which consent shall not be unreasonably withheld. Buyer may assign its
rights and obligations under this Purchase Agreement to any other party:
provided, that Buyer shall remain liable for the performance of all of Buyer's
obligations hereunder. Notwithstanding the above, either party may assign their
rights hereunder to the Lender in connection with the Loan Agreement.
0.4.Benefit and Binding Effect. This Purchase Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
<PAGE>
0.5.Further Assurances. The parties shall take any actions
and execute any other documents that may be necessary or desirable to the
implementation and consummation of this Purchase Agreement.
0.6.GOVERNING LAW. THIS PURCHASE AGREEMENT SHALL BE
GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND (WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF).
0.7.Headings. The headings herein are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Purchase Agreement.
0.8.Entire Agreement. This Purchase Agreement, the schedules
exhibits hereto, all documents, certificates, and other instruments to be
delivered by the parties pursuant hereto, the Letter Agreement, the Option
Agreement and the TBA collectively represent the entire understanding and
agreement between Buyer, MBC and the MBC Sellers with respect to the subject
matter of this Purchase Agreement. In the event of a conflict between the
provisions of this Purchase Agreement and any other agreement between the
parties, the provisions of this Purchase Agreement shall prevail. This Purchase
Agreement supersedes all prior and contemporaneous negotiations between the
parties and cannot be amended, supplemented, or changed except by an agreement
in writing that makes specific reference to this Purchase Agreement and that is
signed by the party against which enforcement of any such amendment, supplement,
or modification is sought.
0.9.Waivers. Except as otherwise provided in this Purchase
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Purchase Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Purchase Agreement.
0.10.Construction Agreement. Although this Purchase
Agreement has been prepared by or on behalf of one Party, it shall not be more
strictly construed against that Party.
0.11.Counterparts. This Purchase Agreement may be signed in
counterparts, and all such counterparts shall collectively be deemed to be one
and the same document.
IN WITNESS WHEREOF, this Purchase Agreement has been duly executed by
Buyer and MBC as of the date written below as to each.
SINCLAIR COMMUNICATIONS, INC.
<PAGE>
By:____________________________________
MONTECITO BROADCASTING
CORPORATION
By:______________________________________
Thomas Allen, Executive Vice President
SELLING STOCKHOLDERS
________________________________________
Jamie Kellner
________________________________________
Douglas Gealy
________________________________________
Thomas Allen
<PAGE>
Schedule 2.2(a)(i)
Tangible Personal Property
See List Attached
<PAGE>
Schedule 2.2(a)(ii)
Leases
See Attached
<PAGE>
Schedule 2.2(a)(iii)
Licenses
See Attached
<PAGE>
Schedule 2.2(a)(iv)
Contracts
See Attached List
<PAGE>
Schedule 2.2(a)(v)
Intangibles
None
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
THE STOCKHOLDERS OF MAX INVESTORS, INC. ,
MAX INVESTORS, INC.
AND
MAX MEDIA PROPERTIES LLC
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS................................................................3
2. SALE OF SHARES/EXCLUDED ASSETS.............................................3
2.1 Sale of Shares.................................................3
2.2 Excluded Assets................................................4
3. PURCHASE PRICE.............................................................6
3.1 Payment........................................................6
3.2. Disbursing Agent...............................................6
4. CLOSING....................................................................7
5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7
5.1. Representations as to Shares, Etc..............................7
c.No Conflicts...............................................8
5.2. Representations and Warranties as to the Company...............8
a.Organization and Good Standing.............................8
b.Capitalization.............................................9
c.No Conflicts...............................................9
d.Financial Statements.......................................9
e.Employee Benefit Plans....................................11
f.Labor 11
g.Insurance.................................................11
h. Material Contracts.......................................11
i.Compliance with Laws......................................12
j.Litigation................................................12
k.No Brokers................................................12
l.Consents..................................................12
m.Tax Matters...............................................12
n.Dividends.................................................15
o.Accounts Receivable.......................................15
p.Company Assets............................................15
q.Representations as to the Company Interests...............15
5.3. Representations and Warranties as to the MMP and the FCC
Licensee Entities.............................................15
a.Organization and Good Standing............................16
b.Capitalization of MMP.....................................16
c.Organization and Capitalization of the FCC License
Entities..................................................16
d.No Conflicts..............................................17
e.Real Property.............................................17
f.Personal Property.........................................18
i
<PAGE>
g.Financial Statements......................................19
h.FCC.......................................................21
i.Intellectual Property.....................................21
j.Employee Benefit Plans....................................22
k.Labor.....................................................24
l.Insurance.................................................25
m. Material Contracts.......................................25
n.Compliance with Laws......................................25
o.Litigation................................................25
p.Consents..................................................26
q.Environmental.............................................26
r.Tax Matters...............................................27
s.Accounts Receivable.......................................29
t.Representations as to MMP Interests.......................29
5.4. Representations and Warranties as to MTR......................30
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................30
6.1. Organization and Good Standing................................30
6.2. Execution and Effect of Agreement.............................30
6.3. No Conflicts..................................................30
6.4. Consents......................................................31
6.5. Litigation....................................................31
6.6. No Brokers....................................................31
6.7. Purchaser Qualifications......................................31
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............32
7.1. Limitation; Survival..........................................32
8. TAX MATTERS...............................................................32
8.1. Section 338 Election..........................................32
8.2. Tax Returns...................................................32
8.3. Apportionment.................................................33
8.4. Cooperation in Tax Matters....................................33
8.5. Certain Taxes.................................................34
8.6. FIRPTA........................................................34
8.7. Section 754 Election..........................................34
8.8. Closing Date Actions..........................................34
ii
<PAGE>
9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................34
9.1. Further Assurances and Assistance.............................34
9.2. Access to Information.........................................34
9.3. Conduct of Business Prior to Closing..........................35
9.4. H-S-R Act.....................................................38
9.5. FCC Application...............................................38
(c)FCC Applications to Transfer Certain FCC Licenses.....39
9.6. Books and Records.............................................39
9.7. Employees and Employee Benefits...............................40
9.8. Interruption of Broadcast Transmission........................40
9.9. Interpretation of Certain Provisions..........................41
9.10. Collection of Accounts Receivable.............................41
9.11. Other Acquisitions............................................43
9.12. Payment of Certain Liabilities Prior to Closing...............43
10. INDEMNIFICATION..........................................................44
10.1. Indemnification of Purchaser by Sellers.......................44
10.2. Indemnification of Sellers by Purchaser.......................45
10.3. Limitations and Other Provisions Regarding Indemnification
Obligations...................................................45
10.4. Notice of Claim Defense of Action.............................47
10.5 Tax Contests..................................................49
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............50
11.1. Conditions Precedent to the Obligation of Purchaser...........50
11.2. Conditions Precedent to the Obligation of Sellers.............51
12. DELIVERIES AT THE CLOSING................................................52
12.1. Deliveries by Sellers.........................................52
12.2. Deliveries by Purchaser.......................................54
13. EXPENSES.................................................................54
14. TERMINATION..............................................................55
14.1 Termination...................................................55
14.2 Procedure and Effect of Termination...........................55
15. NOTICES..................................................................56
16. SELLERS' AGENTS..........................................................58
iii
<PAGE>
16.1. Sellers' Agents...............................................58
17. MISCELLANEOUS............................................................59
17.1. Headings......................................................59
17.2. Schedules and Exhibits........................................59
17.3. Execution in Counterparts.....................................59
17.4. Entire Agreement..............................................59
17.5. Governing Law.................................................59
17.6. Modification..................................................59
17.7. Successors and Assigns........................................60
17.8. Waiver........................................................60
17.9. Severability..................................................60
17.10. Announcements.................................................60
17.11. Specific Performance..........................................61
17.12. Fees and Expenses.............................................61
17.13. Third Party Beneficiaries.....................................61
17.14. Interpretation................................................61
ANNEX 1 - DEFINITIONS
ANNEX 2 - SELLERS
EXHIBITS
Exhibit A - Deposit Escrow Agreement
Exhibit B - Indemnification Escrow Agreement
Exhibit C - MMP II Assignment and Assumption Agreement
Exhibit D - Time Brokerage Agreements
Exhibit E - Opinion of Counsel,
Clark & Stant, P.A.
Exhibit F - Opinion of Sellers' FCC Counsel
Exhibit G - Opinion of Counsel,
Thomas & Libowitz, P.A.
iv
<PAGE>
SCHEDULES
5.1a(ii) Encumbrances of Stock
5.1a(vi) Options and Agreements
5.1b Share Brokers
5.1c No Conflicts
5.2b Capitalization
5.2c Conflicts
5.2d Financial Statements
5.2e Employee Benefit Plans
5.2f Labor
5.2g Insurance
5.2h Material Contracts
5.2i Compliance with Laws
5.2j Litigation
5.2k Brokers
5.2l Consents
5.2m(a) Tax Matters
5.2m(c) Tax Basis and Tax Elections
5.2q Company Interest
5.3b Capitalization
5.3d Conflicts
5.3e Real Property
5.3f Personal Property
5.3g Financial Statements
5.3h FCC Licenses
5.3i Intellectual Property
5.3j Employee Benefit Plans
5.3k Labor
5.3k(d) Employee Terminations or Demands
5.3l Insurance
5.3m Material Contracts
5.3n Compliance with Laws
5.3o Litigation
5.3p Consents
5.3q Environmental Matters
5.3r(a) Tax Matters
5.3r(c) Tax Basis and Tax Elections
5.3t Representations as to MMP Interests
5.4b Capitalization
5.4d Financial Matters
5.4h Material Contracts
5.4l(a) Tax Matters
5.4l(c) Tax Basis and Tax Elections
5.4o Representations as to MTR Interests
v
<PAGE>
6.3 Conflicts
6.4 Consents
6.5 Litigation
6.7 Purchaser Qualifications
9.3(c) Planned Asset Dispositions
vi
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of December, 1997, is entered into by and among Sinclair
Communications, Inc., a Maryland corporation ("Purchaser"), Catherine M.
Daniels, Terrence D. Daniels, Charles P. Daniels, Christopher C. Daniels,
Courtnay P. Daniels, Edward T. Harvey, R. Ted Weschler, Anthony R. Ignaczak,
Stephen M. Burns, J. Hunter Reichert, Jeffrey J. Teschke, Anthony F. Apollaro,
Matthew T. Goodwin, Catherine J. Rotolo, John T. Herzog WFS Roll Over IRA, John
T. Herzog Custodian - Paul Brandon Herzog, John T. Herzog Custodian - Karen
Chelsea Herzog, Allen B. Rider III, Allen B. Rider III SEP IRA, Allen B. Rider
III Custodian - Edward Whitcomb Rider, Allen B. Rider III Custodian - Virginia
Ticknor Rider, James C. Wheat III, James C. Wheat IRA, Jasper L.L.C., Blandfield
Associates, L.L.C., Brenton S. Halsey, James E. Rogers, Wallace Stettinius,
Edward Villanueva, Alexandra D. Hunley, Carolyn E. Underwood IRA, Karon I.
Wagner IRA, Commax Partners, L.P., a Virginia limited partnership, Quad-C
Partners III, L.P., a Virginia limited partnership, Quad-C Partners IV, L.P., a
Virginia limited partnership, and Commonwealth Investors II, L.P., a Virginia
limited partnership. (each a "Seller" and, collectively, "Sellers"), Max
Investors, Inc., a Virginia corporation (the "Company"), and Max Media
Properties LLC, a Virginia limited liability company ("MMP").
RECITALS:
---------
WHEREAS, Sellers own collectively all of the issued and outstanding
shares of capital stock, [par value $1.00] (the "Stock") of the Company; and
WHEREAS, the Company is owner of 3,133,897 Class C Membership Units
(out of a total of 11,631,431 Membership Units) of MMP; and
WHEREAS, Purchaser has simultaneously with the execution of this
Agreement, entered into a Stock Purchase Agreement (the " MRI Agreement") to
acquire from the stockholders of Max Radio Inc. ("MRI") all of the issued and
outstanding stock of MRI, which owns 31% of the equity of MTR Holding Corp., a
Virginia corporation ("MTR"); 3,069,000 Class A Membership Units (out of a total
11,631,431 Membership Units) of MMP, and a 2% limited partnership interest in
Radio License L.P., a Virginia limited partnership ("RLLP"), the owner holder of
the FCC Licenses of the Radio Stations (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to
acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500
Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP,
69% of the
1
<PAGE>
equity of MTR and a 2% limited partnership interests in the Television Licensees
(as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "Management Agreement")
to acquire from Max Management LLC, a Virginia corporation limited liability
company ("Management"), 188,034 Class AC Membership Units (out of a total
11,631,431 Membership Units) of MMP; and
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a
total 11,631,431 Membership Units) of MMP; and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of television stations WSYT-TV in the Syracuse, New York market,
WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio
market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri
and KETK-TV in the Tyler, Texas market (each a "Television Station" and
collectively, the "Television Stations"); and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina
("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro,
North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG";
together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in
Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in
Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky,
pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television
station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement
with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas
pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA
Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max
2
<PAGE>
Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, the parties desire that, before the Closing and after receipt
of any required approval of the FCC, MMP transfer all partnership interests it
holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a
newly-created Virginia limited liability company ("MMP II"), (the "MMP II
Transfers"); and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the membership interests in MMP
II; and
WHEREAS, on the consummation of this Agreement, the MTC Agreement, the
MRI Agreement and the Management Agreement (collectively, the "Purchase
Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431
Membership Units of MMP and all general and limited partnership interests in the
FCC Licensee Entities, other than in Dayton LP, Tri-Cities LP, (the "MMP II
Licenses); and
WHEREAS, MMP holds certain assets more fully described below (the
"Excluded Assets") that will not be acquired by Purchaser; and
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, all of the issued and outstanding shares of Stock.
SECTION 1
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex 1 hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
SECTION 2
SALE OF SHARES/EXCLUDED ASSETS
------------------------------
2.1 SALE OF SHARES. At the Closing, each Seller shall sell, assign,
transfer and deliver to Purchaser, and Purchaser shall purchase from each
Seller, that number and class of shares of Stock as is set forth opposite the
name of each Seller in Annex 2 hereto. Each Seller consents to the sale of stock
by each other Seller pursuant to this Agreement.
3
<PAGE>
2.2 EXCLUDED ASSETS.
(a) The following assets (collectively, the "Excluded Assets")
may be distributed by MMP to the holders of Membership Units in MMP, and may be
distributed by the Company to their shareholders or their designee prior to the
Closing:
(i) 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, and Treasury Bills;
(ii) all furniture, fixtures and equipment located at the
principal place of business of MMP, the address of which is 900 Laskin Road,
Virginia Beach, Virginia 23451 and the leasehold interests therein;
(iii) the Option Agreement with Gary and Susan Clarke,
WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and
agreements related thereto and all related collateral and other documents;
(iv) all notes payable and other amounts due from MCC Air
Inc. and all assets, including real property, promissory notes and agreements
relating solely to the sale and lease of WMQX-AM, Greensboro, NC to
Winston-Salem Radio Corporation and Willis Broadcasting Corporation;
(v) subject to the terms and conditions of the
Indemnification Escrow Agreement (as defined below), the accounts receivable of
the Company and of MMP;
(vi) the names "Max Media," "Max Television," "Max Radio"
and "Max Media Properties.
Any distribution of Excluded Assets by MMP will be made pro
rata to the holders of Membership Units in MMP unless otherwise agreed to by
Purchaser.
(b) Notwithstanding anything to the contrary in Section 2.2(a)
above, the Company, MTR and MMP shall each retain an amount of cash, cash
equivalents and other cash items that are sufficient to cover and pay their
respective Closing Date Liabilities. For purposes of this Agreement, the term
"Closing Date Liabilities" shall mean the liabilities of the Company, MTR and
MMP (other than for Funded Debt, liabilities with respect to program contract
liabilities accruing after the Closing Date and liabilities with respect to
trade and barter obligations arising after the Closing Date) whether or not
disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations
prior to the Closing Date; and (C) for all liabilities of any kind whatsoever
4
<PAGE>
under that certain Mutual Release dated as of January 1, 1997 and that certain
Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder
Settlement Agreements"). Except as otherwise provided in this Section 2.2(b),
the Closing Date Liabilities shall be determined in accordance with GAAP
consistently applied with prior periods, and shall be consistent with the books
and records of the Company, MTR and MMP. The amount of cash, cash equivalents
and cash items retained to cover the Closing Date Liabilities shall not be
considered Excluded Assets.
(i) MMP shall deliver to Purchaser at the Closing a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of the Closing Date Liabilities, which shall be used to determine the amount of
cash, cash equivalents and other cash items required to be retained by the
Company and MMP pursuant to this Section 2.2(b).
(ii) Within one hundred twenty (120) days of the Closing,
Purchaser shall cause its accountant to prepare and deliver to Sellers a
certificate setting forth its calculation of the Closing Date Liabilities (the
"Accountant's Certificate"). The amount of the Closing Date Liabilities as set
forth on the Accountant's Certificate shall be final unless Sellers' Agents
notify Purchaser within thirty (30) days from their receipt of the Accountant's
Certificate that they dispute the Accountant's Certificate. If Sellers' Agents
and Purchaser are unable to agree on the amount of the Closing Date Liabilities
within fifteen (15) days after Sellers' Agents' notice, the parties shall
jointly appoint and engage an independent accountant of national or regional
repute (the "Independent Accountant") to perform an independent evaluation of
the Closing Date Liabilities. The findings of the Independent Accountant as to
the amount of the Closing Date Liabilities shall be final and binding on the
parties hereto.
(iii) Upon the determination of the Closing Date
Liabilities becoming final which is different from the Estimate Certificate
either (A) Purchaser shall be entitled to a payment from the Indemnification
Escrow equal to the amount by which the aggregate amount of the Closing Date
Liabilities exceeds the Closing Date Liabilities shown on the Estimate
Certificate, taking into account any amounts paid from the Indemnification
Escrow under provisions similar to this provision in the MTC Agreement, the
Management Agreement and the MRI Agreement, or (B) Purchaser shall pay to
Disbursing Agent an amount by which the aggregate amount of Closing Date
Liabilities shown on the Estimate Certificate exceeds the Closing Date
Liabilities as finally determined.
(iv) For purposes of determining the amount of the Tax
liabilities of the Company to be included in the Closing Date Liabilities (the
"Closing Date Tax Liabilities"), such Tax liabilities shall include all Tax
liabilities of the Company that are attributable to items of income, gain, loss,
deduction and credit of MMP and the FCC Licensee Entities accruing through and
including the Closing Date, notwithstanding that such items may be reported by
the Company, Purchaser, or Purchaser's Affiliates in Taxable
5
<PAGE>
Periods ending after the Closing Date. The amount of the Tax liabilities
attributable to the Tax items of MMP and the FCC Licensee Entities shall be
determined by assuming that the taxable years of MMP and the FCC Licensee
Entities, as well as the taxable years of the Company, end as of the close of
business on the Closing Date and by assuming Purchaser's compliance with Section
8.8. The Closing Date Tax Liabilities shall not include, and Purchaser shall
have no rights of Indemnification rights under Section 10 with respect to, any
Tax Liabilities arising from the MMP II Distribution
(v) Notwithstanding anything to the contrary contained in
this Section 2.2, the final determination of the Closing Date Liabilities
hereunder shall not affect Purchaser's indemnification rights pursuant to
Section 10 to the extent the actual Closing Date Liabilities exceed the final
determination thereunder.
SECTION 3
PURCHASE PRICE
--------------
3.1 Payment. In consideration for the sale of the Stock, Purchaser
shall pay to Sellers the aggregate amount of the "Purchase Price", payable as
follows:
(1) Purchaser has deposited with First Union National Bank, as
Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which
shall be distributed in accordance with the Deposit Escrow Agreement in the form
attached hereto as Exhibit A.
(2) At the Closing, the "Initial Deposit" which shall be held
in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent
pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto
(the "Indemnification Escrow Agreement"); and
(3) the balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available funds to the accounts
specified by Disbursing Agent pursuant to wire instructions delivered in writing
to Purchaser not later than two (2) Business Days prior to the Closing.
3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase
Price to Sellers in accordance with the Disbursement Agreement.
6
<PAGE>
SECTION 4
CLOSING
-------
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One
Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on such
day), on the later to occur of (a) five Business Days after all applicable
waiting periods under the H-S-R Act shall have expired or terminated, or (b)
five Business Days after the Final Order (the date of Closing being the "Closing
Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in
which case Purchaser shall give Sellers reasonable notice of the Closing, or
(ii) the parties shall mutually agree upon a different date or location;
provided, however, that in no event shall the Closing be held prior to March 18,
1998; and provided, further, that in the event the Closing is postponed past
July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or
otherwise, Sellers, in their sole discretion, may postpone the Closing to
September 1, 1998. In no event shall Closing occur later than the Termination
Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
5.1. REPRESENTATIONS AS TO SHARES, ETC. Each Seller hereby represents
and warrants to Purchaser that:
a. (i) such Seller is the record and the beneficial owner of
all the shares of the Stock set forth opposite such Seller's name in Annex 2
hereto; (ii) such Seller holds of record and owns beneficially all of the shares
of the Stock set forth opposite such Seller's name in Annex 2 hereto free and
clear of any lien, security interest, pledge or encumbrance other than those set
forth on Schedule 5.1a(ii) hereof, all of which will be released at or before
the Closing; (iii) except for any lien, security interest, pledge or encumbrance
created by Purchaser on or subsequent to the Closing Date, upon transfer of the
Stock set forth opposite such Seller's name in Annex 2 hereto to Purchaser at
the Closing, Purchaser will have legal and equitable title to such Stock, free
and clear of any lien, security interest, pledge or encumbrance; (iv) such
Seller has full power and authority to enter into this Agreement, and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary action on the part of such Seller, and if such Seller is an entity
that such entity is duly and validly organized, existing and in good standing in
the jurisdiction of its formation; (v) this Agreement has been duly executed and
delivered by such Seller and constitutes a legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms,
subject to applicable bankruptcy,
7
<PAGE>
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or equity);
and (vi) except as described on Schedule 5.1a(vi), the shares are not subject to
any option(s) warrant(s), voting trusts, outstanding proxies, registration
rights agreement(s), or other agreements regarding voting rights (other than
that contemplated by Section 16 hereof).
b. Except as described on Schedule 5.1b, no Seller nor anyone
acting on behalf of any Seller, has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders fees in connection
with the sale of the Stock and the transactions contemplated by this Agreement.
The payment of such brokerage fees, commissions, or finders fees, if any, shall
remain the sole obligation of Sellers.
c. NO CONFLICTS. Except as described on Schedule 5.1(c),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, as to any Seller (a) violate any
provision of the articles of incorporation, by-laws, general or limited
partnership agreement or limited liability company operating agreement with
respect to any Seller that is an entity, (b) violate any provision of applicable
law, rule and regulation, which violation would prevent or interfere with any
Seller's ability to perform hereunder, or (c) conflict with or result in a
breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent
decree, or any agreement, indenture, mortgage or instrument, to which any Seller
is a party or to which their property is subject, or constitutes to default
thereunder, where such conflict, breach, right of termination, acceleration or
default would prevent or materially interfere with any Seller's ability to
perform hereunder.
5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY.
Sellers and the Company, jointly and severally, hereby represent and
warrant to Purchaser as to the Company as follows:
a. ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia hereto and has full corporate power and
authority to carry on its business as it is now being conducted and to own and
use the assets owned and used by it. The Company is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. The Company does not own any direct or indirect
subsidiary corporation.
b. CAPITALIZATION. The designations of each class of the
capital stock of the Company and the number of authorized and issued and
outstanding shares thereof is as
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described on Schedule 5.2b. All the shares of the Stock have been validly issued
and are fully paid and nonassessable and are held of record by the respective
Sellers as set forth on Annex 2 hereto. Except as described on Schedule 5.2b,
(i) no shares of capital stock of the Company is held in treasury, (ii) there
are no other issued or outstanding equity securities of the Company, (iii) there
are no stock appreciation rights, phantom stock rights, profit participation
rights, or other similar rights with respect to shares outstanding; and (iv)
there are no other issued or outstanding securities of the Company convertible
or exchangeable at any time into equity securities of the Company. The Company
is not subject to any commitment or obligation that would require the issuance
or sale of additional shares of capital stock of the Company at any time under
options, subscriptions, warrants, rights or any other obligations. Schedule 5.2b
sets forth the equity interests in any corporation, partnership, limited
liability company, joint venture or other entity owned by the Company.
c. NO CONFLICTS. Except as described on Schedule 5.2c, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of incorporation or by-laws of the Company, (ii) violate any provision of
applicable law, rule and regulation, which violation would prevent or materially
interfere with Sellers' ability to perform hereunder or have a Material Adverse
Effect, or (iii) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which the Company is a party or to which its property is
subject, or constitute a default thereunder, where such conflict, breach, right
of termination, acceleration or default would prevent or materially interfere
with the Company's ability to perform hereunder or have a Material Adverse
Effect; provided, however, that clause (iii) above shall be limited to Sellers'
Knowledge.
d. FINANCIAL STATEMENTS. As of the date of this Agreement, the
Company has not issued financial statements. Except as set forth on Schedule
5.2.d hereto, since February 14, 1997, the date the Company first held assets,,
there has not been any Material Adverse Effect on the business, financial
condition, operations or results of operations of the Company taken as a whole.
Without limiting the generality of the foregoing, since February 14, 1997,
except as set forth on Schedule 5.2d:
(i) the Company has not sold, leased, transferred, or
assigned any material assets, tangible or intangible;
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<PAGE>
(ii) the Company has not entered into any material
agreement, contract, lease, or license;
(iii) the Company has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which the Company is a party or by which the Company is bound;
(iv) the Company has not imposed any security interest
upon any of its assets, tangible or intangible;
(v) the Company has not made any material capital
expenditures;
(vi) the Company has not made any material capital
investment in, or any material loan to, any Person;
(vii) the Company has not directly created, incurred,
assumed, or guaranteed any indebtedness for borrowed money and capitalized lease
obligations;
(viii) the Company has not granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property;
(ix) there has been no change made or authorized in the
charter or bylaws of the Company;
(x) the Company has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(xi) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) the Company has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees;
(xiv) the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
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<PAGE>
(xv) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(xvi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Company Plan or
Company Benefit Arrangement);
(xvii) the Company has not made any other material change
in employment terms for any of its directors, officers, and employees;
(xviii) the Company has not made or changed any material
Tax election or taken any other action with respect to Taxes inconsistent with
past practices;
(xix) the Company has not adopted any material change in
any method of accounting or accounting practice, except as contemplated or
required by GAAP; and
(xx) except as set forth in this Agreement, the Company
has not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. The Company does not, and has not
in the past, instituted or maintained any Benefit Arrangement or Benefit Plan.
Neither the Company nor any ERISA Affiliate has sponsored, maintained, or had
any liability (direct or indirect, actual or contingent) with respect to any
Benefit Plan Subject to Title IV of ERISA. Neither the Company nor any ERISA
Affiliate has ever made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37). The Company has no liability (whether
actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement.
f. LABOR. The Company has not employed any employees.
g. INSURANCE. The Company maintains no insurance policies.
h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of
all the Material Contracts and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts listed on Schedule 5.2h are legal, valid and binding obligations of
the Company enforceable in accordance with their terms and in full force and
effect subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the right of creditors generally and to
11
<PAGE>
the exercise of judicial discretion in accordance with general principles of
equity (whether applied by a court of law or equity). There exists no default or
event which, with notice or lapse of time, or both, would constitute a default
by the Company or to the Company's Knowledge any other party to any such
Material Contract or which would permit termination, modification or
acceleration. Neither Sellers nor the Company has received notice (or otherwise
has knowledge) that any party to any Material Contract intends to cancel or
terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i,
the Company is in material compliance with all material applicable Federal,
state and local laws, rules and regulations, and to the Company's knowledge,
there are no actions threatened or pending alleging noncompliance therewith.
j. LITIGATION. Except as set forth on Schedule 5.2j hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to the
Company's Knowledge, threatened against (i) any of Sellers that seeks to enjoin
or obtain damages in respect of the transactions contemplated hereby, or (ii)
the Company. There is no outstanding citation, order, judgment, writ,
injunction, or decree of any court, government, or governmental or
administrative agency specifically against or specifically affecting the
Business or the Company, except as disclosed on Schedule 5.2j.
k. NO BROKERS. Except as described on Schedule 5.2k, the
Company has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the sale of the
Stock and the transactions contemplated by this Agreement.
l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto,
(b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no
filing, consent, approval or authorization of any governmental authority or of
any third party on the part of any Seller or the Company is required in
connection with the execution and delivery of this Agreement by Sellers or the
consummation of the transactions contemplated hereby (including any consents
required under any Company Material Contract as a result of the change in
control contemplated hereby).
m. TAX MATTERS.
(a) Except as set forth on Schedule 5.2m(a) hereto:
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(i) All Tax Returns required to be filed by or with
respect to the Company have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to the Company for Taxable
Periods ending on or before December 31, 1997 will have been filed prior to the
Closing Date, even if such Tax Returns are not yet due. Such Tax Returns are or
will be true, correct and complete in all material respects. All Tax Returns
filed by or with respect to the Company are true, correct and complete in all
material respects.
(ii) The Company has paid in full on a timely basis
all Taxes owed by the Company, whether or not shown on any Tax Return, and the
Company will have paid prior to the Closing Date all Taxes owed with respect to
Taxable Periods ending on or before December 31, 1997, even if such Taxes are
not yet due.
(iii) The Company has no liability for unpaid income
Taxes other than its Tax liability attributable to the Company's allocable share
of MMP's items of income, gain, loss, deduction and credit accruing through the
date hereof. The Company's actual liability for unpaid Taxes (determined
consistently with Section 2.2(b)(iv)) will not as of the Closing Date exceed its
liability for such Taxes reflected in the Closing Date Tax Liabilities (as
finally determined pursuant to Section 2.2(b)(ii).
(iv) The Company has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending with
respect to the Company and the Company has not received notice from any Tax
Authority that it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect with respect to the assessment, collection or
payment of Taxes of the Company or for which the Company is liable.
(vii) No extension of the time within which to file
any Tax Return of the Company is currently in effect.
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<PAGE>
(viii) No deficiency for Taxes has been proposed,
asserted, or assessed against the Company.
(ix) There are no liens on the assets of the Company
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) The Company is not and has not been at any time
during the preceding five years a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under
Section 341(f) of the Code affecting the Company.
(xii) The Company has not agreed to, nor is it
required to, make any adjustments under Section 481(a) of the Code as a result
of a change in accounting methods.
(xiii) The Company is not and has not at any time
been a party to a tax sharing, tax indemnity or tax allocation agreement, and
the Company has not assumed the Tax liability of any other entity or person
under contract.
(xiv) The Company is not and has not at any time been
a member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MMP, the Company is not a party to
any joint venture, partnership or other arrangement that is treated as a
partnership for U.S. federal income tax purposes.
(xvi) None of the Company's assets are treated as
"tax exempt use property" within the meaning of Section 168(h) of the Code.
(b) Sellers have furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to the Company since January 1,
1994; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to the Company relating to Taxes.
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<PAGE>
(c) Schedule 5.2m(c) contains complete and accurate
descriptions of (i) the Company's tax capital account in MMP, (ii) the amount of
any net operating loss, net capital loss and any other Tax carryovers of the
Company and (iii) material Tax elections made by or with respect to the Company.
The Company has no net operating losses or other Tax attributes presently
subject to limitation under Code Sections 382, 383 or 384, or the federal
consolidated return regulations.
n. DIVIDENDS. Since February 14, 1997, no dividends have been
declared, issued or otherwise approved by the Board of Directors of the Company
in respect of the Stock.
o. ACCOUNTS RECEIVABLE. The Company has no accounts
receivable.
p. COMPANY ASSETS. The Company owns no other assets other than
cash or cash equivalents and 3,133,897 Class A Membership Units of MMP.
q. REPRESENTATIONS AS TO THE COMPANY INTERESTS.
(i) The Company is the record and the beneficial owner of
3,133,897 Class A Membership Units (out of a total 11,631,431 Membership Units)
of MMP, (the "Company Interests"); (ii) the Company holds of record and owns
beneficially the Company Interests free and clear of any lien, security
interest, pledge or encumbrance other than those set forth on Schedule 5.2q
hereof, all of which will be released at or before the Closing; (iii) the
Company has full power and authority to enter into this Agreement, and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary action on the part of the Company; (iv) this Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and to the
exercise of judicial discretion in accordance with general principles of equity
(whether applied by a court of law or equity); and (v) except as described on
Schedule 5.2q, the Company Interests are not subject to any option(s)
warrant(s), voting trusts, outstanding proxies, registration rights
agreement(s), or other agreements regarding voting rights.
5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE
ENTITIES.
Sellers, MMP and the Company, jointly and severally, hereby represent
and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows:
15
<PAGE>
a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited
liability company duly organized and validly existing under the laws of Virginia
and has full corporate power and authority to carry on its business as it is now
being conducted and to own and use the assets owned and used by it. To the
extent required by law, MMP is qualified as a foreign limited liability company
and is in good standing under the laws of each jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification.
MMP owns 98% of the outstanding partnership interests in the FCC Licensee
Entities.
b. CAPITALIZATION OF MMP. The designations of each class of
the membership units of MMP and the number of authorized and issued and
outstanding membership units thereof is as described on Schedule 5.3b to the MRI
Agreement. All membership units have been validly issued and are fully paid and
nonassessable and are held of record by the respective members of MMP as set
forth on Schedule 5.3b to the MRI Agreement. Except as described on Schedule
5.3b, (i) there are no other issued or outstanding equity securities of MMP;
(ii) there are no membership or value appreciation rights, phantom membership
rights, profit participation rights, or other similar rights with respect to
membership units outstanding; and (iii) there are no other issued or outstanding
membership interests or other securities of MMP convertible or exchangeable at
any time into equity securities of MMP. Except as set forth in the Operating
Agreement of MMP as amended, MMP is not subject to any commitment or obligation
that would require the issuance or sale of additional membership interests or
membership units of MMP at any time under options, subscriptions, warrants,
rights or any other obligations. Schedule 5.3b to the MRI Agreement sets forth
the equity interests in any corporation, partnership, limited liability company,
joint venture or other entity owned by MMP.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE
ENTITIES. Each FCC License Entity is a limited partnership duly organized and
validly existing under the laws of the Commonwealth of Virginia and has full
partnership power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. Each FCC License
Entity is qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. No FCC License Entity owns
any direct or indirect subsidiaries. MMP is the sole general partner and owns
ninety-eight percent (98%) of the partnership interests of each of the FCC
License Entities. MTC is the sole limited partner and owns two percent (2%) of
the partnership interests of each of the FCC License Entities other than RLLP.
MRI is the sole limited partner and owns two percent (2%) of the partnership
interests of RLLP. All such partnership interests have been validly issued and
are fully paid and nonassessable and are held of record by the respective
partners as set forth above. There are no (i) other issued or outstanding equity
securities of any FCC License Entity, (ii) partnership or value appreciation
rights, phantom partnership
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<PAGE>
rights, profit participation rights, or other similar rights with respect to
partnership interests outstanding and (iii) other issued or outstanding
partnership interests or other securities of any FCC License Entity convertible
or exchangeable at any time into equity securities of such FCC License Entity.
No FCC License Entity is subject to any commitment or obligation that would
require the issuance or sale of additional partnership interests of any FCC
License Entity at any time under options, subscriptions, warrants, rights or any
other obligations. No FCC License Entity holds any equity interest in any
corporation, partnership, limited liability company, joint venture or other
entity.
d. NO CONFLICTS. Except as described on Schedule 5.3d to the
MRI Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any
provision of the articles of organization or operating agreement of MMP or the
limited partnership agreements of the FCC Licensee Entities, (ii) violate any
provision of applicable material law, rule and regulation, or (iii) conflict
with or result in a breach of, or give rise to a right of termination of, or
accelerate the performance required by the terms of any judgment, court order or
consent decree, or any material agreement, indenture, mortgage or instrument to
which either MMP or any FCC Licensee Entity is a party or to which any of their
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would have a MMP Material
Adverse Effect.
e. REAL PROPERTY. The MMP Real Property owned and all
leaseholds and other interests in MMP Real Property used or useful in the
Business and all buildings, structures, towers, and improvements thereon used or
useful in the business and operations of the Stations are listed on Schedule
5.3e to the MRI Agreement and, except for Permitted Encumbrances and as
disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee
simple title (insurable at standard rates by a reputable national title insurer)
to all fee estates included in the Real Property, and good title to all other
MMP Real Property, in each case clear of all liens. The FCC Licensee Entities
own no real property, leaseholds or other interests in real property. No portion
of the MMP Real Property or any building, structure, fixture or improvement
thereon is the subject of, or affected by, any condemnation, eminent domain or
inverse condemnation proceeding currently instituted or pending or, to MMP's
Knowledge, threatened.
MMP has a valid leasehold interest in all leased property and subleases
to which it is a party, and MMP is the owner and holder of all the leased
property purported to be granted by such leases and subleases. The MMP Real
Property and the leases and subleases listed on Schedule 5.3e to the MRI
Agreement constitute all of the real property owned, leased or used by MMP in
the business and operations of the Stations, which is material to the business
and operations of the Stations. The Sellers have delivered or caused to be
delivered to the Purchaser correct and complete copies of the deeds, leases and
subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each
lease
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<PAGE>
and sublease listed in Schedule 5.3e to the MRI Agreement:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with several principles of equity (whether applied by a
court of law or equity);
(b) MMP and, to MMP's knowledge, no other party to the
lease or sublease is in material breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a material breach or
default or permit termination, modification, or acceleration thereunder;
(c) MMP and, to MMP's knowledge, no other party to the
lease or sublease has repudiated any material provision thereof;
(d) MMP is not a party to and, to MMP's knowledge, there
are no material disputes, oral agreements, or forbearance programs in effect as
to the lease or sublease;
(e) except as set forth on Schedule 5.3e to the MRI
Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder material
to the operation of the Stations have received all approvals of governmental
authorities (including material licenses and permits) required in connection
with the operation thereof, and have been operated and maintained in accordance
with applicable laws, rules, and regulations in all material respects.
f. PERSONAL PROPERTY. Schedule 5.3f lists as of the date
hereof all items of Personal Property having a fair market value in excess of
$5,000.00. Except as set forth on Schedule 5.3f to the MRI Agreement, MMP has
good and marketable title to all of its material items of tangible personal
property and assets used or useful by MMP located on its premises or shown on
the MMP Financial Statements are free and clear of all liens, security interests
and encumbrances other than those that would not materially affect Purchaser's
use or ownership of such personal property after the Closing. The tangible
personal property of MMP has been maintained in accordance with normal industry
practice and is in good condition and repair given the age and use of such
property (subject to normal wear and tear) and is adequate for its present use
by MMP.
g. FINANCIAL STATEMENTS. MMP has provided or made available to
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Purchaser copies of the MMP Financial Statements. The MMP Financial Statements
have been prepared in accordance with GAAP consistently applied with prior
periods except in the case of the unaudited MMP Financial Statements, the
absence of year-end audit adjustments and notes. The MMP Financial Statements
present fairly the financial position of MMP as at and for the periods indicated
therein, and are consistent with the books and records of MMP. Except as set
forth on Schedule 5.3g to the MRI Agreement, since December 31, 1996, there has
not been any Material Adverse Effect on the business, financial condition,
operations, or results of operations of MMP taken as a whole. Without limiting
the generality of the foregoing, since that date, except as described on
Schedule 5.3g to the MRI Agreement:
(i) MMP has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MMP has not entered into any material agreement,
contract, lease, or license outside the ordinary course of business;
(iii) MMP has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MMP is a party or by which MMP is bound;
(iv) MMP has not imposed any security interest upon any of
its assets, tangible or intangible;
(v) MMP has not made any material capital expenditures
outside the ordinary course of business;
(vi) MMP has not made any material capital investment in,
or any material loan to, any other Person outside the ordinary course of
business;
(vii) MMP has not created, incurred, assumed, or
guaranteed more than $45 million in aggregate indebtedness for borrowed money
and capitalized lease obligations;
(viii) MMP has not granted any license or sublicense of
any material rights under or with respect to any Intellectual Property;
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<PAGE>
(ix) there has been no change made or authorized in the
operating agreement of MMP;
(x) MMP has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xi) MMP has not made any loan to, or entered into any
other transaction with, any of its managers, officers, and employees outside the
ordinary course of business;
(xii) MMP has not entered into any employment contract
outside the ordinary course of business or collective bargaining agreement,
written or oral, or modified the terms of any such existing contract or
agreement;
(xiii) MMP has not granted any increase in the base
compensation of any of its members outside the ordinary course of business;
(xiv) MMP has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its managers, officers, and
employees (or taken any such action with respect to any other MMP Plan or MMP
Benefit Arrangement);
(xv) MMP has not made any other material change in
employment terms for any of its members or employees outside the ordinary course
of business;
(xvi) MMP has not made or changed any material Tax
election or taken any other action with respect to Taxes not in the ordinary
course of business and consistent with past practice;
(xvii) MMP has not made any distributions other than in
the ordinary course of business, and has not made any non-pro rata
distributions;
(xviii) MMP has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xix) except as contemplated by this Agreement, the MRI
Agreement, the Management Agreement, the MTC Agreement, and Assignment and
Assumption Agreement by and between MMP and the Max Media LLC II Distribution
Agreement, MMP has not committed to any of the foregoing.
h. FCC. MMP and the FCC Licensee Entities have been and
currently
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<PAGE>
are operated in material compliance with the terms of the FCC Licenses, the
Communications Act of 1934, as amended, and applicable rules, regulations and
policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and
complete list of which is set forth on Schedule 5.3h to the MRI Agreement, and
true and complete copies of each of which have been delivered to Purchaser, are
valid and in full force and effect. Except as set forth on Schedule 5.3h to the
MRI Agreement, no application, action or proceeding is pending for the renewal
or modification of any of the FCC Licenses and, to Sellers' and MMP's Knowledge,
there is not now before the FCC any investigation or complaint against MMP or
the FCC Licensee Entities relating to the Stations, the unfavorable resolution
of which would impair the qualifications of the FCC Licensee Entities to hold
any FCC Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement,
there is no proceeding pending before the FCC, and there is no outstanding
notice of violation from the FCC with respect to the Stations. Except as set
forth on Schedule 5.3h to the MRI Agreement, no order or notice of violation has
been issued by any governmental entity which permits, revocation, adverse
modification or termination of any FCC License. Except as set forth on Schedule
5.3h to the MRI Agreement and except for those conditions or restrictions
appearing on the face of the FCC Licenses, or other licenses, none of the FCC
Licenses or other licenses is subject to any restriction or condition which
would limit the operation of the Stations as currently operated. The FCC
Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect
and are not subject to any liens, or other encumbrances. No license renewal
applications are pending with respect to any of the FCC Licenses. As of the date
hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason
to believe that the FCC would not renew the FCC Licenses in the ordinary course
for a full license term without any adverse conditions, upon the timely filing
of appropriate applications and payment of the required filing fee. As of the
date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no
reason to believe that the FCC would not grant the FCC Application in the
ordinary course without any adverse conditions. All documents required by 47
C.F.R. Section 73.3526 to be kept in each Station's public inspection files are
in such file, and such file will be maintained in proper order and complete up
to and through the Closing Date.
i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the
MRI Agreement is a complete list of all Intellectual Property owned by or
licensed to MMP on the date hereof material to the operations of the Stations.
To MMP's Knowledge, except as otherwise set forth on Schedule 5.3i to the MRI
Agreement, MMP owns such Intellectual Property free and clear of any royalty,
lien, encumbrance or charge and does not interfere with the rights of others.
Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not received
any written notice or written claim that any such Intellectual Property is not
valid or enforceable, or of any infringement upon or conflict with any patent,
trademark, service mark, copyright or trade name of any third party by MMP.
Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not given any
notice of infringement to any third party with respect to any of the
Intellectual Property and to MMP's Knowledge no
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such infringement exists. There is no Intellectual Property owned by or licensed
to the FCC Licensee Entities.
j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.3j to the MRI Agreement completely and
accurately lists all MMP Plans and MMP Benefit Arrangements currently in
existence and specifically identifies any that are Qualified Plans. Since
January 1, 1996 (the date of formation of MMP), MMP has maintained or
contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI
Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have
always qualified in form and operation under Code Section 401(a) and have a
currently applicable determination letter from the Internal Revenue Service, and
its trust has always been exempt under Code Section 501, and nothing has
occurred with respect to such plan and trust that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty, or
tax under ERISA or the Code.
(b) Each MMP Plan and each MMP Benefit Arrangement has
been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other domestic and foreign laws,
including federal, state, and foreign securities laws and all laws respecting
reporting and disclosure. No MMP Plan holds employer securities.
(c) Neither MMP nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any
ERISA Affiliate has never made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit
Plan sponsored or maintained (or that has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that could reasonably be
expected to result in such liability, as a result of termination, withdrawal or
funding waiver with respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against,
or relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that
would, if successful, result in liability for MMP, and no claims or lawsuits
(other than routine benefit claims) have been asserted, instituted or, to the
knowledge of Sellers and the Company after due inquiry of MMP, threatened by,
against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has
advised Sellers and the Company that MMP does not have knowledge of any fact
that could form the basis for any such claim or lawsuit. MMP Plans
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and MMP Benefit Arrangements are not presently under audit or examination (and
have not received notice of a potential audit or examination) by any
governmental authority, and no matters are pending with respect to the Qualified
Plan under any governmental compliance programs.
(e) No MMP Plan or MMP Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and MMP has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, the MRI Agreement, the Management Agreement or the MTC
Agreement.
(f) With respect to each MMP Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for MMP or any Person required
to be indemnified by it.
(g) MMP has made all required contributions to each MMP
Plan as of the last day of each plan's most recent fiscal year, all benefits
accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been
paid, accrued, or otherwise adequately reserved in accordance with generally
accepted accounting principles; and all monies withheld from employee paychecks
with respect to MMP Plans have been transferred to the appropriate plan within
the timing required by governmental regulations.
(h) MMP and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of MMP nor beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of MMP that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
(j) The FCC Licensee Entities employ no employees and do
not and have not in the past maintained or contributed to any Benefit Plans or
Benefit Arrangements.
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k. LABOR. Except as set forth on Schedule 5.3k to the MRI
Agreement, with respect to employees of and service providers to MMP and the FCC
Licensee Entities:
(a) MMP has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and have not and are not engaged in
any unfair labor practice.
(b) The employees of MMP are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, MMP or, to MMP's
Knowledge, no labor representation organization effort exists nor has there been
any such activity within the past three years.
(c) All Persons classified by MMP and the FCC Licensee
Entities as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and MMP has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, except as described on
Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the
loss of whom would have significant adverse effect on the business of MMP or the
FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate
his or their relationship with MMP or the FCC Licensee Entities, or (B) make any
demand for material payments or modifications of his or their arrangements with
MMP.
(e) There is no charge or compliance proceeding actually
pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee
Entities before the Equal Employment Opportunity Commission or any state, local,
or foreign agency responsible for the prevention of unlawful employment
practices.
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(f) The FCC Licensee Entities do not employ, and have not
in the past, employed employees.
l. INSURANCE. Schedule 5.3l to the MRI Agreement contains a
list of all insurance policies concerning the Business and describes coverage
(including whether occurrence or claims made), other than employee-benefit
related insurance policies. All such policies are legal, valid, binding,
enforceable and in full force and effect subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by court of law or equity).
There are no existing breaches or defaults with respect to such policies, and no
notice of cancellation or termination has been received.
m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement
contains a list of all the Material Contracts of MMP and the FCC Licensee
Entities (other than cash agreements for the sale of advertising time and
retransmission consent agreements) and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts are legal, valid and binding obligations of MMP or the FCC Licensee
Entities, as the case may be, enforceable in accordance with their terms and in
full force and effect. There exists no default or event which, with notice or
lapse of time, or both, would constitute a default by any party to any such
Material Contract or which would permit termination, modification or
acceleration. Neither MMP nor the FCC Licensee Entities have received notice,
nor to MMP's Knowledge, does any party to any Material Contract intend to cancel
or terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n
to the MRI Agreement, MMP and the FCC Licensee Entities are in material
compliance with all material applicable Federal, state and local laws, rules and
regulations, and there are no actions threatened or pending alleging
noncompliance therewith.
o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI
Agreement, there is no suit, claim, action, proceeding or arbitration pending
or, to MMP's Knowledge, threatened against MMP or the FCC Licensee Entities that
seeks to enjoin or obtain damages in respect of MMP's conduct of the Business or
operation of the Stations, or the transactions contemplated hereby. There is no
outstanding citation, order, judgment, writ, injunction, or decree of any court,
government, or governmental or administrative agency against or affecting the
Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule 5.3o
to the MRI Agreement.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the
MRI
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Agreement, (b) for filings pursuant to the H-S-R Act, or (c) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of MMP or the FCC Licensee Entities
is required in connection with the execution and delivery of this Agreement by
Sellers or the consummation of any of the transactions contemplated hereby
(including any consents required under any MMP or FCC Licensee Entities contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the
MRI Agreement:
(a) All of the operations of MMP at or from any MMP Real
Property comply in all material respects with applicable Environmental Laws. MMP
has not engaged in or permitted any operations or activities upon any of the MMP
Real Property for the purpose of or involving the treatment, storage, use,
generation, release, discharge, emission, or disposal of any Hazardous
Substances at the MMP Real Property, except in substantial compliance with
applicable Environmental Laws.
(b) None of the MMP Real Property is listed or, to MMP's
Knowledge, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. MMP has not received any notice from any governmental
entity or third party of any actual or threatened Environmental Liabilities with
respect to the MMP Real Property or the conduct of the Business.
(c) To MMP's Knowledge, after due inquiry, there are no
conditions existing at the MMP Real Property that require, or which with the
giving of notice or the passage of time or both would likely require remedial or
corrective action, removal or closure pursuant to the Environmental Laws.
(d) To MMP's Knowledge, after due inquiry, MMP has all the
material permits, authorizations, licenses, consents and approvals necessary for
the current conduct of the Business and for the operations on, in or at the MMP
Real Property which are required under applicable Environmental Laws and are in
substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
(e) To MMP's Knowledge, after due inquiry, there are no
Hazardous Substances present on or in the MMP Real Property or at any
geologically or hydrologically adjoining property, including any Hazardous
Substances contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment
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(whether movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the MMP
Real Property or such adjoining property, or incorporated into any structure
therein or thereon. Neither MMP or any other Person for whose conduct it is or
may be held responsible, nor to MMP's Knowledge after due inquiry or any other
Person, has permitted or conducted, or was aware of, any Hazardous Substances,
or any illegal activity conducted with respect to the MMP Real Property or any
other properties or assets (whether real, personal, or mixed) in which MMP has
or had an interest.
r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) to the MRI
Agreement:
(i) All Tax Returns required to be filed by or with
respect to MMP have been filed when due in a timely fashion, and all Tax Returns
required to be filed by or with respect to MMP for Taxable Periods ending on or
before December 31, 1997 will have been filed prior to the Closing Date, even if
such Tax Returns are not yet due. All Tax Returns filed by or with respect to
MMP are correct and complete in all material respects.
(ii) MMP has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return, and MMP will have paid prior
to the Closing Date all Taxes payable with respect to Taxable Periods ending on
or before December 31, 1997, even if such Taxes are not yet due.
(iii) MMP's liability for unpaid Taxes (including any
liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not,
as of the date of the MMP Financial Statements, exceed the current liability
accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the
MMP Financial Statements, (b) does not exceed such accruals as adjusted on the
books of MMP for transactions and events through the date hereof in accordance
with the past custom and practice of MMP, and (c) will not, as of the Closing
Date, exceed its liability for such Taxes as reflected in the Closing Date Tax
Liabilities as finally determined pursuant to Section 2.2(b)(ii).
(iv) MMP has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with
respect to
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MMP and MMP has not received notice from any Tax Authority that it intends to
commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect or has been requested with respect to the
assessment, collection or payment of Taxes of MMP or for which MMP is liable.
(vii) No extension of the time within which to file
any Tax Return of MMP is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted or assessed against MMP.
(ix) There are no liens on the assets of MMP relating
or attributable to Taxes (except liens for Taxes not yet due).
(x) MMP is and has since its formation been
classified as a partnership for U.S. federal income tax purposes and has in
effect a valid election under Section 754 of the Code.
(xi) MMP has not agreed to, nor is it required to,
make any adjustments under Section 481(a) of the Code as a result of a change in
accounting methods.
(xii) MMP is not and has not at any time been a party
to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not
assumed the Tax liability of any other entity or person under contract.
(xiii) MMP does not have any liability for the Taxes
of another entity or person as a transferee or successor, or otherwise.
(xiv) Except for itself and the FCC Licensee
Entities, MMP is not and has not at any time been a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes.
(xv) None of MMP's assets are treated as "tax exempt
use property" within the meaning of Section 168(h) of the Code.
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(xvi) The FCC Licensee Entities' sole asset is the
FCC Licenses, and the FCC Licensee Entities are not and have not been required
to file Tax Returns or pay Taxes.
(b) Sellers have furnished or otherwise caused to be
made available to Purchaser correct and complete copies of (i) all income,
franchise and other material Tax Returns filed by or with respect to MMP since
January 1, 1996; and (ii) all examination reports, statements of deficiencies
and closing agreements with respect to MMP relating to Taxes.
(c) Schedule 5.3r(c) to the MRI Agreement contains
complete and accurate descriptions of (i) MMP's basis in its assets, and (ii)
material Tax elections made by or with respect to MMP.
s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that
are reflected on the MMP Financial Statements or on the accounting records of
MMP as of the Closing Date (collectively, the "MMP Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the MMP Accounts Receivable are or will be as of the
Closing Date current and collectable net of the respective reserve shown on the
MMP Financial Statements or on the accounting records of MMP as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the MMP Accounts Receivable as of the Closing Date than
the reserve reflected in the MMP Financial Statements represented of the MMP
Accounts Receivable reflected therein and will not represent a MMP Material
Adverse Effect in the composition of such MMP Accounts Receivable in terms of
aging). Subject to such reserves, each of the MMP Accounts Receivable either has
been or will be collected in full, without any setoff, within ninety (90) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of setoff, other than returns in the ordinary course of
business, under any contract with any obligor of an MMP Accounts Receivable
relating to the amount or validity of such MMP Accounts Receivable. MMP shall
deliver on the Closing Date a complete and accurate list of all MMP Accounts
Receivable as of the Closing Date.
t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record
and the beneficial owner of a 98% general partnership interest in each of the
Television Licensees; (ii) MMP holds of record and owns beneficially these
interests free and clear of any lien, security interest, pledge or encumbrance
other than those set forth on Schedule 5.3t to the MRI Agreement, all of which
will be released at or before the Closing; (iii) MMP has full power and
authority to enter into this Agreement, and the consummation of the
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transactions contemplated hereby has been duly authorized by all necessary
action on the part of MMP; (iv) this Agreement has been duly executed and
delivered by MMP and constitutes a legal, valid and binding obligation of MMP,
enforceable against MMP in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and to the exercise of judicial discretion in
accordance with general principles of equity (whether applied by a court of law
or equity); and (v) except as described on Schedule 5.3t to the MRI Agreement,
MMP's interests in the Television Licensees are not subject to any option(s)
warrant(s), voting trusts, outstanding proxies, registration rights
agreement(s), or other agreements regarding voting rights.
5.4. [RESERVED.]
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Sellers, the Company and
MMP that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI
Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any of the
provisions of the articles of incorporation or by-laws of Purchaser, (ii)
violate any provision of applicable law, rule or regulation, which violation
would prevent or interfere with Purchaser's ability to perform hereunder, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Purchaser is
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a party or to which its property is subject, or constitute a default thereunder,
except where such conflict, breach, right of termination, acceleration or
default would not have a material adverse effect on the business or financial
condition of Purchaser or prevent or materially interfere with Purchaser's
ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI
Agreement, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of Purchaser is required in
connection with the execution and delivery of this Agreement by Purchaser or the
consummation of any of the transactions contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI
Agreement, there is no suit, claim, action, proceeding or arbitration pending
or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin
or obtain damages in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially
qualified to be the Licensee of, acquire, own and operate the Stations under the
Communications Act and the rules, regulations and policies of the FCC. Purchaser
knows of no fact that would, under existing law and the existing rules,
regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an
assignee of the FCC Licenses or as the owner and operator of the Stations, or
(b) cause the FCC to fail to approve in a timely fashion the application for the
FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver
of any FCC rule or policy is necessary to be obtained for the grant of the
applications for the assignment of the FCC Licenses to Purchaser, nor will
processing pursuant to any exception or rule or general applicability be
requested or required in connection with the consummation of the transactions
contemplated by this Agreement Purchaser will have on hand at the Closing,
adequate financial resources to consummate the transactions contemplated by this
Agreement, the MRI Agreement, the Management Agreement and the MTC Agreement.
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SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND
WARRANTIES
----------
7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2
of the Indemnification Escrow Agreement, and subject to the provisions of
Section 10.3, the representations and warranties herein and the obligations of
the parties shall survive the Closing for a period ending on the earlier to
occur of (i) 15 calendar months after the Closing Date and (ii) October 31,
1999, but in no event shall the period be less than 12 calendar months after the
Closing Date; and provided further, however, that representations and warranties
relating to any claims as to which notice shall have been given pursuant to
Section 10.4 on or before such date shall survive until the final resolution of
such claims.
SECTION 8
TAX MATTERS
-----------
8.1. SECTION 338 ELECTION. Purchaser shall not make an election under
Section 338 of the Code (or any comparable provision of state, local or foreign
law) with respect to the purchase of stock in the Company as provided herein.
8.2. TAX RETURNS.
(a) Sellers shall prepare or cause to be prepared and file or
cause to be filed, within the time (including extensions) and manner provided by
law, all Tax Returns of the Company, MMP, and the FCC Licensee Entities that are
required to be filed on or before the Closing Date. In addition, Sellers shall
prepare or cause to be prepared and file or cause to be filed prior to the
Closing Date all Tax Returns for Taxable Periods of the Company, MMP, and the
FCC Licensee Entities for Taxable Periods ending on or before December 31, 1997,
even if such Tax Returns are not yet due. Each of the Company, MMP and the FCC
Licensee Entities shall pay or cause to be paid all Taxes shown as due on its
Tax Returns. Purchaser shall have an opportunity to review and consent to the
filing of all such Tax Returns, which consent shall not be unreasonably withheld
or delayed.
(b) Purchaser shall prepare or cause to be prepared and file or
cause to be filed, within the time and manner provided by law, all Tax Returns
of the Company, MMP, and the FCC Licensee Entities (i) for Taxable Periods
ending on or before the Closing Date that are due after the Closing Date, except
as otherwise provided in Section 8.2(a), and (ii) for Taxable Periods beginning
before and ending after the Closing Date ("Straddle Periods"). Purchaser shall
pay or cause to be paid all Taxes shown as due on
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such Tax Returns; provided that this sentence shall not in any way limit or
affect Purchaser's rights to indemnification under other provisions of this
Agreement. Purchaser shall provide Sellers a reasonable opportunity to review
and consent to the filing of such Tax Returns, which consent shall not be
unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns
with respect to Taxable Periods ending on or before the Closing Date or Straddle
Periods without Sellers' consent; provided, however, that Purchaser may file
amended Tax Returns for such Taxable Periods without Sellers' consent if (i)
such amended Tax Returns are filed to correct errors or omissions in previously
filed Tax Returns that either constitute or are related to a breach of any
representation or warranty set forth in Sections 5.2m or 5.3r (determined
without regard to the limitation on the survival of such representations and
warranties set forth in Section 7.1), or (ii) the filing of such amended Tax
Return would not increase the Taxes of Sellers or Taxes for which Sellers have
indemnification responsibility hereunder by more than $25,000.
(c) All Tax Returns prepared and filed pursuant to this Section
8.2 shall be prepared and filed in accordance with applicable law and in a
manner consistent with past practices of the Company, and MMP (to the extent
consistent with applicable law).
8.3. APPORTIONMENT. The parties agree to cause the Company, MMP, and
the FCC Licensee Entities to file all Tax Returns for any Taxable Period that
would otherwise be a Straddle Period on the basis that the relevant Taxable
Period consists of two periods, one ending as of the close of business on the
Closing Date and one beginning the day after the Closing Date, unless the
relevant Tax Authority will not accept a Tax Return filed on that basis. For
purposes of apportioning any Tax to the portion of any Straddle Period that ends
on the Closing Date, the determination shall be made assuming that there was a
closing of the books as of the close of business on the Closing Date and that
the taxable years of the Company, MMP and the FCC Licensee Entities ended on
that date, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Straddle Period
in question.
8.4. COOPERATION IN TAX MATTERS. Sellers and Purchaser shall (a)
cooperate fully, as reasonably requested, in connection with the preparation and
filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to the Company, MMP and the FCC
Licensee Entities for all Taxable Periods ending on or before the Closing Date
and Straddle Periods; and (c) preserve information, records or documents
relating to Tax matters pertinent to the Company, MMP and the FCC Licensee
Entities that is in their possession or under their control until the expiration
of any applicable statute of limitations.
8.5. CERTAIN TAXES. Sellers shall timely pay all transfer, documentary,
sales,
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use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Stock, and Sellers shall at their own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Sellers shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee
Entities to make a Code Section 754 Election with respect to the Taxable Period
in which the Closing occurs or later Taxable Periods.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause the Company, MMP or the FCC Licensee Entities to take any actions on the
Closing Date other than in the ordinary course of their business, except (i)
such actions as are expressly contemplated by this Agreement, including the
repayment of MMP's Funded Debt, and (ii) such actions as would not increase
Taxes for which Sellers have indemnification responsibility hereunder.
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Sellers, the
Company and MMP (and MMP shall cause the FCC Licensee Entities) to agree that
each will execute and deliver to the other any and all documents, in addition to
those expressly provided for herein, that may be necessary or appropriate to
implement the provisions of this Agreement, whether before, at, or after the
Closing. The parties agree to cooperate with each other to any extent reasonably
required in order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. The Company and MMP, from and after the
date of this Agreement and until the Closing Date or termination pursuant to
Section 14.1, shall give Purchaser and Purchaser's employees and counsel full
and complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of the
Company, MMP, the FCC Licensee Entities or otherwise relating to the Business,
shall provide Purchaser with all financial statements of the Company, the FCC
Licensee Entities and MMP which are currently
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prepared in the ordinary course of business, which shall be prepared and
delivered to Purchaser each month between the date hereof and the Closing Date,
and shall provide copies of such information concerning the Company, MMP, the
FCC Licensees and the Business as Purchaser may reasonably request; provided,
however, that the foregoing shall not permit Purchaser or any agent thereof to
(i) disrupt the Business, or (ii) contact any employee of the Company or MMP
without providing reasonable prior notice to Sellers and allowing a
representative of the Company or MMP to be present. The Company and Sellers will
use their commercially reasonable efforts to obtain the consent of its auditors
to permit inclusion of the Financial Statements and the MMP Financial Statements
in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If
Purchaser requests, it shall have the immediate right, without causing
unreasonable disruption to the Business, to have the access provided for in the
first sentence hereof to conduct an audit of each Station's financial
information, and, subject to the foregoing, the Company, MMP and Sellers shall
cooperate with Purchaser's reasonable requests in connection with such audit,
including, without limitation, giving all reasonable consents thereto as long as
any expenses thereof are borne by Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Sellers, the Company and MMP
shall cause the Business to be conducted in the ordinary course. Except as
contemplated by this Agreement or as consented to by Purchaser (which consent
shall not unreasonably be withheld), from and after the date hereof, Sellers,
the Company, and MMP shall act and cause the FCC Licensee Entities to act, as
follows:
(a) The Company and MMP will not adopt or cause the FCC Licensee
Entities to adopt any material change in any method of accounting or accounting
practice, except as contemplated or required by GAAP;
(b) The Company shall not change or amend its charter or by-laws
and MMP shall not change or amend the operating agreement dated as of January 1,
1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee
Entities to change or amend any limited partnership agreement;
(c) Except (i) for the disposition of obsolete equipment in the
ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the
transfers of the MMP II Licenses to MMP II and the distribution of MMP II to MTC
or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither Company
nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets or
properties owned, leased or used in the operation of the Business;
(d) Neither the Company nor MMP or the FCC Licensee Entities will
merge or consolidate with, agree to merge or consolidate with, or purchase or
agree to
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purchase all or substantially all of the assets of, or otherwise acquire, any
other business entity;
(e) MMP will not merge or consolidate with, or agree to merge or
consolidate with, or purchase or agree to purchase all or substantially all of
the assets of, or otherwise acquire, any other business entity or cause the FCC
Licensee Entities to do likewise;
(f) Neither the Company nor MMP or the FCC Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital stock
or any securities or obligations convertible or exchangeable into shares of its
capital stock or issue or grant any option, warrant or other right to purchase
any shares of its capital stock;
(g) Neither the Company nor MMP or the FCC Licensee Entities will
incur, or agree to incur, any debt for borrowed money other than draws under the
Company's or MMP's, as the case may be, existing revolving credit agreements;
(h) Neither the Company nor MMP or the FCC Licensee Entities will
change its historical practices concerning the payment of accounts payable; and
(i) Neither the Company nor MMP or the FCC Licensee Entities will
declare, issue, or otherwise approve the payment of dividends or distributions
of any kind in respect of the Stock or redeem, purchase or otherwise acquire any
of its stock.
(j) The Company and MMP shall maintain the existing insurance
coverages on the assets of the Stations or other policies providing
substantially similar coverages.
(k) The Company and MMP will not permit any increases in the
compensation of any of the employees of the Company or MMP except as required by
law or existing contract or agreement or enter into or amend any Company Plan,
MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as
contemplated by MMP's operating budgets and in accordance with the past
practice.
(l) Neither the Company nor MMP or the FCC Licensee Entities shall
enter into or renew any contract or commitment relating to the Stations or the
assets of the Company or MMP, or incur any obligation that will be binding on
Purchaser after Closing, except in the ordinary course of business, and MMP
shall not enter into, modify, amend, renew, or change any contract with respect
to programming for the Station for any period after the Closing Date without the
prior approval of Purchaser.
(m) Neither the Company nor MMP or the FCC Licensee Entities shall
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enter into any transactions with any Affiliate of the Company or any Seller that
will be binding upon Purchaser, or the Station following the Closing Date.
(n) The Company and MMP shall use all commercially reasonable
efforts to maintain the assets of the Stations or replacements thereof in good
operating condition and adequate repair, normal wear and tear excepted.
(o) The Company and MMP shall, in connection with the operation of
the Stations, make expenditures materially consistent with the estimates of
expenses set forth in MMP's operating budgets of the Stations and, including,
without limitation, expenditures in respect of promotional, programming and
engineering activities for the Station (and any employee expenditures related to
such activities) for any period covered by the current operating budgets of the
Stations.
(p) Neither the Company nor MMP shall make or allow the FCC
Licensee Entities to make or change any material Tax election, amend any Tax
Return, or take or omit to take any other action not in the ordinary course of
business and consistent with past practice that would have the effect of
increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of the
Company or MMP for any Post-Closing Tax Period.
(q) Except as provided by Section 2.2 hereof and the MMP II
Distribution, the Company, MMP and the FCC Licensee Entities shall not make
distributions other than in the ordinary course of business and consistent with
past practice, and shall not make non-pro rata distributions.
(r) MMP shall not enter into or renew any Tradeout Agreement that
would be binding on Purchaser after the Closing Date, except in the ordinary
course of business, as contemplated by MMP's operating budgets and in accordance
with past practice.
(s) Except as provided in Section 9.3(r) above, MMP shall not
enter into or renew any Time Sales Agreement except in the ordinary course of
business and which are for cash at prevailing rates for a term not exceeding
twelve (12) months.
(t) MMP shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior approval of Purchaser other than as
contemplated by this Agreement, the Management Agreement, the MTC Agreement, and
the MRI Agreement.
(u) Neither the Company nor MMP shall enter into or become subject
to any employment, labor, union or professional service contract not terminable
at will, or any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plans, or
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increase the compensation payable or to become payable to any employee, except
in the ordinary course of business, other than any value appreciation rights
agreement with current employees of MMP, all of which liabilities shall be paid
by MMP at or prior to Closing.
(v) Neither the Company nor MMP or the FCC Licensee Entities shall
take any action which may jeopardize the validity or enforceability of or rights
under the FCC Licenses.
(w) Before Closing, MMP shall pay all one-time fees under Section
3.1 of the Time Brokerage Agreements ("LMAs") with the LMA Stations aggregating
$1,430,000.00 and MMP shall amend the LMAs with the LMA Stations to reflect the
payment by MMP before the Closing of the fees set forth in Section 3.1 of the
LMAs and the reduction of continuing fees as a result of such payments.
9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten
Business Days following the date hereof, file duly completed and executed
Pre-Merger Notification and Report Forms as required under the H-S-R Act and
shall otherwise use their respective best efforts to comply promptly with any
requests made by the Federal Trade Commission ("FTC") or the Department of
Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated
thereunder. Sellers shall cause MMP, to the extent required by law, to join in
or provide information in connection with such filing, including, but not
limited to, any response to any request by the FTC or DOJ. All filing fees and
other similar payments in connection with the H-S-R Act shall be split equally
by Purchaser and the Sellers.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP and Sellers shall, within seven
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC Application and
to secure such consents or approvals as expeditiously as practicable; and
provided further that MMP shall cause the FCC Licensee Entities, to the extent
deemed reasonably necessary by counsel to Purchaser to join in and provide
information in connection with the FCC Application and comply with the
immediately preceding provisions and 9.5(b) below. If the Closing shall not have
occurred for any reason within the initial effective periods of the granting of
FCC approval of the FCC Application, and no party shall have terminated this
Agreement under Section 14, the parties shall jointly request and use their
respective best efforts to obtain one or more extensions of the effective
periods of such grants. No party shall knowingly take, or fail to take, any
action the intent or reasonably anticipated consequence of which would be to
cause the FCC not to grant approval of the FCC Application.
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(b) Sellers, the Company and MMP, as the case may be, shall
publish (and cause the FCC Licensee Entities to publish) the notices required by
the FCC Rules and Regulations relative to the filing of the FCC Application.
Copies of all applications, documents and papers filed after the date hereof and
prior to the Closing, or filed after the Closing with respect to the transaction
under this Agreement, by Purchaser , Sellers, MMP, or the FCC Licensee Entities
with the FCC shall be mailed to the other simultaneously with the filing of the
same with the FCC. Each party shall bear its own costs and expenses (including
the fees and disbursements of its counsel) in connection with the preparation of
the portion of the application to be prepared by it and in connection with the
processing of that application. All filing and grant fees, if any, paid to the
FCC, shall be split equally by Purchaser and the Sellers. None of the
information contained in any filing made by Purchaser or Sellers with the FCC
with respect to the transaction contemplated by this Agreement shall contain any
untrue statement of a material fact.
(c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Sellers,
the Company and MMP shall cause the FCC Licensee Entities holding the FCC
Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in
Greeneville, Tennessee within five (5) Business Days following the date hereof,
to file with the FCC the MMP II FCC Applications and take all reasonable steps
necessary to expedite the processing of the MMP II FCC Applications to secure
the Consent of the FCC to the transfer of control of the FCC Licenses from MMP
to MTC.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
each Seller (a) to have reasonable access to the books and records of Purchaser
and those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
records for a period of four (4) years following the Closing.
9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or
contemplating, and has not made or taken, any decisions or actions concerning
the employees of the Stations after the Closing Date that would require the
service of notice under the Worker Adjustment and Retraining Notification Act of
1988, as amended, (the so-called WARN Act) or any other similar law.
9.8. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment, confiscation
or condemnation of any of the assets of the Stations prior to the completion of
the Closing that interferes with the normal operation of the Stations, MMP shall
notify Purchaser of
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same in writing immediately, specifying with particularity the loss, damage or
impairment, confiscation or condemnation incurred, the cause thereof, if known
or reasonably ascertainable, and the insurance coverage. MMP shall apply the
proceeds of any insurance policy, judgment or award with respect thereto and
take such other commercially reasonable actions, as determined in its sole
discretion, as are necessary to repair, replace or restore such assets of any
Station so damaged to their prior condition as soon as possible after such loss,
damages or impairment, confiscation or condemnation.
(b) If before the Closing Date, due to damage or destruction of
the assets of any Station (other than WMMP-TV in the Charleston, South Carolina
market), the regular broadcast transmission of one (1) or more Television
Stations or two (2) or more Radio Stations in the normal and usual manner is
interrupted for a period of twelve (12) continuous hours or more, MMP shall give
prompt written notice thereof to Purchaser. If on the Closing Date, due to
damages or destruction of the assets of one (1) or more Television Stations
(other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more
Radio Stations the regular broadcast transmission of one (1) or more Television
Stations (other than WMMP-TV in the Charleston, South Carolina market) or two
(2) or more Radio Stations in the normal and usual manner is interrupted such
that the regular broadcast signal of any such Station (including its effective
radiated power) is diminished in any material respect, then (i) MMP shall
immediately give written notice thereof to Purchaser; and (ii) Purchaser shall
have the right, by giving prompt written notice to the other, to postpone the
Closing Date for a period of up to sixty (60) days provided, however, that the
Closing shall occur no later than ten (10) Business Days after regular broadcast
transmission has been restored.
(c) In the event any one (1) or more Television Stations (other
than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio
Stations normal and usual transmission has not been resumed by the Closing Date
as postponed pursuant to section (b) above, Purchaser may, pursuant to Section
14.1(e), terminate this Agreement by written notice to the Sellers' Agent.
Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to
close this Agreement and complete the restoration and replacement of any damaged
assets of the Station in question after the Closing Date, MMP shall deliver or
assign to Purchaser all insurance or other proceeds received in connection
therewith to the extent such proceeds are received by or payable to the Company
or MMP and have not therefore been used in or committed to the restoration or
replacement of the assets.
(d) If before the Closing Date, due to damage or destruction of
the assets the regular broadcast transmission of any Station (other than WMMP-TV
in the Charleston, South Carolina market) in the normal and usual manner is
interrupted for a period of seven (7) continuous days or more, MMP shall give
prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon
receipt of the Interruption Notice,
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Purchaser shall have the right, in its sole and absolute discretion, by giving
prompt written notice thereof to Sellers and MMP within two (2) Business Days of
the date of the Interruption Notice, to terminate this Agreement with the effect
specified in Section 14.2(b) hereof.
(e) Until the Closing Date, the Company and MMP will maintain
and cause MMP to maintain the existing insurance coverages listed on Schedule
5.3l to the MRI Agreement on the Stations and each Station's assets.
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not relying on the specification of any dollar amount in any representation
or warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
9.10. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) At the Closing, Sellers' Agents shall designate Purchaser
as its agent solely for the purposes of collecting the MMP Accounts Receivable.
Purchaser will collect the MMP Accounts Receivable during the period beginning
on the Closing Date and ending on the 180th day after the Closing Date (the
"Collection Period") with the same care and diligence Purchaser uses with
respect to its own accounts receivable and hold all such MMP Accounts Receivable
in trust for Sellers until remitted by Purchaser to the Indemnification Escrow
Agent or the Collections Account pursuant hereto. Purchaser shall not make any
referral or compromise of any of the MMP Accounts Receivable to a collection
agency or attorney for collection and shall not settle or adjust the amount of
any of the MMP Accounts Receivable without the written approval of Sellers'
Agent. If, during the Collection Period, Purchaser receives monies from an
account debtor of Purchaser that is also an account debtor of MMP with respect
to any MMP Accounts Receivable, Purchaser shall credit the sums received to the
oldest account due, except where an account is disputed by the account debtor as
properly due, and the account debtor has so notified Purchaser in writing, in
which case, payments received shall be applied in accordance with the account
debtor's instructions; provided that upon resolution of such dispute if any
amounts in dispute are received by Purchaser, Purchaser shall remit such amounts
to the Indemnification Escrow Agent in accordance with the Indemnification
Escrow Agreement up to the amount of the Additional Indemnification Amount
Deposit and, thereafter, to the Collections Account.
(b) On the ninetieth (90th) day after the Closing Date and on
or before the fifth Business Day after the end of each full fifteen (15) day
period thereafter during
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the Collection Period, Purchaser shall deliver to Sellers' Agents a list of the
amounts collected by Purchaser before the end of such period with respect to the
Accounts Receivable. On or before the fifth Business Day after the end of the
Collection Period, Purchaser shall deliver to Sellers' Agents a list of all of
the Accounts Receivable that remain uncollected.
(c) Sellers' Agents shall establish and maintain during the
Collection Period (and for as long after the Collection Period as Sellers deem
appropriate) a bank account (the "Collections Account") at a commercial bank in
Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for
the deposit of collections of the MMP Accounts Receivable in accordance with
this Section 9.10. Sellers' Agents shall have sole disbursement authority over
the Collections Account. On the ninetieth (90th) day after the Closing Date (or
if such day is not a Business Day, on the next succeeding Business Day),
Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to
the Indemnification Escrow Agreement all amounts collected with respect to any
MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the
Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii)
deposit in the Collections Account any other MMP Accounts Receivable collected
by Purchaser as of such date. On and after the ninetieth (90th) day after the
Closing Date until the expiration of the Collections Period, within five (5)
Business Days of the end of each full fifteen (15) day period, Purchaser shall
deposit all amounts collected with respect to the Accounts Receivable with the
Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement
until the total of all amounts deposited pursuant to the previous sentence and
this sentence equals the Additional Indemnification Amount Deposit and,
thereafter, in the Collections Account. Sellers' Agents shall be entitled to
dispose of all amounts deposited in the Collections Account from time to time as
it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow
Agent shall have no rights therein; provided, however, that Purchasers shall
have no liability whatsoever to Sellers with respect to Sellers' Agents
disposition of any amounts disbursed by Sellers' Agent from the Collections
Account.
(d) After the expiration of the Collection Period, Purchaser shall
have no further obligation hereunder other than (1) so long as Sellers' Agents
continue to maintain the Collections Account, to deposit in such account any
payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives.
(e) Any MMP Accounts Receivable remaining uncollected 180 days
after the Closing Date shall be transferred to Sellers' Agents, together with
all files concerning the collection or attempt to collect such MMP Accounts
Receivable hereunder, and Purchaser shall thereafter have no further
responsibility with respect
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thereto.
(f) Purchaser shall have no right to setoff any amounts collected
for MMP Accounts Receivable against any amounts owed to Purchaser by Sellers;
provided that this Section 9.10 shall not be deemed to limit the right of
Purchaser to make claims against the Indemnification Amount in accordance with,
and subject to, the terms and conditions of this Agreement and the
Indemnification Escrow Agreement.
9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this
Agreement, prior to the Closing, without the prior written consent of Sellers'
Agents, neither Purchaser nor any of its subsidiaries or any party acting
directly or indirectly by or on behalf of any of them shall acquire or enter
into any agreement to acquire a television station or radio station in any
markets in which any Television Station or Radio Station currently broadcasts,
if such acquisition would materially delay the granting of the FCC Application;
provided, however, that nothing in this Section 9.11 shall be construed to
preclude Purchaser proceeding to closing with respect to any transaction pending
as of the date hereof.
9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Sellers, the
Company, and MMP shall comply in all respects with their obligations under
Section 2.2(b) of this Agreement.
9.13. [RESERVED]
9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP
shall make all payments, discharge all obligations and terminate any and all
Value Appreciation Rights Agreements ("VARS"), and the Management Incentive
Agreements ("Incentive Agreements"), including, but not limited to, the VARS and
Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement.
SECTION 10
INDEMNIFICATION
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10.1. INDEMNIFICATION OF PURCHASER BY SELLERS.
(a) Subject to Section 10.3 hereof after the Closing Date, each
Seller, jointly and severally, shall indemnify and hold Purchaser harmless from
and against any and all Losses, however incurred, which arise out of or result
from any breach by such Seller of any representation or warranty of such Seller
as to itself, himself or herself, in Section 5.1 of this Agreement.
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(b) Subject to Section 10.3 hereof after the Closing Date, Sellers
shall jointly and severally indemnify and hold Purchaser harmless from and
against any and all Losses, howsoever incurred, which arise out of or result
from:
(i) any breach of any representation or warranty of Sellers
set forth in Sections 5.2 or 5.3 of this Agreement other than any representation
or warranty of any Seller set forth in Section 5.1 of this Agreement; provided,
however, for purposes of this Section 10.1(b)(i), the representation set forth
in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP
Material Adverse Effect;
(ii) the material failure by Sellers to perform any covenant
of Sellers contained herein;
(iii) breaches by Seller, the Company, MMP, or any of the FCC
License Entities of any other agreements and certificates specifically
contemplated hereby;
(iv) any and all Taxes of the Company, MMP and the FCC
Licensee Entities (including any liability of the Company, MMP or the FCC
Licensee Entities for Taxes of any other entity or person) for any Pre-Closing
Tax Period except to the extent that such Taxes are specifically identified in
the Closing Date Tax Liabilities as finally determined pursuant to Section
2.2(b)(ii) (excluding reserves for deferred Taxes);
(v) [Reserved]
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(vi) any liabilities under the Shareholder Settlement
Agreements; or
(vii) the Closing Date Liabilities, to the extent the Closing
Date Liabilities exceed (A) the aggregate cash, cash equivalents and other cash
items retained as provided by Section 2.2(b), and (B) payments made from the
Indemnification Escrow as provided by Section 2.2(b)(iii);
(c) For purposes of Section 10.1(b)(iv), Taxes of the Company for
Pre-Closing Tax Periods shall be deemed to include Taxes payable by the Company,
Purchaser, or Purchaser's Affiliates that are attributable to items of income,
gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing
through the Closing Date, determined on the basis of a closing of the books of
MMP and the FCC Licensee Entities as of that date, notwithstanding that such
items may be reported in Taxable Periods ending after the Closing Date.
10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3
hereof after the Closing, Purchaser shall indemnify and hold Sellers harmless
from and against any and all Losses, howsoever incurred, which arises out of or
results from:
(a) any breach by Purchaser of any representation or warranty of
Purchaser set forth in Section 6 of this Agreement; or
(b) the material failure by Purchaser to perform any covenant of
Purchaser contained herein.
(c) any and all Taxes of the Company, MMP and the FCC Licensee
Entities (including any liability of the Company, MMP or the FCC Licensee
Entities for Taxes of any other persons) for any Post-Closing Tax Period except
to the extent that (i) such Taxes should have been but were not specifically
identified in the Closing Date Liabilities or are described in Section 10.1(c),
or (ii) such Taxes arise out of, result from or are attributable to a breach of
any representation, warranty or covenant of Sellers set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Sellers' obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Purchaser agrees that the payment of any claim
(whether such claim
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is framed in tort, contract, or otherwise) made by Purchaser for indemnification
hereunder subsequent to the Closing Date, for whatever reason, shall be limited
to, and shall only be made from, the Indemnification Amount in accordance with
the Indemnification Fund Agreement and, except for claims against the
Indemnification Amount, Purchaser waives and releases, and shall have no
recourse against, Sellers as a result of the breach of any representation,
warranty, covenant or agreement of Sellers contained herein, or otherwise
arising out of or in connection with the transactions contemplated hereby or the
operation of the Stations, and such indemnification shall be the sole and
exclusive remedy for Purchaser with respect to any such claim for
indemnification after the Closing Date; provided, however, that nothing herein
shall be deemed to limit any rights or remedies that Purchaser may have for
Sellers' fraud. The Indemnification Fund shall be disbursed in accordance with
the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Purchaser that, other
than with respect to Sellers (but not including any partner, director, officer,
employee, agent or Affiliate Sellers (including any shareholder, director,
officer, employee, agent or Affiliate of the Sellers)) as expressly provided for
in Section 10.1, no partner, director, officer, employee, agent or Affiliate of
Sellers (including any shareholder, director, officer, employee, agent or
Affiliate of Sellers) shall have (i) any personal liability to Purchaser as a
result of the breach of any representation, warranty, covenant or agreement of
Sellers contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations,
or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's
claims pursuant to Section 10.1 and Purchaser waives and releases and shall have
no recourse against any of such parties described in this Section 10.3(c) as a
result of the breach of any representation, warranty, covenant or agreement of
Sellers contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations;
provided, however, that nothing herein shall be deemed to limit any rights or
remedies that Purchaser may have for Sellers' fraud.
(c) Notwithstanding any other provision of this Agreement to the
contrary, Sellers shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement, the Management Agreement, the MRI Agreement and the
Investors Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Basket Amount"), and then only to the extent of the excess of Losses over
the amount of One Hundred Twenty-Five Thousand Dollars ($125,000.00); provided,
however, that this paragraph shall not apply to (i) payments pursuant to Section
2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi)
and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1b(vii)
relates to an item either disclosed on a Schedule and/or set forth on the
Estimate Certificate or the Accountant's Certificate), or (iii) indemnification
pursuant to Sections 10.1(b)(i) for breaches of the representations and
warranties set forth in Sections 5.2m, 5.3r, and 5.41.
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(d) In determining the amount of any Tax or other Loss for which
indemnification is provided under this Agreement, such Loss shall be (i) net of
any insurance recovery made by the indemnified party, (ii) reduced to take into
account any net Tax benefit realized by the indemnified party arising from the
deductibility of such Tax or Loss, and (iii) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Losses, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless a final determination with respect to the indemnified party or
any of its affiliates causes any such payment not to be treated as an adjustment
to the Purchase Price.
(e) No claim for indemnification for Losses shall be made after
expiration of the applicable period set forth in Section 7.1 hereof.
(f) Anything to the contrary in this Section 10.3 notwithstanding,
the terms, conditions and limitations set forth in this Section 10.3 do not
apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the Sellers' Agent
notice of any matter which an indemnified party has determined has given or
could give rise to a right of indemnification under this Agreement, stating the
nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice
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promptly thereafter of all developments coming to Sellers' Agent's attention
materially affecting any matter relating to any indemnification claims.
(b) Except as otherwise provided in Section 10.5, the obligations
and liabilities of an indemnifying party under this Section 10 with respect to
Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly after receipt
by an indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified
party shall give prompt notice thereof to Sellers' Agent and the indemnifying
part(ies) shall be entitled to participate therein or, to the extent that it
desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume the
defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized, without
consent of the indemnified party being required, to settle or compromise any
such action or claim, provided that such settlement or compromise includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim.
(iv) Whether or not an indemnifying part(ies) elects to assume
the defense of any action or claim, the indemnifying part(ies) shall not be
liable for any compromise or settlement of any such action or claim effected
without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement, including, without limitation, making available all
witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
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10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such notice
materially prejudices the indemnifying party.
(b) Sellers, acting through Sellers' Agents, shall have the
right, at their own expense, to control and make all decisions with respect to
any Tax Proceeding relating solely to Taxes of the Company for Taxable Periods
ending on or before the Closing Date; provided, that Purchaser and counsel of
its own choosing shall have the right, at Purchaser's own expense, to
participate fully in all aspects of the prosecution or defense of such Tax
Proceeding; and provided further that Sellers shall not settle any such Tax
Proceeding without the prior written consent of Purchaser if such settlements
could increase the past, present or future Tax liability of Purchaser or any of
its Affiliates, or any Tax liability of the Company for any Post-Closing Tax
Period by an amount greater than $25,000.
(c) Sellers, acting through Sellers' Agents, shall have the
right, at their own expense, to jointly control and participate with Purchaser
in all Tax Proceedings relating to Taxes of the Company for a Straddle Period.
If Sellers exercise such right, neither party shall settle any such Tax
Proceeding without the prior written consent of the other.
(d) If Sellers, acting through Sellers' Agents, do not
exercise their right to assume control of or participate in any Tax Proceeding
as provided under this Section 10.5, Purchaser may, without waiving any rights
to indemnification hereunder, defend or settle the same in such manner as it may
deem appropriate in its sole and absolute discretion.
(e) Purchaser shall control all Tax Proceedings relating to
Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax
Proceedings relating solely to Taxable Periods of MMP ending on or before the
Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers' Agents
fully informed as to the status of any such Tax Proceeding and shall not settle
such a Tax Proceeding without the prior written consent of Sellers' Agents,
which consent shall not be unreasonably withheld; provided that Sellers' Agents'
consent to a settlement shall only be required if such settlements could
increase Sellers' Taxes or Taxes for which Sellers have indemnification
responsibility hereunder by an amount greater than $25,000.
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(f) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
-----------------------------------------------------------
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Sellers shall have complied in all material respects with
their agreements and covenants contained herein to be performed at or prior to
the Closing, and the representations and warranties of Sellers contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate of one of Sellers' Agents, dated as
of the Closing Date and signed by Sellers Agent, certifying as to the
fulfillment of the condition set forth in this Section 11.1(a) ("Sellers'
Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Stock or the assets of the Station.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) All consents identified on Schedules 5.2h, 5.3e and 5.3m to
the MRI Agreement as required consents shall have been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses (other than the MMP II Licenses) shall have been
obtained. All the material conditions contained in the Final Order required to
be satisfied on or prior to the Closing Date shall have been duly satisfied and
performed. Notwithstanding the foregoing, other than conditions relating the
broadcast industry generally, if the consent of the FCC is conditional or
qualified in any manner that has a material adverse effect on Purchaser or
requires Purchaser or any of its subsidiaries to divest any television or radio
station owned, operated or programmed by Purchaser or any of its subsidiaries.
Purchaser may, nevertheless, in its sole discretion, require the consummation of
the transactions
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contemplated by this Agreement, but shall not be required to do so.
(f) Sellers shall have delivered to Purchaser at the Closing
each document required by Section 12.1 hereof.
(g) Since the date of this Agreement through the Closing Date,
there shall not have been either a Material Adverse Effect with respect to the
Company or a MMP Material Adverse Effect with respect to the business,
operations, properties, assets, or condition of MMP, and no event shall have
occurred or circumstance exist that reasonably could be expected to result in
either a Material Adverse Effect or an MMP Material Adverse Effect.
(h) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the
distribution of MMP II to MTC shall have occurred pursuant to the Assignment and
Assumption Agreement and the Distribution Agreement substantially in the form
attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or
more Time Brokerage Agreements generally in the form (subject to such revisions,
additions and deletions as determined by counsel to MMP II and Purchaser prior
to the Closing) attached hereto as Exhibit D.
(i) The closings under the MRI Agreement, the MTC Agreement and
the Management Agreement shall have occurred or will occur simultaneously with
the Closing.
(j) Sellers, the Company or MMP, as the case may be, shall have
complied with their obligations under Section 9.12.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation
of Sellers to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Seller shall have received a certificate of Purchaser, dated as of the Closing
Date and signed by an officer of Purchaser, certifying as to the fulfillment of
the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down
Certificate").
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(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Sellers
from consummating the transactions contemplated hereby.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Sellers at the Closing the
Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the MRI Agreement, the MTC Agreement and
the Management Agreement shall have occurred or occur simultaneously with the
Closing.
SECTION 12
DELIVERIES AT THE CLOSING
-------------------------
12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or
cause to be delivered at the Closing to Purchaser:
(a) Sellers' Bring-Down Certificate;
(b) a legal opinion of Clark & Stant, P.C., counsel to Sellers',
the Company and MMP substantially in the form attached as Exhibit E hereto;
(c) a legal opinion of counsel to the FCC Licensee Entities in
the form attached hereto as Exhibit F;
(d) stock certificates evidencing the Stock, together with stock
powers, dated as of the Closing Date and executed by the respective Sellers,
transferring the Stock to Purchaser;
(e) the original corporate minute books, stock registry and seal
of the Company;
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(f) a certificate as to the existence of the Company issued by
the Secretary of the State Corporation Commission of the Commonwealth of
Virginia dated not more than five (5) Business Days before the Closing Date;
(g) a certificate as to the existence and good standing of MMP
issued by the Secretary of the State Corporation Commission of the Commonwealth
of Virginia not more than five (5) Business Days before the Closing Date and
certificates issued by the appropriate governmental authorities in each
jurisdiction in which MMP is qualified to do business and a certificate as to
the existence for each of the FCC Licensee Entities of the Secretary of the
State Corporation Commission of the Commonwealth of Virginia dated not more than
five (5) Business Days before the Closing Date;
(h) receipt for Purchase Price;
(i) resignations of each of the officers and directors of the
Company effective as of the Closing Date;
(j) the certificate(s) required by Section 8.6;
(k) a copy of any instrument evidencing any consents received;
(l) the Indemnification Escrow Agreement duly executed by
Sellers and Sellers' Agent;
(m) a copy of any instrument evidencing any consent received,
including, but not limited to, estoppel certificates from MMP's landlords with
respect to the Real Property;
(n) [RESERVED]
(o) the Estimate Certificate;
(p) the employee releases with respect to the VARS and Incentive
Agreements duly executed by each employee to such Agreements;
(q) the amendments to the LMAs in a form reasonably satisfactory
to Purchaser duly executed by the necessary parties thereto as contemplated by
Section 9.3(w);
(r) evidence reasonably satisfactory to Purchaser that the
Limited Partnership Agreements of the FCC Licensee Entities have been amended,
and that sufficient actions have been taken by or with respect to MMP, to
require allocation of items of income, gain, loss, deduction and credit with
respect to transferred interests in the FCC
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Licensee Entities and MMP based on the interim closing of the books method
authorized by Code Section 706 and the regulations promulgated thereunder; and
(s) such other documents as Purchaser shall reasonably request.
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Sellers, the Disbursing Agent or the Indemnification
Escrow Agent, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit G hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement duly executed by
Purchaser;
(e) a certificate as to the existence and good standing of the
Purchaser issued by the Maryland Department of Assessments and Taxation of the
State of Maryland dated as of the Closing Date;
(f) one or more fully executed Time Brokerage Agreements as
negotiated pursuant to Section 11.1(h) hereof; and
(g) such other documents as the Company shall reasonably
request.
SECTION 13
EXPENSES
--------
Except as provided in Sections 9.4 and 9.5, each party will pay its own
fees, expenses, and disbursements and those of its counsel in connection with
the subject matter of this Agreement (including the negotiations with respect
hereto and the preparation of any documents) and all other costs and expenses
incurred by it in the performance and compliance with all conditions and
obligations to be performed by it pursuant to this Agreement or as contemplated
hereby.
SECTION 14
TERMINATION
-----------
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14.1 TERMINATION. This Agreement may be terminated:
(a) At any time by mutual written consent of Purchaser and
Sellers;
(b) By either Purchaser or Sellers, if the terminating party is
not in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before October 31,
1998, except where the Closing has been postponed pursuant to the provisions of
Section 9.8, in which case the applicable date shall be upon the expiration of
the period referred to in Section 9.8(b) (the "Termination Date");
(c) by Sellers, if Sellers are not in default or breach in any
respect of their obligations under this Agreement, if all of the conditions in
Section 11.2 have not been satisfied or waived by the date scheduled for the
Closing (as such date may be postponed pursuant to Section 9.8);
(d) by Purchaser, if Purchaser is not in default or breach in any
material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing (as such date may be postponed pursuant to
Section 9.8);
(e) by Purchaser, pursuant to Section 9.8.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Sellers pursuant to Sections 9.8 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein, all
filings, applications and other submissions relating to the transactions
contemplated hereby as to which termination has occurred shall, to the extent
practicable, be withdrawn from the agency or other Person to which such filing
is made.
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(b) If this Agreement is terminated pursuant to Section
14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be
returned to Purchaser and Purchaser shall have the right to pursue all remedies
available hereunder at law or in equity, including, without limitation, the
right to seek specific performance and/or actual monetary damages, but excluding
consequential and incidental damages. In recognition of the unique character of
the property to be sold hereunder, and the damages which Purchaser will suffer
in the event of a termination pursuant to the foregoing Sections of this
Agreement, Sellers hereby waive any defense that Purchaser has an adequate
remedy at law for the breach of this Agreement by Sellers.
(c) If this Agreement is terminated pursuant to Section
14.1(c) and Purchaser shall be in breach in any material respect of its
representations, warranties, covenants, agreements, or obligations set forth in
this Agreement, then and in that event, Sellers shall have the right to retain
the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated
damages, and as the sole and exclusive remedy of Sellers as a consequence of
Purchaser's default (which aggregate amount the parties agree is a reasonable
estimate of the damages that will be suffered by Sellers as a result of the
default by Purchaser and does not constitute a penalty), the parties hereby
acknowledging the inconvenience and nonfeasability of otherwise obtaining
inadequate remedy.
(d) If this Agreement is terminated pursuant to Sections
14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section
3.1(1) shall be returned to Purchaser.
(e) A notice of termination made under any provision of
Section 14.1 of this Agreement shall be deemed to be a notice of termination
under the termination provisions of the MRI Agreement, the Management Agreement
and the MTC Agreement.
(f) In the event of a default by either party that results in
a lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
SECTION 15
NOTICES
-------
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as
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follows:
To Purchaser: SINCLAIR COMMUNICATIONS, INC.
------------ 2000 W. 41st Street
Baltimore, Maryland 21211
Attention: David D. Smith
Telecopy: (410) 467-5043
Telephone: (410) 662-1008
with copies Sinclair Communications, Inc.
(which shall not 2000 W. 41st Street
constitute notice) to: Baltimore, Maryland 21211
Attention: General Counsel
Telecopy: (410) 662-4707
Telephone: (410) 662-1422
and
Thomas & Libowitz, P.A.
Suite 1100
100 Light Street
Baltimore, Maryland 21202
Attention: Steven A. Thomas
Telecopy: (410) 752-2046
Telephone: (410) 752-2468
To Sellers' Agents: Anthony R. Ignaczak
------------------ Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Telecopy: (804) 979-1145
Telephone: (804) 979-9227
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Allen B. Rider, III
Colonnade Capital, L.L.C.
13th Floor
901 East Byrd
Richmond, Virginia 23219
Telecopy: (804) 782-6606
Telephone: (804) 782-3512
Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Each of the Sellers hereby irrevocably appoints
Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called
the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by such Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall be unanimous. In the event of the death,
incapacity or liquidation of any of Sellers' Agents, such person or entity shall
not be replaced, and the remaining Sellers' Agents shall continue in that
capacity. The Sellers agree jointly and severally to indemnify the Sellers'
Agents from and against and in respect of any and all liabilities, damages,
claims, costs, and expenses, including, but not limited to attorneys' fees,
arising out of or due to any action by them as the Sellers' Agents and any and
all actions, proceedings, demands, assessments, or judgments, costs, and
expenses incidental thereto, except to the extent that the same result from bad
faith or gross negligence on the part of the
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Sellers' Agents. Purchaser shall be
entitled to rely exclusively upon any communications given by the Sellers'
Agents on behalf of any Seller, and shall not be liable for any action taken or
not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to
disregard any notices or communications given or made by Sellers unless given or
made through the Sellers' Agents.
SECTION 17
MISCELLANEOUS
-------------
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to this Agreement constitute an integral part of this Agreement as if
fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the MRI Agreement, the
Management Agreement, the MTC Agreement and the FCC Licensee Transfer Agreement,
the Annexes, Schedules and Exhibits and the documents to be delivered hereunder
and thereunder constitute the entire understanding and agreement between the
parties hereto concerning the subject matter hereof. All negotiations and
writings between the parties hereto are merged into this Agreement, the MRI
Agreement, the Management Agreement, the MTC Agreement, the FCC Licensee
Transfer Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein or to be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended except
in writing signed by each of the Purchaser and Sellers' Agent.
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17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its obligations hereunder; and provided further that any change of control in
respect of Purchaser's parent, SBGI, shall not require the consent of Sellers.
In the event of such permitted assignment or other transfer, all of the rights,
obligations, liabilities, and other terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against, the
respective successors and assigns of the parties hereto, whether so expressed or
not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent any Seller or any Affiliate thereof or
Purchaser from making any disclosure in connection with the transactions
contemplated by this Agreement if required by applicable law or otherwise as a
result of its, or its Affiliate's, being a public company, provided that prior
notice of such disclosure is given to the other party hereto.
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17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will
have no adequate remedy at law if Sellers fail to perform their obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however, that all
transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Sellers and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Sellers. Purchaser hereby waives compliance with the provisions of any
applicable bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits hereto are
the result of the efforts of all parties to this Agreement and every covenant,
term, and provision of this Agreement shall be construed according to its fair
meaning and shall not be construed against any particular party as the drafter
of such covenant, term, and/or provision. The Purchaser and Sellers agree that
this Agreement is to be construed in a manner consistent with the terms of the
MRI Agreement, the Management Agreement and the MTC Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
SINCLAIR COMMUNICATIONS, INC.,
a Maryland corporation
By
---------------------------------------------
its
---------------------------------------
Shareholders of Max Investors, Inc.
---------------------------------------
Catherine M. Daniels
---------------------------------------
Terrence D. Daniels
---------------------------------------
Charles P. Daniels
---------------------------------------
Christopher C. Daniels
---------------------------------------
Courtnay P. Daniels
---------------------------------------
Edward T. Harvey
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---------------------------------------
R. Ted Weschler
---------------------------------------
Anthony R. Ignaczak
---------------------------------------
Stephen M. Burns
---------------------------------------
J. Hunter Reichert
---------------------------------------
Jeffrey J. Teschke
---------------------------------------
Anthony F. Apollaro
---------------------------------------
Matthew T. Goodwin
---------------------------------------
Catherine J. Rotolo
JOHN T. HERZOG WFS ROLL
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OVER IRA
---------------------------------------
John T. Herzog Custodian
PAUL BRANDON HERZOG
---------------------------------------
John T. Herzog Custodian
---------------------------------------
Karon Chelsea Herzog
---------------------------------------
Allen B. Rider III
ALLEN B. RIDER III SEP IRA
---------------------------------------
Allen B. Rider III Custodian
EDWARD WHITCOMB RIDER
---------------------------------------
Allen B. Rider III Custodian
---------------------------------------
Virginia Ticknor Rider
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James C. Wheat III
---------------------------------------
James C. Wheat IRA
JASPER L.L.C.
By:
------------------------------------
Its:
-----------------------------------
BLANDFIELD ASSOCIATES, L.L.C.
By:
------------------------------------
Its:
-----------------------------------
---------------------------------------
Brenton S. Halsey
---------------------------------------
James E. Rogers
---------------------------------------
Wallace Stettinius
---------------------------------------
Edward Villanueva
65
<PAGE>
---------------------------------------
Alexandra D. Henley
---------------------------------------
Carolyn E. Underwood IRA
---------------------------------------
Karin I. Wagner IRA
COMMAX PARTNERS, L.P., a
Virginia limited partnership
By:
------------------------------------
Its:
-----------------------------------
QUAD-C PARTNERS III, L.P., a Virginia
limited partnership
By:
------------------------------------
Its:
-----------------------------------
QUAD-C PARTNERS IV, L.P., a Virginia
limited partnership
By:
------------------------------------
Its:
-----------------------------------
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COMMONWEALTH INVESTORS II, L.P., a
Virginia limited partnership
By:
------------------------------------
Its:
-----------------------------------
MAX INVESTORS, INC.
By:
------------------------------------
Its:
-----------------------------------
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ANNEX 1
DEFINITIONS
-----------
As used in the attached Stock Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Allocable Portion" shall mean 0% in the case of the Company and MRI,
96.470% in the case of MCT and 3.530% in the case of Management.
"Basket Amount" has the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
"Broadcast Time Sales Agreement" shall mean all contracts and
agreements pursuant to which MMP has sold commercial air time on the Stations
for cash.
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"Business" means the business of owning and operating the Stations.
"Business Day" means any day on which banks in New York City are open
for business.
"Cash Price" shall mean the excess of $252 million over the Funded Debt
immediately prior to the Closing.
"CERCLA" has the meaning set forth in Section 5.3q of the Agreement.
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Liabilities" has the meaning set forth in Section 2.2(b)
of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Estimated Accounts Receivable" has the meaning of an
amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP
as of the Closing Date, which have been outstanding for no more than 120 days,
as set forth in the Certificate of Sellers' Agent delivered to Purchaser five
(5) days before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" has the meaning set forth in the recitals to the Agreement.
"Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
or may have any liability (whether actual, contingent, with respect to any of
its assets or otherwise) as of the Closing Date, in each case with respect to
any present or former directors, employees, or agents of the Company.
"Company Interests" shall have the meaning set forth in Section 5.2q.
"Company Plan" shall mean, as of the Closing Date, any Benefit Plan for
which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments,
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in each case with respect to any present or former employees of the Company.
Company Plan shall include any Qualified Plan terminated within the preceding
six years.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock and the Station assets to Purchaser to maintain the validity and
effectiveness (any default or violation of the terms thereof) of any Material
Contract and any licenses (including, without limitation, the FCC Licenses) to
be transferred to Purchaser, or otherwise to consummate the transactions
contemplated by this Agreement.
"Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of
the Agreement.
"Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and
Stephen W. Burke.
"Disbursement Agreement" means that certain Disbursement Agreement
dated not later thirty (30) days prior to the Closing, among the Disbursing
Agent and the Sellers.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any Person that together with the Company
or MMP, as applicable, would be or was at any time treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which the Company or MMP, as applicable, is or has been a general
partner.
"Estimate Certificate" shall have the meaning set forth in Section
2.2(b)(i).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
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"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Application" means the applications requesting the approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Licensee Entities" shall have the meaning set forth in the
Recitals.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3h
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"GAAP" means generally accepted accounting principles.
"Funded Debt" means indebtedness of MMP for borrowed money (including
pursuant to capitalized lease obligations), including any and all fees, costs or
other payments associated with its payoff or retirement, other than (i) any
indebtedness due after the Closing Date with respect to program contract
liabilities, and (ii) Closing Date Liabilities.
"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.
"H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
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"Initial Deposit" means $12,750,000 less an amount equal to the lesser
of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts
Receivable.
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service mark registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Incentive Agreements" has the meaning set forth in Section 9.14.
"Indemnification Amount" means $12,750,000.00 deposited or collected
pursuant to the Indemnification Escrow Agreement.
"Indemnification Escrow Agreement" has the meaning set forth in Section
3.1 of the Agreement.
"Indemnification Escrow" has the meaning set forth in Section 3.1 of
the Agreement.
"Knowledge or knowledge" shall mean with respect to the Company, MMP,
MTR and the FCC Licensee Entities the actual knowledge (without any requirement
of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr.,
John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J.
Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the
managers and officers of MMP, and the officers and directors of the Company.
"LMA Stations" shall have the meaning set forth in the Recitals.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Accounts Receivable" has the meaning given in Section 5.3s.
"MMP's Benefit Arrangements" means any Benefit arrangement sponsored or
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maintained by MMP or by the FCC Licensee Entities or with respect to which MMP
or the FCC Licensee Entities has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former director, employees, or
agent of MMP or the FCC Licensee Entities.
"MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan
for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC
Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make
payments, in each case with respect to any present or former employees of MMP or
the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan
terminated within the preceding six (6) years.
"MMP II FCC Applications" means the application requesting the approval
and consent of the FCC to the transfer of control of Television Stations WKEF-TV
and WEMT-TV from MMP to MTC.
"MMP Financial Statements" means the balanced sheet of MMP at December
31, 1996, the audited consolidated statements of operations and cash flows for
the year then ended, all notes thereto and the independent auditor's audit
report thereon, together with the unaudited balance sheet of MMP at September
30, 1997 and the unaudited statement of operations for the nine (9) months then
ended.
"MMP Material Adverse Effect" shall mean a material adverse effect on
the business, or financial condition of any Television Station with the
exception of WMMP-TV in the Charleston, South Carolina market or the Radio
Stations taken as a whole.
"MMP Real Property" means all real property owned or leased by MMP.
"MRI" shall have the meaning set forth in the Recitals.
"MRI Agreement" shall have the meaning set forth in the Recitals.
"MTC" shall have the meaning set forth in the Recitals.
"MTC Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Management Agreement" shall have the meaning set forth in the
Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of the Company taken as a whole.
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"Material Contract" means all agreements to which the Company or MMP is
a party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
"Pro Rata Share" shall mean 26.9433% in the case of the Company,
1.6167% in the case of Management, 26.6519% in the case of MRI, and 44.7881% in
the case of MTC.
"Purchase Price" shall mean the sum of (a) the Pro Rata Share of the
excess of the Cash Price over 40% of the Step-Up plus (b) the Allocable Portion
of 40% of the Step-Up.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
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"Qualified Plan" shall mean any Company Plan or MMP Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by the Company.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Sellers" has the meaning set forth in the preamble to the Agreement.
"Sellers' Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Shareholder Settlement Agreements" shall have the meaning set forth in
Section 2.2(b).
"Stations" has the meaning set forth in the recitals to the Agreement.
"Step-Up" shall mean the amount of Code Section 754 basis step-up,
calculated as the present value (determined using an 8.0% discount rate over a
15-year period assuming straight line amortization) of 45.812% of the Cash Price
minus (or plus in the case of a negative) the aggregate tax basis capital
accounts of MTR and Management in MMP immediately prior to the Closing.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
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"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Television Licensee" shall have the meaning set forth in the Recitals.
"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
"VARS" has the meaning set forth in Section 9.14.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
MAX MANAGEMENT LLC
AND
MAX MEDIA PROPERTIES LLC
<PAGE>
TABLE OF CONTENTS
-----------------
1. DEFINITIONS................................................................3
2. SALE OF ASSETS/EXCLUDED ASSETS.............................................3
2.1. Sale of Assets..................................................3
2.2. Excluded Assets.................................................3
3. PURCHASE PRICE.............................................................6
3.1. Payment.........................................................6
3.2. Disbursing Agent................................................6
4. CLOSING....................................................................7
5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7
5.1. RESERVED........................................................7
5.2. Representations and Warranties as to the Company................7
a. Organization and Good Standing..........................7
b. RESERVED................................................7
c. No Conflicts............................................8
d. Financial Statements....................................8
e. Employee Benefit Plans..................................9
f. Labor...................................................9
g. Insurance...............................................9
h. Material Contracts......................................9
i. Compliance with Laws...................................10
j. Litigation.............................................10
k. No Brokers.............................................10
l. Consents...............................................10
m. Tax Matters............................................10
n. RESERVED...............................................12
o. Accounts Receivable....................................12
p. RESERVED...............................................12
q. Representations as to the Company Interests............12
5.3. Representations and Warranties as to the MMP and the FCC
Licensee Entities.............................................13
a. Organization and Good Standing.........................13
b. Capitalization of MMP..................................13
c. Organization and Capitalization of the FCC License
Entities..............................................14
d. No Conflicts...........................................14
e. Real Property..........................................15
f. Personal Property......................................16
g. Financial Statements...................................16
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h. FCC....................................................18
i. Intellectual Property..................................19
j. Employee Benefit Plans.................................19
k. Labor..................................................21
l. Insurance..............................................22
m. Material Contracts....................................23
n. Compliance with Laws...................................23
o. Litigation.............................................23
p. Consents...............................................23
q. Environmental..........................................23
r. Tax Matters............................................25
s. Accounts Receivable....................................27
t. Representations as to MMP Interests....................27
5.4. RESERVED.......................................................28
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................28
6.1. Organization and Good Standing.................................28
6.2. Execution and Effect of Agreement..............................28
6.3. No Conflicts...................................................28
6.4. Consents.......................................................28
6.5. Litigation.....................................................29
6.6. No Brokers.....................................................29
6.7. Purchaser Qualifications.......................................29
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............29
7.1. Limitation; Survival...........................................29
8. TAX MATTERS...............................................................30
8.1. RESERVED.......................................................30
8.2. Tax Returns....................................................30
8.3. Apportionment..................................................31
8.4. Cooperation in Tax Matters.....................................31
8.5. Certain Taxes..................................................31
8.6. FIRPTA.........................................................31
8.7. Section 754 Election...........................................32
8.8. Closing Date Actions...........................................32
9. ADDITIONAL COVENANTS AND UNDERTAKINGS......................................32
9.1. Further Assurances and Assistance..............................32
9.2. Access to Information..........................................32
9.3. Conduct of Business Prior to Closing...........................33
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9.4. H-S-R Act......................................................36
9.5. FCC Application................................................36
(c)FCC Applications to Transfer Certain FCC Licenses......37
9.6. Books and Records..............................................37
9.7. Employees and Employee Benefits................................37
9.8. Interruption of Broadcast Transmission.........................37
9.9. Interpretation of Certain Provisions...........................39
9.10. Collection of Accounts Receivable..............................39
9.11. Other Acquisitions.............................................41
9.12. Payment of Certain Liabilities Prior to Closing................41
9.13. RESERVED.......................................................41
9.14. Value Appreciation Rights and Incentive Fees...................41
10. INDEMNIFICATION..........................................................42
10.1. Indemnification of Purchaser by Sellers........................42
10.2. Indemnification of Sellers by Purchaser........................43
10.3. Limitations and Other Provisions Regarding Indemnification
Obligations...................................................43
10.4. Notice of Claim Defense of Action..............................45
10.5 Tax Contests...................................................46
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............48
11.1. Conditions Precedent to the Obligation of Purchaser............48
11.2. Conditions Precedent to the Obligation of Sellers..............49
12. DELIVERIES AT THE CLOSING................................................50
12.1. Deliveries by Sellers..........................................50
12.2. Deliveries by Purchaser........................................52
13. EXPENSES.................................................................52
14. TERMINATION..............................................................53
14.1 Termination....................................................53
14.2 Procedure and Effect of Termination............................53
15. NOTICES..................................................................54
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16. SELLERS' AGENTS..........................................................56
16.1. Sellers' Agents...............................................56
17. MISCELLANEOUS............................................................57
17.1. Headings......................................................57
17.2. Schedules and Exhibits........................................57
17.3. Execution in Counterparts.....................................57
17.4. Entire Agreement..............................................57
17.5. Governing Law.................................................57
17.6. Modification..................................................57
17.7. Successors and Assigns........................................57
17.8. Waiver........................................................58
17.9. Severability..................................................58
17.10. Announcements.................................................58
17.11. Specific Performance..........................................58
17.12. Fees and Expenses.............................................59
17.13. Third Party Beneficiaries.....................................59
17.14. Interpretation................................................59
ANNEX 1 - DEFINITIONS
ANNEX 2 - SELLERS
EXHIBITS
Exhibit A - Deposit Escrow Agreement
Exhibit B - Indemnification Escrow Agreement
Exhibit C - MMP II Assignment and Assumption Agreement
Exhibit D - Time Brokerage Agreements
Exhibit E - Opinion of Counsel,
Clark & Stant, P.A.
Exhibit F - Opinion of Sellers' FCC Counsel
Exhibit G - Opinion of Counsel,
Thomas & Libowitz, P.A.
iv
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SCHEDULES
5.1a(ii) Encumbrances of Stock
5.1a(vi) Options and Agreements
5.1b Share Brokers
5.1c No Conflicts
5.2b Capitalization
5.2c Conflicts
5.2d Financial Statements
5.2e Employee Benefit Plans
5.2f Labor
5.2g Insurance
5.2h Material Contracts
5.2i Compliance with Laws
5.2j Litigation
5.2k Brokers
5.2l Consents
5.2m(a) Tax Matters
5.2m(c) Tax Basis and Tax Elections
5.2q Company Interest
5.3b Capitalization
5.3d Conflicts
5.3e Real Property
5.3f Personal Property
5.3g Financial Statements
5.3h FCC Licenses
5.3i Intellectual Property
5.3j Employee Benefit Plans
5.3k Labor
5.3k(d) Employee Terminations or Demands
5.3l Insurance
5.3m Material Contracts
5.3n Compliance with Laws
5.3o Litigation
5.3p Consents
5.3q Environmental Matters
5.3r(a) Tax Matters
5.3r(c) Tax Basis and Tax Elections
5.3t Representations as to MMP Interests
5.4b Capitalization
5.4d Financial Matters
5.4h Material Contracts
v
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5.4l(a) Tax Matters
5.4l(c) Tax Basis and Tax Elections
5.4o Representations as to MTR Interests
6.3 Conflicts
6.4 Consents
6.5 Litigation
6.7 Purchaser Qualifications
9.3(c) Planned Asset Dispositions
vi
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of December, 1997, is entered into by and among Sinclair
Communications, Inc., a Maryland corporation ("Purchaser"), Max Management LLC,
a Virginia limited liability company (the "Seller"), and Max Media Properties
LLC, a Virginia limited liability company ("MMP").
RECITALS:
WHEREAS, Seller owns 188,034 Class C Membership Units (out of a total
of 11,631,431 Membership Units) of MMP (the "Assets"); and
WHEREAS, Seller desires to sell, assign and transfer the Assets, and
Purchaser desires to acquire the Assets, all on the terms described herein;
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "MRI Agreement") to
acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI
is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation
("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431
Membership Units) of MMP, and a 2% limited partnership interest in Radio License
L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of
the Radio Stations (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to
acquire all of the issued and outstanding shares of Max Investors, Inc., a
Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C
Membership Units (out of a total 11,631,431 Membership Units) of MMP; and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to
acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500
Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP,
69% of the equity of MTR and a 2% limited partnership interests in the
Television Licensees (as defined below); and
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of
a total 11,631,431 Membership Units) of MMP; and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of television stations WSYT-TV in the Syracuse, New York market,
WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio
market, WEMT-
<PAGE>
TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in
the Tyler, Texas market (each a "Television Station" and collectively, the
"Television Stations"); and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina
("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro,
North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG";
together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in
Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in
Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah,
Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp.,
television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage
Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches,
Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the
"LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, the parties desire that, before the Closing and after receipt
of any required approval of the FCC, MMP transfer all partnership interests it
holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a
newly-created Virginia limited liability company ("MMP II") (the "MMP II
Transfers"); and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the membership interests in MMP
II; and
WHEREAS, on the consummation of this Agreement, the MTC Agreement, the
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Investors Agreement and the MRI Agreement (collectively, the "Purchase
Agreements") Purchaser will own, directly or indirectly, all of the 11,631,431
Membership Units of MMP and all general and limited partnership interests in the
FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II
Licenses"); and
WHEREAS, MMP holds certain assets more fully described below (the
"Excluded Assets") that will not be acquired by Purchaser; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the Assets.
SECTION 1
---------
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meaning
specified in the text hereof or on Annex 1 which is incorporated herein by
reference, which meaning shall be applicable to both the singular and plural
forms of the terms defined.
SECTION 2
SALE OF ASSETS/EXCLUDED ASSETS
2.1. SALE OF ASSETS. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date (as hereinafter defined), Seller
hereby agrees to transfer, convey, assign and deliver to Purchaser on the
Closing Date, and Purchaser agrees to acquire, all of Seller's right, title and
interest in the Assets, together with any additions thereto, between the date of
this Agreement and the Closing Date, but excluding those assets described in
Section 2.2, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever other than as described on Schedule 2.1.
2.2 EXCLUDED ASSETS.
(a) The following assets (collectively, the "Excluded
Assets") may be distributed by MMP to Seller and to the holders of Membership
Units in MMP, and may be distributed by Seller or its designee prior to the
Closing:
3
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(i) 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, and Treasury Bills;
(ii) all furniture, fixtures and equipment located at the
principal place of business of MMP, the address of which is 900 Laskin Road,
Virginia Beach, Virginia 23451 and the leasehold interest therein;
(iii) the Option Agreement with Gary and Susan Clarke, WWBI
TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and
agreements related thereto and all related collateral and other documents;
(iv) all notes payable and other amounts due from MCC Air
Inc. and all assets, including real property, promissory notes and agreements
relating solely to the sale and lease of WMQX-AM, Greensboro, NC to
Winston-Salem Radio Corporation and Willis Broadcasting Corporation;
(v) subject to the terms and conditions of the
Indemnification Escrow Agreement (as defined below), the accounts receivable of
MMP.
(vi) the names "Max Media," "Max Television," "Max Radio"
and "Max Media Properties".
Any distribution of Excluded Assets by MMP will be made pro rata to the holders
of Membership Units in MMP unless otherwise agreed to by Purchaser.
(b) Notwithstanding anything to the contrary in Section 2.2(a)
above, MTR and MMP shall each retain an amount of cash, cash equivalents and
other cash items that are sufficient to cover and pay their respective Closing
Date Liabilities. For purposes of this Agreement, the term "Closing Date
Liabilities" shall mean the liabilities of MTR and MMP (other than for Funded
Debt, liabilities with respect to program contract liabilities accruing after
the Closing Date and liabilities with respect to trade and barter obligations
arising after the Closing Date) whether or not disclosed on any Schedule hereto
(A) as of the Closing Date; (B) for operations prior to the Closing Date; and
(C) for all liabilities of any kind whatsoever under that certain Mutual Release
dated as of January 1, 1997 and that certain Settlement Agreement dated as of
January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except
as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall
be determined in accordance with GAAP consistently applied with prior periods,
and shall be consistent with the books and records of MTR and MMP. The amount of
cash, cash equivalents and cash items retained to cover the Closing Date
Liabilities shall not be considered Excluded Assets.
4
<PAGE>
(i) MMP shall deliver to Purchaser at the Closing a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of the Closing Date Liabilities, which shall be used to determine the amount of
cash, cash equivalents and other cash items required to be retained by MTR and
MMP pursuant to this Section 2.2(b).
(ii) Within one hundred twenty (120) days of the Closing,
Purchaser shall cause its accountant to prepare and deliver to Seller a
certificate setting forth its calculation of the Closing Date Liabilities (the
"Accountant's Certificate"). The amount of the Closing Date Liabilities as set
forth on the Accountant's Certificate shall be final unless Sellers' Agents
notify Purchaser within thirty (30) days from their receipt of the Accountant's
Certificate that they dispute the Accountant's Certificate. If Sellers' Agents
and Purchaser are unable to agree on the amount of the Closing Date Liabilities
within fifteen (15) days after Sellers' Agents' notice, the parties shall
jointly appoint and engage an independent accountant of national or regional
repute (the "Independent Accountant") to perform an independent evaluation of
the Closing Date Liabilities. The findings of the Independent Accountant as to
the amount of the Closing Date Liabilities shall be final and binding on the
parties hereto.
(iii) Upon the determination of the Closing Date
Liabilities becoming final which is different from the Estimate Certificate
either (A) Purchaser shall be entitled to a payment from the Indemnification
Escrow equal to the amount by which the aggregate amount of the Closing Date
Liabilities exceeds the Closing Date Liabilities shown on the Estimate
Certificate, taking into account any amounts paid from the Indemnification
Escrow under provisions similar to this provision in the MRI Agreement, the
Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to
Disbursing Agent an amount by which the aggregate amount of Closing Date
Liabilities shown on the Estimate Certificate exceeds the Closing Date
Liabilities as finally determined.
(iv) For purposes of determining the amount of the Tax
liabilities of MTR to be included in the Closing Date Liabilities (the "Closing
Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities
of MTR that are attributable to items of income, gain, loss, deduction and
credit of MMP and the FCC Licensee Entities accruing through and including the
Closing Date, notwithstanding that such items may be reported by MTR, Purchaser,
or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The
amount of the Tax liabilities attributable to the Tax items of MMP and the FCC
Licensee Entities shall be determined by assuming that the taxable years of MMP
and the FCC Licensee Entities, as well as the taxable years of the Company and
MTR, end as of close of business on the Closing Date and by assuming Purchaser's
compliance with Section 8.8. The Closing Date Tax Liabilities shall not include,
and Purchaser shall have no rights
5
<PAGE>
of Indemnification under Section 10 with respect to, any Tax Liabilities arising
from the MMP II Distribution.
(v) Notwithstanding anything to the contrary contained in
this Section 2.2, the final determination of the Closing Date Liabilities
hereunder shall not affect Purchaser's indemnification rights pursuant to
Section 10 to the extent the actual Closing Date Liabilities exceed the final
determination thereunder.
SECTION 3
PURCHASE PRICE
--------------
3.1 Payment. In consideration for the sale of the Stock, Purchaser
shall pay to Seller the "Purchase Price," payable as follows:
(1)Purchaser has deposited with First Union National Bank, as
Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which
shall be distributed in accordance with the Deposit Escrow Agreement in the form
attached hereto as Exhibit A.
(2)At the Closing, the "Initial Deposit" which shall be held
in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent
pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto
(the "Indemnification Escrow Agreement"); and
(3)The balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available funds to the accounts
specified by Disbursing Agent pursuant to wire instructions delivered in writing
to Purchaser not later than two (2) Business Days prior to the Closing.
3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the
Purchase Price to Seller in accordance with the Disbursement Agreement.
6
<PAGE>
SECTION 4
CLOSING
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One
Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on such
day), on the later to occur of (a) five Business Days after all applicable
waiting periods under the H-S-R Act shall have expired or terminated, or (b)
five Business Days after the Final Order (the date of Closing being the "Closing
Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in
which case Purchaser shall give Sellers reasonable notice of the Closing, or
(ii) the parties shall mutually agree upon a different date or location;
provided, however, that in no event shall the Closing be held prior to March 18,
1998; and provided, further, that in the event the Closing is postponed past
July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or
otherwise, Seller, in its sole discretion, may postpone the Closing to September
1, 1998. In no event shall Closing occur later than the Termination Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1. RESERVED
5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER .
Seller hereby represents and warrants to Purchaser as follows:
a. ORGANIZATION AND GOOD STANDING. Seller is a limited
liability company duly organized and validly existing under the laws of the
Commonwealth of Virginia hereto and has full corporate power and authority to
carry on its business as it is now being conducted and to own and use the assets
owned and used by it. To the extent required by law, Seller is qualified as a
foreign limited liability company and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. Seller does not own any
direct or indirect subsidiary corporation.
b. RESERVED
7
<PAGE>
c. NO CONFLICTS. Except as described on Schedule 5.2c,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of organization or operating agreement of Seller, (ii) violate any provision of
applicable law, rule and regulation, which violation would prevent or materially
interfere with Seller's ability to perform hereunder or have a Material Adverse
Effect, or (iii) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller is a party or to which its property is subject, or
constitute a default thereunder, where such conflict, breach, right of
termination, acceleration or default would prevent or materially interfere with
Seller's ability to perform hereunder or have a Material Adverse Effect.
d. FINANCIAL STATEMENTS. As of the date of this Agreement,
Seller has not issued any financial statements. Except as set forth on Schedule
5.2.d hereto, since February 14, 1997, there has not been any Material Adverse
Effect on the business, financial condition, operations or results of operations
of Seller taken as a whole. Without limiting the generality of the foregoing,
since February 14, 1997, except as set forth on Schedule 5.2d:
(i) Seller has not sold, leased, transferred, or
assigned Asset;
(ii) Seller has not entered into any material
agreement, contract, lease, or license affecting the Assets;
(iii) Seller has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which the Company is a party or by which the Company is bound;
(iv) Seller has not imposed any security interest upon
any of the Assets;
(viii) Seller has not granted any license or sublicense
of any material rights under or with respect to any Asset;
(ix) there has been no change made or authorized in the
charter or bylaws of Seller;
(x) the Assets have not experienced any material
damage, destruction, or loss (whether or not covered by insurance);
8
<PAGE>
(xi) Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Company Plan or
Company Benefit Arrangement);
(xii) Seller has not made or changed any material Tax
election or taken any other action with respect to Taxes inconsistent with past
practices affecting the Assets;
(xiii) Seller has not adopted any material change in
any method of accounting or accounting practice, except as contemplated or
required by GAAP; and
(xiv) except as set forth in this Agreement, Seller has
not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. Seller does not, and has not in
the past, instituted or maintained any Benefit Arrangement or Benefit Plan.
Neither Seller nor any ERISA Affiliate has sponsored, maintained, or had any
liability (direct or indirect, actual or contingent) with respect to any Benefit
Plan Subject to Title IV of ERISA. Neither Seller nor any ERISA Affiliate has
ever made or been obligated to make, or reimbursed or been obligated to
reimburse another employer for, contributions to any multiemployer plan (as
defined in ERISA Section 3(37). Seller has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement.
f. LABOR. Seller has not employed any employees.
g. INSURANCE. Seller maintains no insurance policies.
h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list
of all the Material Contracts and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts listed on Schedule 5.2h are legal, valid and binding obligations of
Seller enforceable in accordance with their terms and in full force and effect
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the right of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity). There exists no default or event which,
with notice or lapse of time, or both, would constitute a default by Seller or
to the Seller's Knowledge any other party to any such Material Contract or which
would permit termination, modification or acceleration. Seller has not received
notice (or otherwise has knowledge) that any party to
9
<PAGE>
any Material Contract intends to cancel or terminate any such agreement or to
exercise or not to exercise any option to renew thereunder.
i. COMPLIANCE WITH LAWS. Except as set forth on Schedule
5.2i, Seller is in material compliance with all material applicable Federal,
state and local laws, rules and regulations, and to Seller's knowledge, there
are no actions threatened or pending alleging noncompliance therewith.
j. LITIGATION. Except as set forth on Schedule 5.2j hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to
Seller's Knowledge, threatened against Seller. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency specifically against or specifically
affecting Seller, except as disclosed on Schedule 5.2j.
k. NO BROKERS. Except as described on Schedule 5.2k, Seller
has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the sale of the
Stock and the transactions contemplated by this Agreement.
l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto, (b)
for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no filing,
consent, approval or authorization of any governmental authority or of any third
party on the part of Seller is required in connection with the execution and
delivery of this Agreement by Seller or the consummation of the transactions
contemplated hereby (including any consents required under any Company Material
Contract as a result of the change in control contemplated hereby).
m. TAX MATTERS.
(a) Except as set forth on Schedule 5.2m(a) hereto:
(i) All Tax Returns required to be filed by or with
respect to Seller have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to Seller for Taxable Periods
ending on or before December 31, 1997 will have been filed prior to the Closing
Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with
respect to Seller are true, correct and complete in all material respects.
(ii) Seller h as paid in full on a timely basis all
Taxes owed by Seller, whether or not shown on any Tax Return, and Seller will
have paid prior to the
10
<PAGE>
Closing Date all Taxes owed with respect to Taxable Periods ending on or before
December 31, 1997, even if such Taxes are not yet due.
(iii) Seller has no liability for unpaid income Taxes
other than its Tax liability attributable to Seller's allocable share of MMP's
items of income, gain, loss, deduction and credit accruing through the date
hereof.
(iv) Seller has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with respect
to Seller and Seller has not received notice from any Tax Authority that it
intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect with respect to the assessment, collection or
payment of Taxes of Seller or for which Seller is liable.
(vii) No extension of the time within which to file any
Tax Return of Seller is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted, or assessed against Seller.
(ix) There are no liens on the assets of Seller
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) Seller is not and has not been at any time during
the preceding five years a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under
Section 341(f) of the Code affecting Seller.
(xii) Seller has not agreed to, nor is it required to,
make any adjustments under Section 481 (a) of the Code as a result of a change
in accounting methods.
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(xiii) Seller is not and has not at any time been a
party to a tax sharing, tax indemnity or tax allocation agreement, and Seller
has not assumed the Tax liability of any other entity or person under contract.
(xiv) Seller is not and has not at any time been a
member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MMP and the FCC Licensee Entities,
Seller is not a party to any joint venture, partnership or other arrangement
that is treated as a partnership for U.S. federal income tax purposes.
(xvi) None of Seller's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Seller has furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to Seller since January 1, 1994;
and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to Seller relating to Taxes.
(c) Schedule 5.2m(c) contains complete and accurate
descriptions of (i) Seller's tax capital account in MMP, and (ii) material Tax
elections made by or with respect to Seller. Seller has no net operating losses
or other Tax attributes presently subject to limitation under Code Sections 382,
383 or 384, or the federal consolidated return regulations.
n. RESERVED
o. ACCOUNTS RECEIVABLE. Seller has no accounts receivable.
p. RESERVED
q. REPRESENTATIONS AS TO SELLER INTERESTS.
(i) Seller is the record and the beneficial owner of 188,034
Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP,
(the "Seller Interests"); (ii) Seller holds of record and owns beneficially
Seller Interests free and clear of any lien, security interest, pledge or
encumbrance other than those set forth on Schedule 5.2q hereof, all of which
will be released at or before the Closing; (iii) Seller
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has full power and authority to enter into this Agreement, and the consummation
of the transactions contemplated hereby has been duly authorized by all
necessary action on the part of Seller; (iv) this Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity); and (v) except as described on Schedule
5.2q, Seller Interests are not subject to any option(s) warrant(s), voting
trusts, outstanding proxies, registration rights agreement(s), or other
agreements regarding voting rights.
5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE
ENTITIES.
Seller and MMP, jointly and severally, hereby represent and warrant to
Purchaser as to MMP and the FCC Licensee Entities as follows:
a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited
liability company duly organized and validly existing under the laws of Virginia
and has full corporate power and authority to carry on its business as it is now
being conducted and to own and use the assets owned and used by it. To the
extent required by law, MMP is qualified as a foreign limited liability company
and is in good standing under the laws of each jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification.
MMP owns 98% of the outstanding partnership interests in the FCC Licensee
Entities.
b. CAPITALIZATION OF MMP. The designations of each class of
the membership units of MMP and the number of authorized and issued and
outstanding membership units thereof is as described on Schedule 5.3b to the MRI
Agreement. All membership units have been validly issued and are fully paid and
nonassessable and are held of record by the respective members of MMP as set
forth on Schedule 5.3b to the MRI Agreement. Except as described on Schedule
5.3b to the MRI Agreement, (i) there are no other issued or outstanding equity
securities of MMP; (ii) there are no membership or value appreciation rights,
phantom membership rights, profit participation rights, or other similar rights
with respect to membership units outstanding; and (iii) there are no other
issued or outstanding membership interests or other securities of MMP
convertible or exchangeable at any time into equity securities of MMP. Except as
set forth in the Operating Agreement of MMP as amended, MMP is not subject to
any commitment or obligation that would require the issuance or sale of
additional membership interests or membership units of MMP at any time under
options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b
to the MRI Agreement sets forth the equity interests in any corporation,
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partnership, limited liability company, joint venture or other entity owned by
MMP.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE
ENTITIES. Each FCC License Entity is a limited partnership duly organized and
validly existing under the laws of the Commonwealth of Virginia and has full
partnership power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. Each FCC License
Entity is qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. No FCC License Entity owns
any direct or indirect subsidiaries. MMP is the sole general partner and owns
ninety-eight percent (98%) of the partnership interests of each of the FCC
License Entities. MTC is the sole limited partner and owns two percent (2%) of
the partnership interests of each of the FCC License Entities other than RLLP.
MRI is the sole limited partner and owns two percent (2%) of the partnership
interests of RLLP. All such partnership interests have been validly issued and
are fully paid and nonassessable and are held of record by the respective
partners as set forth above. There are no (i) other issued or outstanding equity
securities of any FCC License Entity, (ii) partnership or value appreciation
rights, phantom partnership rights, profit participation rights, or other
similar rights with respect to partnership interests outstanding and (iii) other
issued or outstanding partnership interests or other securities of any FCC
License Entity convertible or exchangeable at any time into equity securities of
such FCC License Entity. No FCC License Entity is subject to any commitment or
obligation that would require the issuance or sale of additional partnership
interests of any FCC License Entity at any time under options, subscriptions,
warrants, rights or any other obligations. No FCC License Entity holds any
equity interest in any corporation, partnership, limited liability company,
joint venture or other entity.
d. NO CONFLICTS. Except as described on Schedule 5.3d to the
MRI Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any
provision of the articles of organization or operating agreement of MMP or the
limited partnership agreements of the FCC Licensee Entities, (ii) violate any
provision of applicable material law, rule and regulation, or (iii) conflict
with or result in a breach of, or give rise to a right of termination of, or
accelerate the performance required by the terms of any judgment, court order or
consent decree, or any material agreement, indenture, mortgage or instrument to
which either MMP or any FCC Licensee Entity is a party or to which any of their
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would have a MMP Material
Adverse Effect.
e. REAL PROPERTY. The MMP Real Property owned and all
leaseholds and other interests in MMP Real Property used or useful in the
Business and all buildings,
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structures, towers, and improvements thereon used or useful in the business and
operations of the Stations are listed on Schedule 5.3e to the MRI Agreement and,
except for Permitted Encumbrances and as disclosed in Schedule 5.3e to the MRI
Agreement, MMP has good and marketable fee simple title (insurable at standard
rates by a reputable national title insurer) to all fee estates included in the
Real Property, and good title to all other MMP Real Property, in each case clear
of all liens. The FCC Licensee Entities own no real property, leaseholds or
other interests in real property. No portion of the MMP Real Property or any
building, structure, fixture or improvement thereon is the subject of, or
affected by, any condemnation, eminent domain or inverse condemnation proceeding
currently instituted or pending or, to MMP's Knowledge, threatened.
MMP has a valid leasehold interest in all leased property and subleases
to which it is a party, and MMP is the owner and holder of all the leased
property purported to be granted by such leases and subleases. The MMP Real
Property and the leases and subleases listed on Schedule 5.3e to the MRI
Agreement constitute all of the real property owned, leased or used by MMP in
the business and operations of the Stations, which is material to the business
and operations of the Stations. The Sellers have delivered or caused to be
delivered to the Purchaser correct and complete copies of the deeds, leases and
subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each
lease and sublease listed in Schedule 5.3e to the MRI Agreement:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with several principles of equity (whether applied by a
court of law or equity);
(b) MMP and, to MMP's knowledge, no other party to the lease
or sublease is in material breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
(c) MMP and, to MMP's knowledge, no other party to the lease
or sublease has repudiated any material provision thereof;
(d) MMP is not a party to and, to MMP's knowledge, there are
no material disputes, oral agreements, or forbearance programs in effect as to
the lease or sublease;
(e) except as set forth on Schedule 5.3e to the MRI
Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered
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any interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder material
to the operation of the Stations have received all approvals of governmental
authorities (including material licenses and permits) required in connection
with the operation thereof, and have been operated and maintained in accordance
with applicable laws, rules, and regulations in all material respects.
f. PERSONAL PROPERTY. Schedule 5.3f to the MRI Agreement lists
as of the date hereof all items of Personal Property having a fair market value
in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI
Agreement, MMP has good and marketable title to all of its material items of
tangible personal property and assets used or useful by MMP located on its
premises or shown on the MMP Financial Statements are free and clear of all
liens, security interests and encumbrances other than those that would not
materially affect Purchaser's use or ownership of such personal property after
the Closing. The tangible personal property of MMP has been maintained in
accordance with normal industry practice and is in good condition and repair
given the age and use of such property (subject to normal wear and tear) and is
adequate for its present use by MMP.
g. FINANCIAL STATEMENTS. MMP has provided or made available to
Purchaser copies of the MMP Financial Statements. The MMP Financial Statements
have been prepared in accordance with GAAP consistently applied with prior
periods except in the case of the unaudited MMP Financial Statements, the
absence of year-end audit adjustments and notes. The MMP Financial Statements
present fairly the financial position of MMP as at and for the periods indicated
therein, and are consistent with the books and records of MMP. Except as set
forth on Schedule 5.3g to the MRI Agreement hereto, since December 31, 1996,
there has not been any Material Adverse Effect on the business, financial
condition, operations, or results of operations of MMP taken as a whole. Without
limiting the generality of the foregoing, since that date, except as described
on Schedule 5.3g to the MRI Agreement:
(i) MMP has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MMP has not entered into any material agreement,
contract, lease, or license outside the ordinary course of business;
(iii) MMP has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MMP is a party or by which MMP is bound;
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(iv) MMP has not imposed any security interest upon any of
its assets, tangible or intangible;
(v) MMP has not made any material capital expenditures
outside the ordinary course of business;
(vi) MMP has not made any material capital investment in, or
any material loan to, any other Person outside the ordinary course of business;
(vii) MMP has not created, incurred, assumed, or guaranteed
more than $45 million in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) MMP has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
operating agreement of MMP;
(x) MMP has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xi) MMP has not made any loan to, or entered into any other
transaction with, any of its managers, officers, and employees outside the
ordinary course of business;
(xii) MMP has not entered into any employment contract
outside the ordinary course of business or collective bargaining agreement,
written or oral, or modified the terms of any such existing contract or
agreement;
(xiii) MMP has not granted any increase in the base
compensation of any of its members outside the ordinary course of business;
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(xiv) MMP has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its managers, officers, and employees (or
taken any such action with respect to any other MMP Plan or MMP Benefit
Arrangement);
(xv) MMP has not made any other material change in
employment terms for any of its members or employees outside the ordinary course
of business;
(xvi) MMP has not made or changed any material Tax election
or taken any other action with respect to Taxes not in the ordinary course of
business and consistent with past practice;
(xvii) MMP has not made any distributions other than in the
ordinary course of business, and has not made any non-pro rata distributions;
(xviii) MMP has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xix) except as contemplated by this Agreement, the
Investors Agreement, the MRI Agreement, the MTC Agreement, and Assignment and
Assumption Agreement by and between MMP and the Max Media LLC II Distribution
Agreement, MMP has not committed to any of the foregoing.
h. FCC. MMP and the FCC Licensee Entities have been and
currently are operated in material compliance with the terms of the FCC
Licenses, the Communications Act of 1934, as amended, and applicable rules,
regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC
Licenses, a true and complete list of which is set forth on Schedule 5.3h to the
MRI Agreement, and true and complete copies of each of which have been delivered
to Purchaser, are valid and in full force and effect. Except as set forth on
Schedule 5.3h to the MRI Agreement, no application, action or proceeding is
pending for the renewal or modification of any of the FCC Licenses and, to
Sellers' and MMP's Knowledge, there is not now before the FCC any investigation
or complaint against MMP or the FCC Licensee Entities relating to the Stations,
the unfavorable resolution of which would impair the qualifications of the FCC
Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h
to the MRI Agreement, there is no proceeding pending before the FCC, and there
is no outstanding notice of violation from the FCC with respect to the Stations.
Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of
violation has been issued by any governmental entity which permits, revocation,
adverse modification or termination of any FCC License. Except as set forth on
Schedule 5.3h to the MRI Agreement and except for
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those conditions or restrictions appearing on the face of the FCC Licenses, or
other licenses, none of the FCC Licenses or other licenses is subject to any
restriction or condition which would limit the operation of the Stations as
currently operated. The FCC Licenses listed in Schedule 5.3h to the MRI
Agreement are currently in effect and are not subject to any liens, or other
encumbrances. No license renewal applications are pending with respect to any of
the FCC Licenses. As of the date hereof, Sellers, the Company, MMP, and the FCC
License Entities have no reason to believe that the FCC would not renew the FCC
Licenses in the ordinary course for a full license term without any adverse
conditions, upon the timely filing of appropriate applications and payment of
the required filing fee. As of the date hereof, Sellers, the Company, MMP and
the FCC Licensee Entities have no reason to believe that the FCC would not grant
the FCC Application in the ordinary course without any adverse conditions. All
documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's
public inspection files are in such file, and such file will be maintained in
proper order and complete up to and through the Closing Date.
i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the
MRI Agreement is a complete list of all Intellectual Property owned by or
licensed to MMP on the date hereof material to the operations of the Stations.
To MMP's Knowledge, except as otherwise set forth on Schedule 5.3i to the MRI
Agreement hereto, MMP owns such Intellectual Property free and clear of any
royalty, lien, encumbrance or charge and does not interfere with the rights of
others. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not
received any written notice or written claim that any such Intellectual Property
is not valid or enforceable, or of any infringement upon or conflict with any
patent, trademark, service mark, copyright or trade name of any third party by
MMP. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not
given any notice of infringement to any third party with respect to any of the
Intellectual Property and to MMP's Knowledge no such infringement exists. There
is no Intellectual Property owned by or licensed to the FCC Licensee Entities.
j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.3j to the MRI Agreement completely and
accurately lists all MMP Plans and MMP Benefit Arrangements currently in
existence and specifically identifies any that are Qualified Plans. Since
January 1, 1996 (the date of formation of MMP), MMP has maintained or
contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI
Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have
always qualified in form and operation under Code Section 401(a) and have a
currently applicable determination letter from the Internal Revenue Service, and
its trust has always been exempt under Code Section 501, and nothing has
occurred with respect to such plan and trust that could cause the loss of such
qualification or exemption or
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the imposition of any liability, lien, penalty, or tax under ERISA or the Code.
(b) Each MMP Plan and each MMP Benefit Arrangement has been
maintained in accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other domestic and foreign laws, including
federal, state, and foreign securities laws and all laws respecting reporting
and disclosure. No MMP Plan holds employer securities.
(c) Neither MMP nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any
ERISA Affiliate has never made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit
Plan sponsored or maintained (or that has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that could reasonably be
expected to result in such liability, as a result of termination, withdrawal or
funding waiver with respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that
would, if successful, result in liability for MMP, and no claims or lawsuits
(other than routine benefit claims) have been asserted, instituted or, to the
knowledge of Sellers and the Company after due inquiry of MMP, threatened by,
against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has
advised Sellers and the Company that MMP does not have knowledge of any fact
that could form the basis for any such claim or lawsuit. MMP Plans and MMP
Benefit Arrangements are not presently under audit or examination (and have not
received notice of a potential audit or examination) by any governmental
authority, and no matters are pending with respect to the Qualified Plan under
any governmental compliance programs.
(e) No MMP Plan or MMP Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and MMP has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, the Investors Agreement, the MRI Agreement or the MTC
Agreement.
(f) With respect to each MMP Plan, there have been no
violations
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of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims
would result in any liability for MMP or any Person required to be indemnified
by it.
(g) MMP has made all required contributions to each MMP Plan
as of the last day of each plan's most recent fiscal year, all benefits accrued
under any unfunded MMP Plan or MMP Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with generally accepted
accounting principles; and all monies withheld from employee paychecks with
respect to MMP Plans have been transferred to the appropriate plan within the
timing required by governmental regulations.
(h) MMP and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of MMP nor beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of MMP that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
(j) The FCC Licensee Entities employ no employees and do not
and have not in the past maintained or contributed to any Benefit Plans or
Benefit Arrangements.
k. LABOR. Except as set forth on Schedule 5.3k to the MRI
Agreement, with respect to employees of and service providers to MMP and the FCC
Licensee Entities:
(a) MMP has been in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice.
(b) The employees of MMP are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, MMP or, to MMP's
Knowledge, no labor
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representation organization effort exists nor has there been any such activity
within the past three years.
(c) All Persons classified by MMP and the FCC Licensee
Entities as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and MMP has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, except as described on Schedule
5.3k(d) to the MRI Agreement, no employee of or group of employees, the loss of
whom would have significant adverse effect on the business of MMP or the FCC
Licensee Entities, has notified MMP of his or their intent to (A) terminate his
or their relationship with MMP or the FCC Licensee Entities, or (B) make any
demand for material payments or modifications of his or their arrangements with
MMP.
(e) There is no charge or compliance proceeding actually
pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee
Entities before the Equal Employment Opportunity Commission or any state, local,
or foreign agency responsible for the prevention of unlawful employment
practices.
(f) The FCC Licensee Entities do not employ, and have not in
the past, employed employees.
l. INSURANCE. Schedule 5.3l to the MRI Agreement hereto
contains a list of all insurance policies concerning the Business and describes
coverage (including whether occurrence or claims made), other than
employee-benefit related insurance policies. All such policies are legal, valid,
binding, enforceable and in full force and effect subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and to the exercise of judicial discretion in
accordance with general principles of equity (whether applied by court of law or
equity). There are no existing breaches or defaults with respect to such
policies, and no notice of cancellation or termination has been received.
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m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement
hereto contains a list of all the Material Contracts of MMP and the FCC Licensee
Entities (other than cash agreements for the sale of advertising time and
retransmission consent agreements) and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts are legal, valid and binding obligations of MMP or the FCC Licensee
Entities, as the case may be, enforceable in accordance with their terms and in
full force and effect. There exists no default or event which, with notice or
lapse of time, or both, would constitute a default by any party to any such
Material Contract or which would permit termination, modification or
acceleration. Neither MMP nor the FCC Licensee Entities have received notice,
nor to MMP's Knowledge, does any party to any Material Contract intend to cancel
or terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n
to the MRI Agreement, MMP and the FCC Licensee Entities are in material
compliance with all material applicable Federal, state and local laws, rules and
regulations, and there are no actions threatened or pending alleging
noncompliance therewith.
o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee
Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of
the Business or operation of the Stations, or the transactions contemplated
hereby. There is no outstanding citation, order, judgment, writ, injunction, or
decree of any court, government, or governmental or administrative agency
against or affecting the Business, MMP or the FCC Licensee Entities, except as
disclosed on Schedule 5.3o to the MRI Agreement.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the
MRI Agreement hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of MMP or the FCC Licensee Entities
is required in connection with the execution and delivery of this Agreement by
Sellers or the consummation of any of the transactions contemplated hereby
(including any consents required under any MMP or FCC Licensee Entities contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the
MRI Agreement hereto:
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(a) All of the operations of MMP at or from any MMP Real
Property comply in all material respects with applicable Environmental Laws. MMP
has not engaged in or permitted any operations or activities upon any of the MMP
Real Property for the purpose of or involving the treatment, storage, use,
generation, release, discharge, emission, or disposal of any Hazardous
Substances at the MMP Real Property, except in substantial compliance with
applicable Environmental Laws.
(b) None of the MMP Real Property is listed or, to MMP's
Knowledge, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. MMP has not received any notice from any governmental
entity or third party of any actual or threatened Environmental Liabilities with
respect to the MMP Real Property or the conduct of the Business.
(c) To MMP's Knowledge, after due inquiry, there are no
conditions existing at the MMP Real Property that require, or which with the
giving of notice or the passage of time or both would likely require remedial or
corrective action, removal or closure pursuant to the Environmental Laws.
(d) To MMP's Knowledge, after due inquiry, MMP has all the
material permits, authorizations, licenses, consents and approvals necessary for
the current conduct of the Business and for the operations on, in or at the MMP
Real Property which are required under applicable Environmental Laws and are in
substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
(e) To MMP's Knowledge, after due inquiry, there are no
Hazardous Substances present on or in the MMP Real Property or at any
geologically or hydrologically adjoining property, including any Hazardous
Substances contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the MMP Real Property or such adjoining property, or
incorporated into any structure therein or thereon. Neither MMP or any other
Person for whose conduct it is or may be held responsible, nor to MMP's
Knowledge after due inquiry or any other Person, has permitted or conducted, or
was aware of, any Hazardous Substances, or any illegal activity conducted with
respect to the MMP Real Property or any other properties or assets (whether
real, personal, or mixed) in which MMP has or had an interest.
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r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) to the MRI
Agreement hereto:
(i) All Tax Returns required to be filed by or with respect
to MMP have been filed when due in a timely fashion, and all Tax Returns
required to be filed by or with respect to MMP for Taxable Periods ending on or
before December 31, 1997 will have been filed prior to the Closing Date, even if
such Tax Returns are not yet due. All Tax Returns filed by or with respect to
MMP are true, correct and complete in all material respects.
(ii) MMP has paid in full on a timely basis all Taxes owed
by it, whether or not shown on any Tax Return, and MMP will have paid prior to
the Closing Date all Taxes payable with respect to Taxable Periods ending on or
before December 31, 1997, even if such Taxes are not yet due.
(iii) MMP's liability for unpaid Taxes (including any
liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not,
as of the date of the MMP Financial Statements, exceed the current liability
accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the
MMP Financial Statements, (b) does not exceed such accruals as adjusted on the
books of MMP for transactions and events through the date hereof in accordance
with the past custom and practice of MMP, and (c) will not as of the Closing
Date exceed its liabilities for such Taxes as reflected in the Closing Date Tax
Liabilities as finally determined pursuant to Section 2.2(b)(ii).
(iv) MMP has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with respect to
MMP and MMP has not received notice from any Tax Authority that it intends to
commence a Tax Proceeding.
(vi) No waiver or extension of any statute of limitations is
currently in effect or has been requested with respect to the assessment,
collection or payment of Taxes of MMP or for which MMP is liable.
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(vii) No extension of the time within which to file any Tax
Return of MMP is currently in effect.
(viii) No deficiency for Taxes has been proposed, asserted
or assessed against MMP.
(ix) There are no liens on the assets of MMP relating or
attributable to Taxes (except liens for Taxes not yet due).
(x) MMP is and has since its formation been classified as a
partnership for U.S. federal income tax purposes and has in effect a valid
election under Section 754 of the Code.
(xi) MMP has not agreed to, nor is it required to, make any
adjustments under Section 481(a) of the Code as a result of a change in
accounting methods.
(xii) MMP is not and has not at any time been a party to a
tax sharing, tax indemnity or tax allocation agreement, and MMP has not assumed
the Tax liability of any other entity or person under contract.
(xiii) MMP does not have any liability for the Taxes of
another entity or person as a transferee or successor, or otherwise.
(xiv) Except for itself and the FCC Licensee Entities, MMP
is not and has not at any time been a party to any joint venture, partnership or
other arrangement that is treated as a partnership for U.S. federal income tax
purposes.
(xv) None of MMP's assets are treated as "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(xvi) The FCC Licensee Entities' sole asset is the FCC
Licenses, and the FCC Licensee Entities are not and have not been required to
file Tax Returns or pay Taxes.
(b) Sellers have furnished or otherwise caused to be made
available to Purchaser correct and complete copies of (i) all income, franchise
and other material Tax Returns filed by or with respect to MMP since January 1,
1996; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to MMP relating to Taxes.
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(c) Schedule 5.3r(c) to the MRI Agreement contains complete
and accurate descriptions of (i) MMP's basis in its assets, and (ii) material
Tax elections made by or with respect to MMP.
s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that are
reflected on the MMP Financial Statements or on the accounting records of MMP as
of the Closing Date (collectively, the "MMP Accounts Receivable") represent or
will represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid prior to the
Closing Date, the MMP Accounts Receivable are or will be as of the Closing Date
current and collectable net of the respective reserve shown on the MMP Financial
Statements or on the accounting records of MMP as of the Closing Date (which
reserves are adequate and calculated consistent with past practice and, in the
case of the reserve as of the Closing Date, will not represent a greater
percentage of the MMP Accounts Receivable as of the Closing Date than the
reserve reflected in the MMP Financial Statements represented of the MMP
Accounts Receivable reflected therein and will not represent a MMP Material
Adverse Effect in the composition of such MMP Accounts Receivable in terms of
aging). Subject to such reserves, each of the MMP Accounts Receivable either has
been or will be collected in full, without any setoff, within ninety (90) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of setoff, other than returns in the ordinary course of
business, under any contract with any obligor of an MMP Accounts Receivable
relating to the amount or validity of such MMP Accounts Receivable. MMP shall
deliver on the Closing Date a complete and accurate list of all MMP Accounts
Receivable as of the Closing Date.
t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record and
the beneficial owner of a 98% general partnership interest in each of the
Television Licensees; (ii) MMP holds of record and owns beneficially these
interests free and clear of any lien, security interest, pledge or encumbrance
other than those set forth on Schedule 5.3t to the MRI Agreement hereof, all of
which will be released at or before the Closing; (iii) MMP has full power and
authority to enter into this Agreement, and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary action on the part
of MMP; (iv) this Agreement has been duly executed and delivered by MMP and
constitutes a legal, valid and binding obligation of MMP, enforceable against
MMP in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity); and (v)
except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in
the Television Licensees are not subject to any option(s) warrant(s), voting
trusts, outstanding proxies, registration rights agreement(s), or other
agreements regarding voting rights.
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5.4. [RESERVED]
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and MMP that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI
Agreement hereof, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any of the
provisions of the articles of incorporation or by-laws of Purchaser, (ii)
violate any provision of applicable law, rule or regulation, which violation
would prevent or interfere with Purchaser's ability to perform hereunder, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Purchaser is a party or to which its property is subject,
or constitute a default thereunder, except where such conflict, breach, right of
termination, acceleration or default would not have a material adverse effect on
the business or financial condition of Purchaser or prevent or materially
interfere with Purchaser's ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI
Agreement hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of Purchaser is required in
connection with the execution and delivery of this
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Agreement by Purchaser or the consummation of any of the transactions
contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks
to enjoin or obtain damages in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially
qualified to be the Licensee of, acquire, own and operate the Stations under the
Communications Act and the rules, regulations and policies of the FCC. Purchaser
knows of no fact that would, under existing law and the existing rules,
regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an
assignee of the FCC Licenses or as the owner and operator of the Stations, or
(b) cause the FCC to fail to approve in a timely fashion the application for the
FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver
of any FCC rule or policy is necessary to be obtained for the grant of the
applications for the assignment of the FCC Licenses to Purchaser, nor will
processing pursuant to any exception or rule or general applicability be
requested or required in connection with the consummation of the transactions
contemplated by this Agreement Purchaser will have on hand at the Closing,
adequate financial resources to consummate the transactions contemplated by this
Agreement, the Investors Agreement, the Management Agreement and the MTC
Agreement.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES
7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2
of the Indemnification Escrow Agreement, and subject to the provisions of
Section 10.3, the representations and warranties herein and the obligations of
the parties shall survive the Closing for a period ending on the earlier to
occur of (i) 15 calendar months after the Closing Date and (ii) October 31,
1999, but in no event shall the period be less than 12 calendar months after the
Closing Date; and provided further, however, that representations and warranties
relating to any claims as to which notice shall have been given pursuant to
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Section 10.4 on or before such date shall survive until the final resolution of
such claims.
SECTION 8
TAX MATTERS
-----------
8.1. RESERVED
8.2. TAX RETURNS.
------------
(a) Seller shall prepare or cause to be prepared and file or
cause to be filed, within the time (including extensions) and manner provided by
law, all Tax Returns of Seller, MMP, and the FCC Licensee Entities that are
required to be filed on or before the Closing Date. In addition, Seller shall
prepare or cause to be prepared and file or cause to be filed prior to the
Closing Date all Tax Returns for Taxable Periods of Seller, MMP, and the FCC
Licensee Entities for Taxable Periods ending on or before December 31, 1997,
even if such Tax Returns are not yet due. Each of Seller, MMP and the FCC
Licensee Entities shall pay or cause to be paid all Taxes shown as due on its
Tax Returns. Purchaser shall have an opportunity to review and consent to the
filing of all such Tax Returns, which consent shall not be unreasonably withheld
or delayed.
(b) Purchaser shall prepare or cause to be prepared and file
or cause to be filed, within the time and manner provided by law, all Tax
Returns of MMP and the FCC Licensee Entities (i) for Taxable Periods ending on
or before the Closing Date that are due after the Closing Date, except as
described in Section 8.2a, and (ii) for Taxable Periods beginning before and
ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause
to be paid all Taxes shown as due on such Tax Returns; provided that this
sentence shall not in any way limit or affect Purchaser's rights to any
indemnification under other provisions of this Agreement. Purchaser shall
provide Seller a reasonable opportunity to review and consent to the filing of
such Tax Returns, which consent shall not be unreasonably withheld or delayed.
Purchaser shall not file amended Tax Returns with respect to Taxable Periods
ending on or before the Closing Date or Straddle Periods without Seller's
consent; provided, however, that Purchaser may file amended Tax Returns for such
Taxable Periods without Seller's consent if (i) such amended Tax Returns are
filed to correct errors or omissions in previously filed Tax Returns that either
constitute or are related to a breach of any representation or warranty set
forth in Sections 5.2m or 5.3r (determined without regard to the limitation on
the survival of such representations and warranties set forth in Section 7.1),
or (ii) the filing of such amended Tax Return would not increase the Taxes of
Seller or Taxes for which Seller has indemnification responsibility hereunder by
more than $25,000.
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(c) All Tax Returns prepared and filed pursuant to this
Section 8.2 shall be prepared and filed in accordance with applicable law and in
a manner consistent with past practices of MMP (to the extent consistent with
applicable law).
8.3. APPORTIONMENT. The parties agree to cause MMP and the FCC Licensee
Entities to file all Tax Returns for any Taxable Period that would otherwise be
a Straddle Period on the basis that the relevant Taxable Period consists of two
periods, one ending as of the close of business on the Closing Date and one
beginning the day after the Closing Date, unless the relevant Tax Authority will
not accept a Tax Return filed on that basis. For purposes of apportioning any
Tax to the portion of any Straddle Period that ends on the Closing Date, the
determination shall be made assuming that there was a closing of the books as of
the close of business on the Closing Date and that the taxable years of MMP and
the FCC Licensee Entities ended on that date, except that real, personal and
intangible property Taxes shall be apportioned ratably on a daily basis between
the portions of the Straddle Period in question.
8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a)
cooperate fully, as reasonably requested, in connection with the preparation and
filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to Seller, MMP and the FCC
Licensee Entities for all Taxable Periods ending on or before the Closing Date
and Straddle Periods; and (c) preserve information, records or documents
relating to Tax matters pertinent to MMP and the FCC Licensee Entities that is
in their possession or under their control until the expiration of any
applicable statute of limitations.
8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Assets, and Seller shall at its own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee
Entities to make a Code Section 754 Election with respect to the Taxable Period
in which the
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Closing occurs or later Taxable Periods.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause MMP or the FCC Licensee Entities to take any actions on the Closing Date
other than in the ordinary course of their business, except (i) such actions as
are expressly contemplated by this Agreement, including the repayment of MMP's
Funded Debt, and (ii) such actions as would not increase Taxes of Seller or
Taxes for which Seller has indemnification responsibility hereunder.
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
-------------------------------------
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Seller and MMP (and
MMP shall cause the FCC Licensee Entities) to agree that each will execute and
deliver to the other any and all documents, in addition to those expressly
provided for herein, that may be necessary or appropriate to implement the
provisions of this Agreement, whether before, at, or after the Closing. The
parties agree to cooperate with each other to any extent reasonably required in
order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. Seller and MMP, from and after the date of
this Agreement and until the Closing Date or termination pursuant to Section
14.1, shall give Purchaser and Purchaser's employees and counsel full and
complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of
Seller, MMP, the FCC Licensee Entities or otherwise relating to the Business,
shall provide Purchaser with all financial statements of Seller, the FCC
Licensee Entities and MMP which are currently prepared in the ordinary course of
business, which shall be prepared and delivered to Purchaser each month between
the date hereof and the Closing Date, and shall provide copies of such
information concerning Seller, MMP, the FCC Licensees and the Business as
Purchaser may reasonably request; provided, however, that the foregoing shall
not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii)
contact any employee of Seller or MMP without providing reasonable prior notice
to Seller and allowing a representative of Seller or MMP to be present. The
Company and Seller will use their commercially reasonable efforts to obtain the
consent of its auditors to permit inclusion of the Financial Statements and the
MMP Financial Statements in applicable securities filings of Sinclair Broadcast
Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right,
without causing unreasonable disruption to the Business, to have the access
provided for in the first sentence hereof to conduct an audit of each Station's
financial information, and, subject to the foregoing, MMP and Seller shall
cooperate with Purchaser's reasonable requests in connection with such audit,
including, without limitation, giving all reasonable consents
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thereto as long as any expenses thereof are borne by Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Seller and MMP shall cause the
Business to be conducted in the ordinary course. Except as contemplated by this
Agreement or as consented to by Purchaser (which consent shall not unreasonably
be withheld), from and after the date hereof, Seller and MMP shall act and cause
the FCC Licensee Entities to act, as follows:
(a) Seller and MMP will not adopt or cause the FCC Licensee
Entities to adopt any material change in any method of accounting or accounting
practice, except as contemplated or required by GAAP;
(b) Seller shall not change or amend its charter or by-laws
and MMP shall not change or amend the operating agreement dated as of January 1,
1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee
Entities to change or amend any limited partnership agreement;
(c) Except (i) for the disposition of obsolete equipment in
the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii)
the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to
Seller or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither
Seller nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets
or properties owned, leased or used in the operation of the Business;
(d) Neither Seller nor MMP or the FCC Licensee Entities will
merge or consolidate with, agree to merge or consolidate with, or purchase or
agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity other than Seller's acquisition of MMP II
pursuant to the MMP II Distribution;
(e) MMP will not merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or substantially all
of the assets of, or otherwise acquire, any other business entity or cause the
FCC Licensee Entities to do likewise;
(f) Neither Seller nor MMP or the FCC Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital stock
or any securities or obligations convertible or exchangeable into shares of its
capital stock or issue or grant any option, warrant or other right to purchase
any shares of its capital stock;
(g) Neither Seller nor MMP or the FCC Licensee Entities will
incur, or
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agree to incur, any debt for borrowed money other than draws under the Company's
or MMP's, as the case may be, existing revolving credit agreements;
(h) Neither Seller nor MMP or the FCC Licensee Entities will
change its historical practices concerning the payment of accounts payable; and
(i) Neither Seller nor MMP or the FCC Licensee Entities will
declare, issue, or otherwise approve the payment of dividends or distributions
of any kind in respect of its membership interest or redeem, purchase or
otherwise acquire any of its membership interest.
(j) Seller and MMP shall maintain the existing insurance
coverages on the assets of the Stations or other policies providing
substantially similar coverages.
(k) Seller and MMP will not permit any increases in the
compensation of any of the employees of Seller or MMP except as required by law
or existing contract or agreement or enter into or amend any Company Plan, MMP
Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as
contemplated by MMP's operating budgets and in accordance with the past
practice.
(l) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into or renew any contract or commitment relating to the Stations or the
Assets of MMP, or incur any obligation that will be binding on Purchaser after
Closing, except in the ordinary course of business, and MMP shall not enter
into, modify, amend, renew, or change any contract with respect to programming
for the Stations for any period after the Closing Date without the prior
approval of Purchaser.
(m) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into any transactions with any Affiliate of Seller that will be binding
upon Purchaser, or the Stations following the Closing Date.
(n) Seller and MMP shall use all commercially reasonable
efforts to maintain the assets of the Stations or replacements thereof in good
operating condition and adequate repair, normal wear and tear excepted.
(o) Seller and MMP shall, in connection with the operation of
the Stations, make expenditures materially consistent with the estimates of
expenses set forth in MMP's operating budgets of the Stations and, including,
without limitation, expenditures in respect of promotional, programming and
engineering activities for the Station (and any employee expenditures related to
such activities) for any period covered by the current operating budgets of the
Stations.
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(p) Neither Seller nor MMP shall make or allow MTR or the FCC
Licensee Entities to make or change any material Tax election, amend any Tax
Return, or take or omit to take any other action not in the ordinary course of
business and consistent with past practice that would have the effect of
increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP
for any Post-Closing Tax Period.
(q) Except as provided by Section 2.2 hereof and the MMP II
Distribution, MMP and the FCC Licensee Entities shall not make distributions
other than in the ordinary course of business and consistent with past practice,
and shall not make non-pro rata distributions.
(r) MMP shall not enter into or renew any Tradeout Agreement
that would be binding on Purchaser after the Closing Date, except in the
ordinary course of business, as contemplated by MMP's operating budgets and in
accordance with past practice.
(s) Except as provided in Section 9.3(r) above, MMP shall not
enter into or renew any Time Sales Agreement except in the ordinary course of
business and which are for cash at prevailing rates for a term not exceeding
twelve (12) months.
(t) MMP shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior approval of Purchaser other than as
contemplated by this Agreement, the MTC Agreement, the MRI Agreement, and the
Investor Agreement.
(u) Neither Seller nor MMP shall enter into or become subject
to any employment, labor, union or professional service contract not terminable
at will, or any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plans, or increase the compensation payable or to become payable
to any employee, except in the ordinary course of business, other than any value
appreciation rights agreements with current employees of MMP, all of which
liabilities shall be paid by MMP at or prior to Closing.
(v) Neither Seller nor MMP or the FCC Licensee Entities shall
take any action which may jeopardize the validity or enforceability of or rights
under the FCC Licenses.
(w) Before the Closing, MMP shall pay all one-time fees under
Section 3.1 of the Time Brokerage Agreements ("LMAs") aggregating $1,430,000.00,
and MMP shall amend the LMAs with the LMA Stations to reflect the payment by MMP
before the Closing of the fees set forth in Section 3.1 aggregating of the LMAs
and the reduction of
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continuing fees as a result of such payments.
9.4. H-S-R ACT. Each of Purchaser and Seller shall, within ten Business
Days following the date hereof, file duly completed and executed Pre-Merger
Notification and Report Forms as required under the H-S-R Act and shall
otherwise use their respective best efforts to comply promptly with any requests
made by the Federal Trade Commission ("FTC") or the Department of Justice
("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder.
Seller shall cause MMP, to the extent required by law, to join in or provide
information in connection with such filing, including, but not limited to, any
response to any request by the FTC or DOJ. All filing fees and other similar
payments in connection with the H-S-R Act shall be split equally by Purchaser
and the Seller.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP and Seller shall, within seven
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC Application and
to secure such consents or approvals as expeditiously as practicable; and
provided further that MMP shall cause the FCC Licensee Entities, to the extent
deemed reasonably necessary by counsel to Purchaser to join in and provide
information in connection with the FCC Application and comply with the
immediately preceding provisions and 9.5(b) below. If the Closing shall not have
occurred for any reason within the initial effective periods of the granting of
FCC approval of the FCC Application, and no party shall have terminated this
Agreement under Section 14, the parties shall jointly request and use their
respective best efforts to obtain one or more extensions of the effective
periods of such grants. No party shall knowingly take, or fail to take, any
action the intent or reasonably anticipated consequence of which would be to
cause the FCC not to grant approval of the FCC Application.
(b) Seller and MMP, as the case may be, shall publish (and
cause the FCC Licensee Entities to publish) the notices required by the FCC
Rules and Regulations relative to the filing of the FCC Application. Copies of
all applications, documents and papers filed after the date hereof and prior to
the Closing, or filed after the Closing with respect to the transaction under
this Agreement, by Purchaser, Seller, MMP, or the FCC Licensee Entities with the
FCC shall be mailed to the other simultaneously with the filing of the same with
the FCC. Each party shall bear its own costs and expenses (including the fees
and disbursements of its counsel) in connection with the preparation of the
portion of the application to be prepared by it and in connection with the
processing of that application. All filing and grant fees, if any, paid to the
FCC, shall be split equally by Purchaser and the Seller. None of the information
contained in any filing made by Purchaser or Seller with
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the FCC with respect to the transaction contemplated by this Agreement shall
contain any untrue statement of a material fact.
(c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Seller
and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for
Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee,
within five (5) Business Days following the date hereof, to file with the FCC
the MMP II FCC Applications and take all reasonable steps necessary to expedite
the processing of the MMP II FCC Applications to secure the Consent of the FCC
to the transfer of control of the FCC Licenses from MMP to MTC.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
Seller (a) to have reasonable access to the books and records of Purchaser and
those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
records for a period of four (4) years following the Closing.
9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or
contemplating, and has not made or taken, any decisions or actions concerning
the employees of the Stations after the Closing Date that would require the
service of notice under the Worker Adjustment and Retraining Notification Act of
1988, as amended, (the so-called WARN Act) or any other similar law.
9.8. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment,
confiscation or condemnation of any of the assets of the Stations prior to the
completion of the Closing that interferes with the normal operation of the
Stations, MMP shall notify Purchaser of same in writing immediately, specifying
with particularity the loss, damage or impairment, confiscation or condemnation
incurred, the cause thereof, if known or reasonably ascertainable, and the
insurance coverage. MMP shall apply the proceeds of any insurance policy,
judgment or award with respect thereto and take such other commercially
reasonable actions, as determined in its sole discretion, as are necessary to
repair, replace or restore such assets of any Station so damaged to their prior
condition as soon as possible after such loss, damages or impairment,
confiscation or condemnation.
(b) If before the Closing Date, due to damage or destruction
of the assets of any Station (other than WMMP-TV in the Charleston, South
Carolina market), the regular broadcast transmission of one (1) or more
Television Stations or two (2) or more
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Radio Stations in the normal and usual manner is interrupted for a period of
twelve (12) continuous hours or more, MMP shall give prompt written notice
thereof to Purchaser. If on the Closing Date, due to damages or destruction of
the assets of one (1) or more Television Stations (other than WMMP-TV in the
Charleston, South Carolina market) or two (2) or more Radio Stations the regular
broadcast transmission of one (1) or more Television Stations (other than
WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio
Stations in the normal and usual manner is interrupted such that the regular
broadcast signal of any such Station (including its effective radiated power) is
diminished in any material respect, then (i) MMP shall immediately give written
notice thereof to Purchaser; and (ii) Purchaser shall have the right, by giving
prompt written notice to the other, to postpone the Closing Date for a period of
up to sixty (60) days provided, however, that the Closing shall occur no later
than ten (10) Business Days after regular broadcast transmission has been
restored.
(c) In the event any one (1) or more Television Stations
(other than WMMP-TV in Charleston, South Carolina market) or two (2) or more
Radio Stations normal and usual transmission has not been resumed by the Closing
Date as postponed pursuant to section (b) above, Purchaser may, pursuant to
Section 14.1(e), terminate this Agreement by written notice to the Sellers'
Agent. Notwithstanding the foregoing, however, Purchaser may, at its option,
proceed to close this Agreement and complete the restoration and replacement of
any damaged assets of the Station in question after the Closing Date, MMP shall
deliver or assign to Purchaser all insurance or other proceeds received in
connection therewith to the extent such proceeds are received by or payable to
the Company or MMP and have not therefore been used in or committed to the
restoration or replacement of the assets.
(d) If before the Closing Date, due to damage or destruction
of the assets the regular broadcast transmission of any Station (other than
WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner
is interrupted for a period of seven (7) continuous days or more, MMP shall give
prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon
receipt of the Interruption Notice, Purchaser shall have the right, in its sole
and absolute discretion, by giving prompt written notice thereof to Seller and
MMP within two (2) Business Days of the date of the Interruption Notice, to
terminate this Agreement with the effect specified in Section 14.2(b) hereof.
(e) Until the Closing Date, MMP will maintain and cause MMP to
maintain the existing insurance coverages listed on Schedule 5.3l to the MRI
Agreement on the Stations and each Station's assets.
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not
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relying on the specification of any dollar amount in any representation or
warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
9.10. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) At the Closing, Sellers' Agents shall designate Purchaser
as its agent solely for the purposes of collecting the MMP Accounts Receivable.
Purchaser will collect the MMP Accounts Receivable during the period beginning
on the Closing Date and ending on the 180th day after the Closing Date (the
"Collection Period") with the same care and diligence Purchaser uses with
respect to its own accounts receivable and hold all such MMP Accounts Receivable
in trust for Sellers until remitted by Purchaser to the Indemnification Escrow
Agent or the Collections Account pursuant hereto. Purchaser shall not make any
referral or compromise of any of the MMP Accounts Receivable to a collection
agency or attorney for collection and shall not settle or adjust the amount of
any of the MMP Accounts Receivable without the written approval of Sellers'
Agent. If, during the Collection Period, Purchaser receives monies from an
account debtor of Purchaser that is also an account debtor of MMP with respect
to any MMP Accounts Receivable, Purchaser shall credit the sums received to the
oldest account due, except where an account is disputed by the account debtor as
properly due, and the account debtor has so notified Purchaser in writing, in
which case, payments received shall be applied in accordance with the account
debtor's instructions; provided that upon resolution of such dispute if any
amounts in dispute are received by Purchaser, Purchaser shall remit such amounts
to the Indemnification Escrow Agent in accordance with the Indemnification
Escrow Agreement up to the amount of the Additional Indemnification Amount
Deposit and, thereafter, to the Collections Account.
(b) On the ninetieth (90th) day after the Closing Date and on
or before the fifth Business Day after the end of each full fifteen (15) day
period thereafter during the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of the amounts collected by Purchaser before the end of
such period with respect to the Accounts Receivable. On or before the fifth
Business Day after the end of the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of all of the Accounts Receivable that remain
uncollected.
(c) Sellers' Agents shall establish and maintain during the
Collection Period (and for as long after the Collection Period as Sellers deem
appropriate) a bank account (the "Collections Account") at a commercial bank in
Norfolk, Virginia, as
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notified in writing by Sellers' Agents to Purchaser for the deposit of
collections of the MMP Accounts Receivable in accordance with this Section 9.10.
Sellers' Agents shall have sole disbursement authority over the Collections
Account. On the ninetieth (90th) day after the Closing Date (or if such day is
not a Business Day, on the next succeeding Business Day), Purchaser shall (i)
deposit with the Indemnification Escrow Agent pursuant to the Indemnification
Escrow Agreement all amounts collected with respect to any MMP Accounts
Receivable, not to exceed the excess of $12,750,000 over the Initial Deposit
(the "Additional Indemnification Amount Deposit"), and (ii) deposit in the
Collections Account any other MMP Accounts Receivable collected by Purchaser as
of such date. On and after the ninetieth (90th) day after the Closing Date until
the expiration of the Collections Period, within five (5) Business Days of the
end of each full fifteen (15) day period, Purchaser shall deposit all amounts
collected with respect to the Accounts Receivable with the Indemnification
Escrow Agent pursuant to the Indemnification Escrow Agreement until the total of
all amounts deposited pursuant to the previous sentence and this sentence equals
the Additional Indemnification Amount Deposit and, thereafter, in the
Collections Account. Sellers' Agents shall be entitled to dispose of all amounts
deposited in the Collections Account from time to time as it chooses, in its
sole discretion, and Purchaser and the Indemnification Escrow Agent shall have
no rights therein; provided, however, that Purchasers shall have no liability
whatsoever to Sellers with respect to Sellers' Agents disposition of any amounts
disbursed by Sellers' Agent from the Collections Account.
(d) After the expiration of the Collection Period, Purchaser
shall have no further obligation hereunder other than (1) so long as Sellers'
Agents continue to maintain the Collections Account, to deposit in such account
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives.
(e) Any MMP Accounts Receivable remaining uncollected 180 days
after the Closing Date shall be transferred to Sellers' Agents, together with
all files concerning the collection or attempt to collect such MMP Accounts
Receivable hereunder, and Purchaser shall thereafter have no further
responsibility with respect thereto.
(f) Purchaser shall have no right to setoff any amounts
collected for MMP Accounts Receivable against any amounts owed to Purchaser by
Seller; provided that this Section 9.10 shall not be deemed to limit the right
of Purchaser to make claims against the Indemnification Amount in accordance
with, and subject to, the terms and conditions of this Agreement and the
Indemnification Escrow Agreement.
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9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this
Agreement, prior to the Closing, without the prior written consent of Sellers'
Agents, neither Purchaser nor any of its subsidiaries or any party acting
directly or indirectly by or on behalf of any of them shall acquire or enter
into any agreement to acquire a television station or radio station in any
markets in which any Television Station or Radio Station currently broadcasts,
if such acquisition would materially delay the granting of the FCC Application;
provided, however, that nothing in this Section 9.11 shall be construed to
preclude Purchaser proceeding to closing with respect to any transaction pending
as of the date hereof.
9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Seller and MMP
shall comply in all respects with their obligations under Section 2.2(b) of this
Agreement.
9.13. RESERVED
9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP
shall make all payments, discharge all obligations and terminate any and all
Value Appreciation Rights Agreements ("VARS"), and the Tyler and Nacogdoches
Management Incentive Agreements ("Incentive Agreements"), including, but not
limited to, the VARS and Incentive Agreements listed on Schedules 5.3j and 5.3m
to the MRI Agreement.
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SECTION 10
INDEMNIFICATION
10.1. INDEMNIFICATION OF PURCHASER BY SELLER.
(a) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, however incurred, which arise out of or result from any breach by Seller
of any representation or warranty of Seller in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, howsoever incurred, which arise out of or result from:
(i) any breach of any representation or warranty of
Seller set forth in Sections 5.2, 5.3 or 5.4 of this Agreement; provided,
however, for purposes of this Section 10.1(b)(i), the representation set forth
in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP
Material Adverse Effect;
(ii) the material failure by Seller to perform any
covenant of Seller contained herein;
(iii) breaches by Seller, MMP or any of the FCC
License Entities of other agreements and certificates specifically contemplated
hereby;
(iv) any and all Taxes of MMP and the FCC Licensee
Entities (including any liability of MMP or the FCC Licensee Entities for Taxes
of any other entity or person) for any Pre-Closing Tax Period except to the
extent that such Taxes are specifically identified in the Closing Date Tax
Liabilities as finally determined pursuant to Section 2.2(b)(ii);
(v) [RESERVED]
(vi) any liabilities under the Shareholder
Settlement Agreements; or
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(vii) the Closing Date Liabilities, to the extent
the Closing Date Liabilities exceed (A) the aggregate cash equivalents and other
cash items retained as provided by Section 2.2(b) and (B) payments made from the
Indemnification Escrow as provided by Section 2.2(b)(iii).
(c) [RESERVED]
10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3
hereof after the Closing, Purchaser shall indemnify and hold Seller harmless
from and against any and all Losses, howsoever incurred, which arises out of or
results from:
(a) any breach by Purchaser of any representation or
warranty of Purchaser set forth in Section 6 of this Agreement; or
(b) the material failure by Purchaser to perform any
covenant of Purchaser contained herein.
(c) any and all Taxes of MMP and the FCC Licensee
Entities (including any liability of MMP or the FCC Licensee Entities for Taxes
of any other persons) for any Post-Closing Tax Period except to the extent that
(i) such Taxes should have been but were not specifically identified in the
Closing Date Liabilities, or (ii) such Taxes arise out of, result from or are
attributable to a breach of any representation, warranty or covenant of Sellers
set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Seller's obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement
or applicable law to the contrary, Purchaser agrees that the payment of any
claim (whether such claim is framed in tort, contract, or otherwise) made by
Purchaser for indemnification hereunder subsequent to the Closing Date, for
whatever reason, shall be limited to, and shall only be made from, the
Indemnification Amount in accordance with the Indemnification Escrow Agreement
and, except for claims against the Indemnification Amount, Purchaser waives and
releases, and shall have no recourse against, Seller as a result of the breach
of any representation, warranty, covenant or agreement of Seller contained
herein, or otherwise arising out of or in connection with the transactions
contemplated hereby or the operation of the Stations, and such indemnification
shall be the sole and exclusive remedy for Purchaser with respect to any such
claim for indemnification after the Closing Date;
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provided, however, that nothing herein shall be deemed to limit any rights or
remedies that Purchaser may have for Sellers' fraud. The Indemnification Escrow
shall be disbursed in accordance with the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to
the contrary notwithstanding, it is understood and agreed by Purchaser that,
other than with respect to Seller (but not including any partner, director,
officer, employee, agent or Affiliate Seller (including any shareholder,
director, officer, employee, agent or Affiliate of the Seller)) as expressly
provided for in Section 10.1, no partner, director, officer, employee, agent or
Affiliate of Seller (including any shareholder, director, officer, employee,
agent or Affiliate of Seller) shall have (i) any personal liability to Purchaser
as a result of the breach of any representation, warranty, covenant or agreement
of Sellers contained herein or otherwise arising out of or in connection with
the transactions contemplated hereby or thereby or the operations of the
Stations, or (ii) any personal obligation to indemnify Purchaser for any of
Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases
and shall have no recourse against any of such parties described in this Section
10.3(c) as a result of the breach of any representation, warranty, covenant or
agreement of Seller contained herein or otherwise arising out of or in
connection with the transactions contemplated hereby or thereby or the
operations of the Stations; provided, however, that nothing herein shall be
deemed to limit any rights or remedies that Purchaser may have for Seller's
fraud.
(c) Notwithstanding any other provision of this Agreement to
the contrary, Seller shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement, the MRI Agreement, the Investors Agreement and the
Management Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Basket Amount"), and then only to the extent of the excess of Losses over
the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided,
however, that this paragraph shall not apply to (i) payments pursuant to Section
2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi),
and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii)
relates to an item disclosed on a Schedule and/or set forth on the Estimate
Certificate or the Accountant's Certificate), or (iii) indemnification pursuant
to Sections 10.1(b)(i) for breaches of the representations and warranties set
forth in Sections 5.2m, 5.3r, and 5.41.
(d) In determining the amount of any Tax or other Loss for
which indemnification is provided under this Agreement, such Loss shall be (i)
net of any insurance recovery made by the indemnified party, (ii) reduced to
take into account any net Tax benefit realized by the indemnified party arising
from the deductibility of such Tax or Loss, and (iii) increased to take account
of any net Tax cost incurred by the
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indemnified party arising from the receipt of indemnification payments
hereunder. Any indemnification payment hereunder shall initially be made without
regard to this paragraph and shall be reduced to reflect any net Tax benefit or
increased to reflect any net Tax cost only after the indemnified party has
actually realized such benefit or cost. For purposes of this Agreement, an
indemnified party shall be deemed to have "actually realized" a net Tax benefit
or net Tax cost to the extent that, and at such time as, the amount of Taxes
payable by such indemnified party is (x) reduced below the amount of Taxes that
such indemnified party would have been required to pay but for the deductibility
of such Tax or Losses, and (y) increased above the amount of Taxes that such
indemnified party would have been required to pay but for the receipt of such
indemnification payments. The amount of any reduction hereunder shall be
adjusted to reflect any final determination (which shall include the execution
of Form 870-AD or successor form) with respect to the indemnified party's
liability for Taxes. Any indemnity payments under this Agreement shall be
treated as an adjustment to the Purchase Price for Tax purposes, unless a final
determination with respect to the indemnified party or any of its affiliates
causes any such payment not to be treated as an adjustment to the Purchase
Price.
(e) No claim for indemnification for Losses shall be made
after expiration of the applicable period set forth in Section 7.1 hereof.
(f) Anything to the contrary in this Section 10.3
notwithstanding, the terms, conditions and limitations set forth in this Section
10.3 do not apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the Sellers'
Agent notice of any matter which an indemnified party has determined has given
or could give rise to a right of indemnification under this Agreement, stating
the nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice promptly thereafter of all developments
coming to Sellers' Agent's attention materially affecting any matter relating to
any indemnification claims.
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(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly
after receipt by an indemnified party of notice of the commencement of any
action or the presentation or other assertion of any claim which could result in
any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such
indemnified party shall give prompt notice thereof to Sellers' Agent and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume
the defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the indemnified party from all liability arising out
of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects
to assume the defense of any action or claim, the indemnifying part(ies) shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest
extent possible in connection with any claim for which indemnification is or may
be sought under this Agreement, including, without limitation, making available
all witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
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(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such notice
materially prejudices the indemnifying party.
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(b) Seller, acting through Sellers' Agents, shall have the
right, at its own expense, to control and make all decisions with respect to any
Tax Proceeding relating solely to Taxes of Seller for Taxable Periods ending on
or before the Closing Date; provided, that Purchaser and counsel of its own
choosing shall have the right, at Purchaser's own expense, to participate fully
in all aspects of the prosecution or defense of such Tax Proceeding; and
provided further that Seller shall not settle any such Tax Proceeding without
the prior written consent of Purchaser if such settlements could increase the
past, present or future Tax liability of Purchaser or any of its Affiliates, or
for any Post-Closing Tax Period by an amount greater than $25,000.
(c) RESERVED
(d) If Seller, acting through Sellers' Agents, does not
exercise its right to assume control of or participate in any Tax Proceeding as
provided under this Section 10.5, Purchaser may, without waiving any rights to
indemnification hereunder, defend or settle the same in such manner as it may
deem appropriate in its sole and absolute discretion.
(e) Purchaser shall control all Tax Proceedings relating to
Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax
Proceedings relating solely to Taxable Periods of MMP ending on or before the
Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers' Agents
fully informed as to the status of any such Tax Proceeding and shall not settle
such a Tax Proceeding without the prior written consent of Sellers' Agents,
which consent shall not be unreasonably withheld; provided that Sellers' Agents'
consent to a settlement shall only be required if such settlements could
increase Seller's Taxes or Taxes for which Seller has indemnification
responsibility hereunder by an amount greater than $25,000.
(f) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
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SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
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11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Seller shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Seller contained herein shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate of one of Sellers' Agents, dated as
of the Closing Date and signed by Sellers' Agent, certifying as to the
fulfillment of the condition set forth in this Section 11.1(a) ("Sellers'
Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Assets or the assets of the Station.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) All consents identified on Schedules 5.2h hereto and
Schedules 5. 3e and 5.3m to the MRI Agreement as required consents shall have
been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses (other than the MMP II Licenses) shall have been
obtained. All the material conditions contained in the Final Order required to
be satisfied on or prior to the Closing Date shall have been duly satisfied and
performed. Notwithstanding the foregoing, other than conditions relating the
broadcast industry generally, if the consent of the FCC is conditional or
qualified in any manner that has a material adverse effect on Purchaser or
requires Purchaser or any of its subsidiaries to divest any television or radio
station owned, operated or programmed by Purchaser or any of its subsidiaries.
Purchaser may, nevertheless, in its sole discretion, require the consummation of
the transactions contemplated by this Agreement, but shall not be required to do
so.
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(f) Seller shall have delivered to Purchaser at the Closing
each document required by Section 12.1 hereof.
(g) Since the date of this Agreement through the Closing
Date, there shall not have been either a Material Adverse Effect with respect to
the Assets or a MMP Material Adverse Effect with respect to the business,
operations, properties, assets, or condition of MMP, and no event shall have
occurred or circumstance exist that reasonably could be expected to result in
either a Material Adverse Effect or an MMP Material Adverse Effect.
(h) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, to MMP II and the
distribution of MMP II to MTC shall have occurred pursuant to the Assignment and
Assumption Agreement and the Distribution Agreement substantially in the form
attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or
more Time Brokerage Agreements generally in the form (subject to such revisions,
additions and deletions as determined by counsel to MMP II and Purchaser prior
to the Closing) attached hereto as Exhibit D.
(i) The closings under the Investors Agreement, the MRI
Agreement and the MTC Agreement shall have occurred or will occur simultaneously
with the Closing.
(j) Seller or MMP, as the case may be, shall have complied
with its obligations under Section 9.12.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation
of Seller to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects
with its agreements and covenants contained herein to be performed at or prior
to the Closing, and the representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except that representations and warranties that were made as of a specified date
shall continue on the Closing Date to have been true as of the specified date,
and Seller shall have received a certificate of Purchaser, dated as of the
Closing Date and signed by an officer of Purchaser, certifying as to the
fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's
Bring-Down Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Seller
from consummating the
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transactions contemplated hereby.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Seller at the Closing
the Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the Investors Agreement, the MRI
Agreement and the MTC Agreement shall have occurred or occur simultaneously with
the Closing.
SECTION 12
DELIVERIES AT THE CLOSING
12.1. DELIVERIES BY SELLER. At the Closing, Seller will deliver or
cause to be delivered at the Closing to Purchaser:
(a) Seller's Bring-Down Certificate;
(b) a legal opinion of Clark & Stant, P.C., counsel to Seller
and MMP substantially in the form attached as Exhibit E hereto;
(c) a legal opinion of counsel to the FCC Licensee Entities
in the form attached hereto as Exhibit F;
(d) a bill of sale, assignment and other transfer documents,
dated as of the Closing Date and executed by the Seller, transferring the Assets
to Purchaser;
(e) [RESERVED];
(f) a certificate as to the existence of Seller issued by the
Secretary of the State Corporation Commission of the Commonwealth of Virginia
dated not more than five (5) Business Days before the Closing Date;
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(g) a certificate as to the existence and good standing of
MMP issued by the Secretary of the State Corporation Commission of the
Commonwealth of Virginia not more than five (5) Business Days before the Closing
Date and certificates issued by the appropriate governmental authorities in each
jurisdiction in which MMP is qualified to do business and a certificate as to
the existence for each of the FCC Licensee Entities of the Secretary of the
State Corporation Commission of the Commonwealth of Virginia dated not more than
five (5) Business Days before the Closing Date;
(h) receipt for Purchase Price;
(i) [RESERVED];
(j) the certificate(s) required by Section 8.6;
(k) a copy of any instrument evidencing any consents
received;
(l) the Indemnification Escrow Agreement duly executed by
Seller and Seller's Agent;
(m) a copy of any instrument evidencing any consent received,
including, but not limited to, estoppel certificates from MMP's landlords with
respect to the Real Property;
(n) the certificate required by Section 2.2(b)(i);
(o) the Estimate Certificate;
(p) the amendments to the LMAs in a form reasonably
satisfactory to Purchaser duly executed by the necessary parties thereto;
(q) the amendment to the MMP operating agreement in a form
reasonably satisfactory to Purchaser as contemplated by Section 12.l(r) of the
MTC Agreement;
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(r) the covenants not to compete and solicit duly executed by
A. E. Loving, Jr., John A. Trinder and Charles A. McFadden in a form reasonably
satisfactory to Purchaser; and
(s) such other documents as Purchaser shall reasonably
request;
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Seller, the Disbursing Agent or the Indemnification
Escrow Agent, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit G hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement duly executed by
Purchaser;
(e) a certificate as to the existence and good standing of
the Purchaser issued by the Maryland Department of Assessments and Taxation of
the State of Maryland dated as of the Closing Date;
(f) one or more fully executed Time Brokerage Agreements as
negotiated pursuant to Section 11.1(h) hereof; and
(g) such other documents as Seller shall reasonably request.
SECTION 13
EXPENSES
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Except as provided in Sections 9.4 and 9.5, each party will pay its own
fees, expenses, and disbursements and those of its counsel in connection with
the subject matter of this Agreement (including the negotiations with respect
hereto and the preparation of any documents) and all other costs and expenses
incurred by it in the performance and compliance with all conditions and
obligations to be performed by it pursuant to this Agreement or as contemplated
hereby.
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SECTION 14
TERMINATION
14.1 TERMINATION. This Agreement may be terminated:
(a) At any time by mutual written consent of Purchaser and
Seller;
(b) By either Purchaser or Seller, if the terminating party
is not in default or breach in any material respect of its obligations under
this Agreement, if the Closing hereunder has not taken place on or before
October 31, 1998, except where the Closing has been postponed pursuant to the
provisions of Section 9.8, in which case the applicable date shall be upon the
expiration of the period referred to in Section 9.8(b) (the "Termination Date");
(c) by Seller, if Seller's not in default or breach in any
respect of their obligations under this Agreement, if all of the conditions in
Section 11.2 have not been satisfied or waived by the date scheduled for the
Closing (as such date may be postponed pursuant to Section 9.8);
(d) by Purchaser, if Purchaser is not in default or breach in
any material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing (as such date may be postponed pursuant to
Section 9.8);
(e) by Purchaser, pursuant to Section 9.8.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either
or both Purchaser and/or Seller pursuant to Sections 9.8 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein, all
filings, applications and other submissions relating to the transactions
contemplated hereby as to which termination has occurred shall, to the extent
practicable, be withdrawn from the agency or other Person to which such filing
is made.
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(b) If this Agreement is terminated pursuant to Section
14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be
returned to Purchaser and Purchaser shall have the right to pursue all remedies
available hereunder at law or in equity, including, without limitation, the
right to seek specific performance and/or actual monetary damages, but excluding
consequential and incidental damages. In recognition of the unique character of
the property to be sold hereunder, and the damages which Purchaser will suffer
in the event of a termination pursuant to the foregoing Sections of this
Agreement, Seller hereby waives any defense that Purchaser has an adequate
remedy at law for the breach of this Agreement by Seller.
(c) If this Agreement is terminated pursuant to Section
14.1(c) and Purchaser shall be in breach in any material respect of its
representations, warranties, covenants, agreements, or obligations set forth in
this Agreement, then and in that event, Seller shall have the right to retain
the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated
damages, and as the sole and exclusive remedy of Seller as a consequence of
Purchaser's default (which aggregate amount the parties agree is a reasonable
estimate of the damages that will be suffered by Seller as a result of the
default by Purchaser and does not constitute a penalty), the parties hereby
acknowledging the inconvenience and nonfeasability of otherwise obtaining
inadequate remedy.
(d) If this Agreement is terminated pursuant to Sections
14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section
3.1(1) shall be returned to Purchaser.
(e) A notice of termination made under any provision of
Section 14.1 of this Agreement shall be deemed to be a notice of termination
under the termination provisions of the Investor Agreement, the MTC Agreement
and the MRI Agreement.
(f) In the event of a default by either party that results in
a lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
SECTION 15
NOTICES
-------
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as
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follows:
To Purchaser: SINCLAIR COMMUNICATIONS, INC.
------------
2000 W. 41st Street
Baltimore, Maryland 21211
Attention: David D. Smith
Telecopy: (410) 467-5043
Telephone: (410) 662-1008
with copies Sinclair Communications, Inc.
(which shall not constitute 2000 W. 41st Street
notice) to: Baltimore, Maryland 21211
Attention: General Counsel
Telecopy: (410) 662-4707
Telephone: (410) 662-1422
and
Thomas & Libowitz, P.A.
Suite 1100
100 Light Street
Baltimore, Maryland 21202
Attention: Steven A. Thomas
Telecopy: (410) 752-2046
Telephone: (410) 752-2468
To Sellers' Agents: Anthony R. Ignaczak
------------------ Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Telecopy: (804) 979-1145
Telephone: (804) 979-9227
Allen B. Rider, III
Colonnade Capital, L.L.C.
13th Floor
901 East Byrd
Richmond, Virginia 23219
Telecopy: (804) 782-6606
Telephone: (804) 782-3512
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Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B.
Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the
"Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall be unanimous. In the event of the death,
incapacity or liquidation of any of Sellers' Agents, such person or entity shall
not be replaced, and the remaining Sellers' Agents shall continue in that
capacity. Seller agrees to indemnify the Sellers' Agents from and against and in
respect of any and all liabilities, damages, claims, costs, and expenses,
including, but not limited to attorneys' fees, arising out of or due to any
action by them as the Sellers' Agents and any and all actions, proceedings,
demands, assessments, or judgments, costs, and expenses incidental thereto,
except to the extent that the same result from bad faith or gross negligence on
the part of the Sellers' Agents. Purchaser shall be entitled to rely exclusively
upon any communications given by the Sellers' Agents on behalf of Seller, and
shall not be liable for any action taken or not taken in reliance upon the
Sellers' Agents. Purchaser shall be entitled to disregard any notices or
communications given or made by Seller unless given or made through the Sellers'
Agents.
SECTION 17
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MISCELLANEOUS
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to or referenced in this Agreement constitute an integral part of this
Agreement as if fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the
MTC Agreement, the MRI Agreement and the FCC Licensee Transfer Agreement, the
Annexes, Schedules and Exhibits and the documents to be delivered hereunder and
thereunder constitute the entire understanding and agreement between the parties
hereto concerning the subject matter hereof. All negotiations and writings
between the parties hereto are merged into this Agreement, the Investors
Agreement, the MTC Agreement, the MRI Agreement, the FCC Licensee Transfer
Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein or to be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended except
in writing signed by each of the Purchaser and Sellers' Agent.
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its
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obligations hereunder; and provided further that any change of control in
respect of Purchaser's parent, SBGI, shall not require the consent of Sellers.
In the event of such permitted assignment or other transfer, all of the rights,
obligations, liabilities, and other terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against, the
respective successors and assigns of the parties hereto, whether so expressed or
not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if required by applicable law or otherwise as a result of its, or
its Affiliate's, being a public company, provided that prior notice of such
disclosure is given to the other party hereto.
17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will
have no adequate remedy at law if Seller fails to perform its obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
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17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however, that all
transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Seller. Purchaser hereby waives compliance with the provisions of any applicable
bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Seller acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits hereto are
the result of the efforts of all parties to this Agreement and every covenant,
term, and provision of this Agreement shall be construed according to its fair
meaning and shall not be construed against any particular party as the drafter
of such covenant, term, and/or provision. The Purchaser and Seller agree that
this Agreement is to be construed in a manner consistent with the terms of the
Investors Agreement, the MTC Agreement and the MRI Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
MAX MANAGEMENT LLC,
a Virginia limited liability company
By ________________________________
its __________________________
SINCLAIR COMMUNICATIONS, INC.,
a Maryland corporation
By ________________________________
its __________________________
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ANNEX 1
DEFINITIONS
As used in the attached Asset Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Allocable Portion" shall mean 0% in the case of each of Investors and
MRI, 96.470% in the case of MTC and 3.530% in the case of Seller.
"Assets" has the meaning set forth in the Recitals.
"Basket Amount" has the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
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"Broadcast Time Sales Agreement" shall mean all contracts and
agreements pursuant to which MMP has sold commercial air time on the Stations
for cash.
"Business" means the business of owning and operating the Stations.
"Business Day" means any day on which banks in New York City are open
for business.
"Cash Price" shall mean the excess of $252 million over the Funded Debt
immediately prior to the Closing.
"CERCLA" has the meaning set forth in Section 5.3q of the Agreement.
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Liabilities" has the meaning set forth in Section 2.2(b)
of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Estimated Accounts Receivable" has the meaning of an
amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP
as of the Closing Date, which have been outstanding for no more than 120 days,
as set forth in the Certificate of Sellers' Agent delivered to Purchaser five
(5) days before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" refers to Seller in the Agreement.
"Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
or may have any liability (whether actual, contingent, with respect to any of
its assets or otherwise) as of the Closing Date, in each case with respect to
any present or former directors, employees, or agents of the Company.
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"Company Plan" shall mean, as of the Closing Date, any Benefit Plan for
which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments, in each case with respect to any present or former
employees of the Company. Company Plan shall include any Qualified Plan
terminated within the preceding six years.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock and the Station assets to Purchaser to maintain the validity and
effectiveness (any default or violation of the terms thereof) of any Material
Contract and any licenses (including, without limitation, the FCC Licenses) to
be transferred to Purchaser, or otherwise to consummate the transactions
contemplated by this Agreement.
"Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of
the Agreement.
"Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and
Stephen W. Burke.
"Disbursement Agreement" means that certain Disbursement Agreement
dated not later thirty (30) days prior to the Closing, among the Disbursing
Agent and the Seller.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" shall mean any Person that together with the Company
or MMP, as applicable, would be or was at any time treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which the Company or MMP, as applicable, is or has been a general
partner.
"Estimate Certificate" shall have the meaning set forth in Section
2.2(b)(i).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Application" means the applications requesting approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Licensee Entities" shall have the meaning set forth in the
Recitals.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3h
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"Funded Debt" means indebtedness of MMP for borrowed money (including
capitalized lease obligations), including any and all fees, costs or other
payments associated with its payoff or retirement, other than (i) any
indebtedness due after the Closing Date with respect to program contract
liabilities, and (ii) Closing Date Liabilities.
"GAAP" means generally accepted accounting principles.
"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials
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or substances regulated or defined as or included in the definition of
"hazardous substances, "hazardous materials," "hazardous constituents," "toxic
substances," "pollutants, "pollutants," "contaminants" or any similar
denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity under any Environmental
Laws.
"H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Deposit" means $12,750,000 less an amount equal to the lesser
of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts
Receivable.
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service mark registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Incentive Agreements" has the meaning set forth in Section 9.14.
"Indemnification Amount" means $12,750,000.00 deposited or collected
pursuant to the Indemnification Escrow Agreement.
"Indemnification Escrow Agreement" has the meaning set forth in
Section 3.1 of the Agreement.
"Indemnification Escrow" has the meaning set forth in Section 3.1 of
the Agreement.
"Investors Agreement" has the meaning set forth in the Recitals.
"Investors" has the meaning set forth in the Recitals.
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"Knowledge or knowledge" shall mean with respect to Seller, MMP, MTR
and the FCC Licensee Entities the actual knowledge (without any requirement of
inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr.,
John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J.
Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the
managers and officers of MMP, and the officers and directors of Seller.
"LMA Stations" shall have the meaning set forth in the Recitals.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Accounts Receivable" has the meaning given in Section 5.3s.
"MMP's Benefit Arrangements" means any Benefit arrangement sponsored or
maintained by MMP or by the FCC Licensee Entities or with respect to which MMP
or the FCC Licensee Entities has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former director, employees, or
agent of MMP or the FCC Licensee Entities.
"MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan
for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC
Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make
payments, in each case with respect to any present or former employees of MMP or
the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan
terminated within the preceding six (6) years.
"MMP II FCC Applications" means the application requesting the approval
and consent of the FCC to the transfer of control of Television Stations WKEF-TV
and WEMT-TV from MMP to MTC.
"MMP Financial Statements" means the balance sheet of MMP at December
31, 1996, the audited consolidated statements of operations and cash flows for
the year then ended, all notes thereto and the independent auditor's audit
report thereon, together with the unaudited balance sheet of MMP at September
30, 1997 and the unaudited statement of operations for the nine (9) months then
ended.
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"MMP Material Adverse Effect" shall mean a material adverse effect on
the business, or financial condition of any Television Station with the
exception of WMMP-TV in the Charleston, South Carolina market or the Radio
Stations taken as a whole.
"MMP Real Property" means all real property owned or leased by MMP.
"MRI" shall have the meaning set forth in the Recitals.
"MRI Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of the Company taken as a whole.
"Material Contract" means all agreements to which Seller or MMP is a
party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
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"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
"Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167%
in the case of Seller, 26.6519% in the case of MRI, and 44.7881% in the case of
MTC.
"Purchase Price" shall mean the sum of (a) the Pro Rata Share of the
excess of the Cash Price over 40% the Step-Up, plus (b) the Allocable Portion of
40% of the Step-Up.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
"Qualified Plan" shall mean any Company Plan or MMP Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by Seller.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Agents" shall have the meaning set forth in Section 16.1.
"Sellers' Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Seller Interests" shall have the meaning set forth in Section 5.3t2q.
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"Shareholder Settlement Agreements" shall have the meaning set forth
in Section 2.2(b).
"Step Up" shall mean the amount of Section 754 basis step-up,
calculated as the present value (determined using an 8.0% discount rate over a
15-year period assuming straight line amortization) of 45.812% of the Cash Price
minus (or plus in the case of a negative) the aggregate tax basis capital
accounts of MTC and Seller in MMP immediately prior to the Closing.
"Stations" has the meaning set forth in the recitals to the Agreement.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
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"Television Licensee" shall have the meaning set forth in the Recitals.
"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
"VARS" has the meaning set forth in Section 9.14.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
MAX TELEVISION COMPANY
MAX MEDIA PROPERTIES LLC
AND
MAX MEDIA PROPERTIES II LLC
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS................................................................3
2. SALE OF ASSETS/EXCLUDED ASSETS.............................................3
2.1. Sale of Assets.................................................3
2.2. Excluded Assets................................................3
3. PURCHASE PRICE.............................................................6
3.1. Payment........................................................6
3.2. Disbursing Agent...............................................6
4. CLOSING....................................................................6
5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7
5.1. RESERVED.......................................................7
5.2. Representations and Warranties as to the Company...............7
a. Organization and Good Standing........................7
b. RESERVED..............................................7
c. No Conflicts..........................................7
d. Financial Statements..................................8
e. Employee Benefit Plans................................9
f. Labor ...............................................11
g. Insurance............................................11
h. Material Contracts..................................12
i. Compliance with Laws.................................12
j. Litigation...........................................12
k. No Brokers...........................................12
l. Consents.............................................12
m. Tax Matters..........................................13
n. RESERVED.............................................15
o. Accounts Receivable..................................15
p. RESERVED.............................................15
q. Representations as to the Company Interests..........15
5.3. Representations and Warranties as to the MMP and the FCC
Licensee Entities............................................15
a. Organization and Good Standing.......................16
b. Capitalization of MMP................................16
c. Organization and Capitalization of the FCC License
Entities............................................16
d. No Conflicts.........................................17
e. Real Property........................................17
f. Personal Property....................................18
g. Financial Statements.................................18
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h. FCC..................................................21
i. Intellectual Property................................21
j. Employee Benefit Plans...............................22
k. Labor................................................24
l. Insurance............................................25
m. Material Contracts...................................25
n. Compliance with Laws.................................25
o. Litigation...........................................26
p. Consents.............................................26
q. Environmental........................................26
r. Tax Matters..........................................27
s. Accounts Receivable..................................29
t. Representations as to MMP Interests..................30
5.4. Representations and Warranties as to MTR......................30
a. Organization and Good Standing.......................30
b. Capitalization.......................................30
c. No Conflicts.........................................31
d. Financial Statements.................................31
e. Employee Benefit Plans...............................33
f. Labor................................................33
g. Insurance............................................33
h. Material Contracts...................................33
i. Compliance with Laws.................................33
j. Litigation...........................................33
k. Consents.............................................34
l. Tax Matters..........................................34
m. Dividends............................................36
n. MTR Assets...........................................36
o. Representations as to MTR Interests..................36
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................36
6.1. Organization and Good Standing................................36
6.2. Execution and Effect of Agreement.............................37
6.3. No Conflicts..................................................37
6.4. Consents .....................................................37
6.5. Litigation....................................................37
6.6. No Brokers....................................................37
6.7. Purchaser Qualifications......................................38
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............38
7.1. Limitation; Survival..........................................38
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8. TAX MATTERS...............................................................38
8.1. Section 338 Election..........................................38
8.2. Tax Returns...................................................39
8.3. Apportionment.................................................40
8.4. Cooperation in Tax Matters....................................40
8.5. Certain Taxes.................................................40
8.6. FIRPTA........................................................40
8.7. Section 754 Election..........................................40
8.8. Closing Date Actions..........................................41
9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................41
9.1. Further Assurances and Assistance.............................41
9.2. Access to Information.........................................41
9.3. Conduct of Business Prior to Closing..........................42
9.4. H-S-R Act.....................................................45
9.5. FCC Application...............................................45
(c)FCC Applications to Transfer Certain FCC Licenses.....46
9.6. Books and Records.............................................46
9.7. Employees and Employee Benefits...............................46
9.8. Interruption of Broadcast Transmission........................47
9.9. Interpretation of Certain Provisions..........................48
9.10. Collection of Accounts Receivable.............................48
9.11. Other Acquisitions............................................50
9.12. Payment of Certain Liabilities Prior to Closing...............50
9.13. RESERVED......................................................50
9.14. Value Appreciation Rights and Incentive Fees..................50
10. INDEMNIFICATION..........................................................51
10.1. Indemnification of Purchaser by Sellers.......................51
10.2. Indemnification of Sellers by Purchaser.......................52
10.3. Limitations and Other Provisions Regarding Indemnification
Obligation...................................................52
10.4. Notice of Claim Defense of Action.............................54
10.5 Tax Contests..................................................55
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............57
11.1. Conditions Precedent to the Obligation of Purchaser...........57
11.2. Conditions Precedent to the Obligation of Sellers.............58
<PAGE>
12. DELIVERIES AT THE CLOSING................................................59
12.1. Deliveries by Sellers.........................................59
12.2. Deliveries by Purchaser.......................................61
13. EXPENSES.................................................................61
14. TERMINATION..............................................................62
14.1 Termination...................................................62
14.2 Procedure and Effect of Termination...........................62
15. NOTICES..................................................................64
16. SELLERS' AGENTS..........................................................65
16.1. Sellers' Agents...............................................65
17. MISCELLANEOUS............................................................66
17.1. Headings......................................................66
17.2. Schedules and Exhibits........................................66
17.3. Execution in Counterparts.....................................66
17.4. Entire Agreement..............................................66
17.5. Governing Law.................................................67
17.6. Modification..................................................67
17.7. Successors and Assigns........................................67
17.8. Waiver........................................................67
17.9. Severability..................................................67
17.10. Announcements.................................................68
17.11. Specific Performance..........................................68
17.12. Fees and Expenses.............................................68
17.13. Third Party Beneficiaries.....................................68
17.14. Interpretation................................................68
ANNEX 1 - DEFINITIONS
ANNEX 2 - SELLERS
<PAGE>
EXHIBITS
Exhibit A ......... Deposit Escrow Agreement
Exhibit B ......... Indemnification Escrow Agreement
Exhibit C ......... MMP II Assignment and Assumption Agreement
Exhibit D ......... Time Brokerage Agreements
Exhibit E ......... Opinion of Counsel,
......... Clark & Stant, P.A.
Exhibit F ......... Opinion of Sellers' FCC Counsel
Exhibit G ......... Opinion of Counsel,
......... Thomas & Libowitz, P.A.
SCHEDULES
5.1a(ii) ......... Encumbrances of Stock
5.1a(vi) ......... Options and Agreements
5.1b ......... Share Brokers
5.1c ......... No Conflicts
5.2b ......... Capitalization
5.2c ......... Conflicts
5.2d ......... Financial Statements
5.2e ......... Employee Benefit Plans
5.2f ......... Labor
5.2g ......... Insurance
5.2h ......... Material Contracts
5.2i ......... Compliance with Laws
5.2j ......... Litigation
5.2k ......... Brokers
5.2l ......... Consents
5.2m(a) ......... Tax Matters
5.2m(c) ......... Tax Basis and Tax Elections
5.2q ......... Company Interest
5.3b ......... Capitalization
5.3d ......... Conflicts
5.3e ......... Real Property
5.3f ......... Personal Property
5.3g ......... Financial Statements
5.3h ......... FCC Licenses
5.3i ......... Intellectual Property
5.3j ......... Employee Benefit Plans
5.3k ......... Labor
5.3k(d) ......... Employee Terminations or Demands
5.3l ......... Insurance
5.3m ......... Material Contracts
5.3n ......... Compliance with Laws
<PAGE>
5.3o ......... Litigation
5.3p ......... Consents
5.3q ......... Environmental Matters
5.3r(a) ......... Tax Matters
5.3r(c) ......... Tax Basis and Tax Elections
5.3t ......... Representations as to MMP Interests
5.4b ......... Capitalization
5.4d ......... Financial Matters
5.4h ......... Material Contracts
5.4l(a) ......... Tax Matters
5.4l(c) ......... Tax Basis and Tax Elections
5.4o ......... Representations as to MTR Interests
6.3 ......... Conflicts
6.4 ......... Consents
6.5 ......... Litigation
6.7 ......... Purchaser Qualifications
9.3(c) ......... Planned Asset Dispositions
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of December, 1997, is entered into by and among Sinclair
Communications, Inc., a Maryland corporation ("Purchaser"), Max Television
Company, a Virginia corporation ("Seller"), and Max Media Properties LLC, a
Virginia limited liability company ("MMP").
RECITALS:
WHEREAS, Seller owns among other things 5,140,500 Class B Membership
Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the equity of
MTR and a 2% limited partnership interests in the Television Licensees (as
defined below) (the "Assets") ; and
WHEREAS, Seller desires to sell, assign and transfer the Assets, and
Purchaser desires to acquire the Assets, all on the terms described herein;
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "MRI Agreement") to
acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI
is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation
("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431
Membership Units) of MMP, and a 2% limited partnership interest in Radio License
L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of
the Radio Stations (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to
acquire all of the issued and outstanding shares of Max Investors, Inc., a
Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C
Membership Units (out of a total 11,631,431 Membership Units) of MMP; and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "Management Agreement")
to acquire from Max Management LLC, a Virginia limited liability company
("Management"); 188,034 Class C Membership Units (out of a total of 11,631,431
Membership Units) of MMP and
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a
total 11,631,431 Membership Units) of MMP; and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of television stations WSYT-TV in the Syracuse, New York market,
WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio
market, WEMT-
<PAGE>
TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in
the Tyler, Texas market (each a "Television Station" and collectively, the
"Television Stations"); and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina
("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro,
North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG";
together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in
Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM,
inVirginia Beach, Virginia ("WPTE"), and WFOG-FM, inSuffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky,
pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television
station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement
with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas
pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA
Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, the parties desire that, before the Closing and after receipt
of any required approval of the FCC, MMP transfer all partnership interests it
holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a
newly-created Virginia limited liability company ("MMP II") (the "MMP II
Transfers"); and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the membership interests in MMP
II; and
WHEREAS, on the consummation of this Agreement, the MRI Agreement, the
2
<PAGE>
Investors Agreement and the Management Agreement (collectively, the "Purchase
Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431
Membership Units of MMP and all general and limited partnership interests in the
FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II
Licenses"); and
WHEREAS, MMP holds certain assets more fully described below (the
"Excluded Assets") that will not be acquired by Purchaser; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Assets.
SECTION 1
DEFINITIONS
As used in this Agreement, capitalized terms shall have the meaning
specified in the text hereof or on Annex 1 which is incorporated herein by
reference, which meaning shall be applicable to both the singular and plural
forms of the terms defined.
SECTION 2
SALE OF ASSETS/EXCLUDED ASSETS
2.1. SALE OF ASSETS. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date (as hereinafter defined), Seller
hereby agrees to transfer, convey, assign and deliver to Purchaser on the
Closing Date, and Purchaser agrees to acquire, all of Seller's right, title and
interest in the Assets, together with any additions thereto, between the date of
this Agreement and the Closing Date, but excluding those assets described in
Section 2.2, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever other than as described on Schedule 2.1.
2.2 EXCLUDED ASSETS.
(a) The following assets (collectively, the "Excluded Assets")
may be distributed by MMP to Seller and to the holders of Membership Units in
MMP, and may be distributed by the Company and MTR to their shareholders or its
designee prior to the Closing:
(i) all cash, cash equivalents and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank balances and
rights in
3
<PAGE>
and to bank accounts, and Treasury Bills;
(ii) all furniture, fixtures and equipment located at the
principal place of business of MMP, the address of which is 900 Laskin Road,
Virginia Beach, Virginia 23451 and the leasehold interest therein;
(iii) the Option Agreement with Gary and Susan Clarke,
WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and
agreements related thereto and all related collateral and other documents;
(iv) all notes payable and other amounts due from MCC Air
Inc. and all assets, including real property, promissory notes and agreements
relating solely to the sale and lease of WMQX-AM, Greensboro, NC to
Winston-Salem Radio Corporation and Willis Broadcasting Corporation;
(v) subject to the terms and conditions of the
Indemnification Escrow Agreement (as defined below), the accounts receivable of
MMP.
(vi) the names "Max Media," "Max Television," "Max Radio"
and "Max Media Properties".
Any distribution of Excluded Assets by MMP will be made pro rata to the holders
of Membership Units in MMP unless otherwise agreed to by Purchaser.
(b) Notwithstanding anything to the contrary in Section 2.2(a)
above, MTR and MMP shall each retain an amount of cash, cash equivalents and
other cash items that are sufficient to cover and pay their respective Closing
Date Liabilities. For purposes of this Agreement, the term "Closing Date
Liabilities" shall mean the liabilities of MTR and MMP (other than for Funded
Debt, liabilities with respect to program contract liabilities accruing after
the Closing Date and liabilities with respect to trade and barter obligations
arising after the Closing Date) whether or not disclosed on any Schedule hereto
(A) as of the Closing Date; (B) for operations prior to the Closing Date; and
(C) for all liabilities of any kind whatsoever under that certain Mutual Release
dated as of January 1, 1997 and that certain Settlement Agreement dated as of
January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except
as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall
be determined in accordance with GAAP consistently applied with prior periods,
and shall be consistent with the books and records of MTR and MMP. The amount of
cash, cash equivalents and cash items retained to cover the Closing Date
Liabilities shall not be considered Excluded Assets.
(i) MMP shall deliver to Purchaser at the Closing a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of the Closing Date Liabilities,
4
<PAGE>
which shall be used to determine the amount of cash, cash equivalents and other
cash items required to be retained by MTR and MMP pursuant to this Section
2.2(b).
(ii) Within one hundred twenty (120) days of the Closing,
Purchaser shall cause its accountant to prepare and deliver to Seller a
certificate setting forth its calculation of the Closing Date Liabilities (the
"Accountant's Certificate"). The amount of the Closing Date Liabilities as set
forth on the Accountant's Certificate shall be final unless Sellers' Agents
notify Purchaser within thirty (30) days from their receipt of the Accountant's
Certificate that they dispute the Accountant's Certificate. If Sellers' Agents
and Purchaser are unable to agree on the amount of the Closing Date Liabilities
within fifteen (15) days after Sellers' Agents' notice, the parties shall
jointly appoint and engage an independent accountant of national or regional
repute (the "Independent Accountant") to perform an independent evaluation of
the Closing Date Liabilities. The findings of the Independent Accountant as to
the amount of the Closing Date Liabilities shall be final and binding on the
parties hereto.
(iii) Upon the determination of the Closing Date
Liabilities becoming final which is different from the Estimate Certificate
either (A) Purchaser shall be entitled to a payment from the Indemnification
Escrow equal to the amount by which the aggregate amount of the Closing Date
Liabilities exceeds the Closing Date Liabilities shown on the Estimate
Certificate, taking into account any amounts paid from the Indemnification
Escrow under provisions similar to this provision in the MRI Agreement, the
Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to
Disbursing Agent an amount by which the aggregate amount of Closing Date
Liabilities shown on the Estimate Certificate exceeds the Closing Date
Liabilities as finally determined.
(iv) For purposes of determining the amount of the Tax
liabilities of MTR to be included in the Closing Date Liabilities (the "Closing
Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities
of MTR that are attributable to items of income, gain, loss, deduction and
credit of MMP and the FCC Licensee Entities accruing through and including the
Closing Date, notwithstanding that such items may be reported by MTR, Purchaser,
or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The
amount of the Tax liabilities attributable to the Tax items of MMP and the FCC
Licensee Entities shall be determined by assuming that the taxable years of MMP
and the FCC Licensee Entities, as well as the taxable years of the Company and
MTR, end as of close of business on the Closing Date and by assuming Purchaser's
compliance with Section 8.8. The Closing Date Tax Liabilities shall not include,
and Purchaser shall have no rights of Indemnification under Section 10 with
respect to, any Tax Liabilities arising from the MMP II Distribution.
5
<PAGE>
(v) Notwithstanding anything to the contrary contained in
this Section 2.2, the final determination of the Closing Date Liabilities
hereunder shall not affect Purchaser's indemnification rights pursuant to
Section 10 to the extent the actual Closing Date Liabilities exceed the final
determination thereunder.
SECTION 3
PURCHASE PRICE
3.1 Payment. In consideration for the sale of the Assets, Purchaser
shall pay to Seller the "Purchase Price", payable as follows:
(1) Purchaser has deposited with First Union National Bank, as
Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which
shall be distributed in accordance with the Deposit Escrow Agreement in the form
attached hereto as Exhibit A.
(2) At the Closing, the "Initial Deposit" which shall be held
in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent
pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto
(the "Indemnification Escrow Agreement"); and
(3) the balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available funds to the accounts
specified by Disbursing Agent pursuant to wire instructions delivered in writing
to Purchaser not later than two (2) Business Days prior to the Closing.
3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase
Price to Seller in accordance with the Disbursement Agreement.
SECTION 4
CLOSING
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One
Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on such
day), on the later to occur of (a) five Business Days after all applicable
waiting periods under the H-S-R Act shall have expired or terminated, or (b)
five Business Days after the Final Order (the date of Closing being the "Closing
Date"), unless (i)
6
<PAGE>
Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser
shall give Sellers reasonable notice of the Closing, or (ii) the parties shall
mutually agree upon a different date or location; provided, however, that in no
event shall the Closing be held prior to March 18, 1998; and provided, further,
that in the event the Closing is postponed past July 15, 1998, due to a
postponement of the Closing under Section 9.8(b) or otherwise, Seller, in its
sole discretion, may postpone the Closing to September 1, 1998. In no event
shall Closing occur later than the Termination Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1. RESERVED
5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER .
Seller hereby represents and warrants to Purchaser as follows:
a. ORGANIZATION AND GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia hereto and has full corporate power and authority to
carry on its business as it is now being conducted and to own and use the assets
owned and used by it. The Company is qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
Other than stock of MTR, the Company does not own any direct or indirect
subsidiary corporation.
b. RESERVED
c. NO CONFLICTS. Except as described on Schedule 5.2c, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of incorporation or by-laws of Seller, (ii) violate any provision of applicable
law, rule and regulation, which violation would prevent or materially interfere
with Seller's ability to perform hereunder or have a Material Adverse Effect, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller is a party or to which its property is subject, or
constitute a default thereunder, where such conflict, breach, right of
termination, acceleration or default would prevent or materially interfere with
the Seller's ability to perform hereunder or have a Material Adverse
7
<PAGE>
Effect.
d. FINANCIAL STATEMENTS. Seller has provided or made available
to Purchaser copies of the Financial Statements. The Financial Statements have
been prepared in accordance with GAAP consistently applied with prior periods.
The Financial Statements present fairly the financial position of the Company as
at and for the periods indicated therein. Except as set forth on Schedule 5.2.d
hereto, since December 31, 1996, there has not been any Material Adverse Effect
on the business, financial condition, operations or results of operations of
Seller taken as a whole. Without limiting the generality of the foregoing, since
December 31, 1996, except as set forth on Schedule 5.2d:
(i) Seller has not sold, leased, transferred, or assigned
Asset;
(ii) Seller has not entered into any material agreement,
contract, lease, or license affecting the Assets;
(iii) Seller has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which Seller is a party or by which Seller is bound;
(iv) Seller has not imposed any security interest upon any
of the Assets;
(viii) Seller has not granted any license or sublicense of
any material rights under or with respect to any Asset;
(ix) there has been no change made or authorized in the
charter or bylaws of Seller;
(x) the Assets have not experienced any material damage,
destruction, or loss (whether or not covered by insurance);
(xi) Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Company Plan or
Company Benefit Arrangement);
(xii) Seller has not made or changed any material Tax
election or taken any other action with respect to Taxes inconsistent with past
practices affecting the Assets;
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(xiii) Seller has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xiv) except as set forth in this Agreement, Seller has
not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.2e completely and accurately lists all
Company Plans and Company Benefit Arrangements and specifically identifies any
that are Qualified Plans. Neither Seller nor any ERISA Affiliate has ever
maintained or contributed to any Qualified Plans other than those listed on
Schedule 5.2e. The Qualified Plan has always qualified in form and operation
under Code Section 401(a) and has a currently applicable determination letter
from the Internal Revenue Service, and its trust has always been exempt under
Code Section 501, and nothing has occurred with respect to such plan and trust
that could cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Code.
(b) Each Company Plan and each Company Benefit Arrangement
has been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other domestic and foreign laws,
including federal, state, and foreign securities laws and all laws respecting
reporting and disclosure. No Company Plan holds employer securities.
(c) Neither Seller nor any ERISA Affiliate (since August 1,
1992) has sponsored, maintained, or had any liability (direct or indirect,
actual or contingent) with respect to any Benefit Plan subject to Title IV of
ERISA. Neither Seller nor any ERISA Affiliate has ever made or been obligated to
make, or reimbursed or been obligated to reimburse another employer for,
contributions to any multiemployer plan (as defined in ERISA Section 3(37)).
Seller has no liability (whether actual, contingent, or otherwise) with respect
to any Benefit Plan or Benefit Arrangement that is not a Company Benefit
Arrangement or with respect to any Benefit Plan sponsored or maintained (or
which has been or should have been sponsored or maintained) by any ERISA
Affiliate; and no facts exist that could reasonably be expected to result in
such liability, as a result of termination, withdrawal or funding waiver with
respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-Company Benefit Plans or non-Company Benefit Arrangements
that would, if successful, result in liability for Seller, and no claims or
lawsuits (other than routine benefit
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claims) have been asserted, instituted or, to the Knowledge of Seller,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, and Seller does not have Knowledge of any fact that could form the
basis for any such claim or lawsuit. The Company Plans and Company Benefit
Arrangements are not presently under audit or examination (and have not received
notice of a potential audit or examination) by any governmental authority, and
no matters are pending with respect to the Qualified Plan under any governmental
compliance programs.
(e) No Company Plan or Company Benefit Arrangement contains
any provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and Seller has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement.
(f) With respect to each Company Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for Seller or any Person
required to be indemnified by it.
(g) Seller has made all required contributions to the
Company Plan as of the last day of each plan's most recent fiscal year, all
benefits accrued under any unfunded Company Plan or Company Benefit Arrangement
will have been paid, accrued, or otherwise adequately reserved in accordance
with generally accepted accounting principles; and all monies withheld from
employee paychecks with respect to Company Plans have been transferred to the
appropriate plan within the timing required by governmental regulations.
(h) Seller and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of Seller nor beneficiary of
any such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Seller that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
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f. LABOR. With respect to employees of and service providers
to Seller, except as set forth on Schedule 5.2f:
(a) Seller is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice.
(b) The employees of Seller are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, the Company, and
to Seller's knowledge, no labor representation organization effort exists nor
has there been any such activity within the past three years.
(c) All Persons classified by Seller as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and Seller has fully and accurately reported their compensation on
IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, Seller has not employed any
employees.
(e) There is no charge or compliance proceeding actually
pending or threatened against Seller before the Equal Employment Opportunity
Commission or any state, local, or foreign agency responsible for the prevention
of unlawful employment practices.
g. INSURANCE. Schedule 5.2g hereto contains a list of all
insurance policies of Seller and describes coverage thereunder (including
whether occurrence or claims made), other than employee-benefit related
insurance policies. All such policies are legal, valid, binding, enforceable and
in full force and effect subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by court of law or equity). There are no
existing breaches or defaults by Seller or, to Seller's Knowledge by any other
party with respect to such policies, and no notice of cancellation or
termination has been received.
h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of
all the Material Contracts and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts listed on Schedule 5.2h are
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legal, valid and binding obligations of Seller enforceable in accordance with
their terms and in full force and effect subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the right of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or equity).
There exists no default or event which, with notice or lapse of time, or both,
would constitute a default by Seller or to the Company's Knowledge any other
party to any such Material Contract or which would permit termination,
modification or acceleration. Seller has not received notice (or otherwise has
knowledge) that any party to any Material Contract intends to cancel or
terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i,
Seller is in material compliance with all material applicable Federal, state and
local laws, rules and regulations, and to Seller's knowledge, there are no
actions threatened or pending alleging noncompliance therewith.
j. LITIGATION. Except as set forth on Schedule 5.2j hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to
Seller's Knowledge, threatened against Seller. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency specifically against or specifically
affecting Seller, except as disclosed on Schedule 5.2j.
k. NO BROKERS. Except as described on Schedule 5.2k, Seller
has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the sale of the
Stock and the transactions contemplated by this Agreement.
l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto,
(b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no
filing, consent, approval or authorization of any governmental authority or of
any third party on the part of Seller is required in connection with the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby (including any consents required under any
Company Material Contract as a result of the change in control contemplated
hereby).
m. TAX MATTERS.
(a) Except as set forth on Schedule 5.2m(a) hereto:
(i) All Tax Returns required to be filed by or
with respect to Seller have been filed when due in a timely fashion, and all Tax
Returns required to be
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filed by or with respect to Seller for Taxable Periods ending on or before
December 31, 1997 will have been filed prior to the Closing Date, even if such
Tax Returns are not yet due. All Tax Returns filed by or with respect to Seller
are true, correct and complete in all material respects.
(ii) Seller has paid in full on a timely basis all
Taxes owed by Seller, whether or not shown on any Tax Return, and Seller will
have paid prior to the Closing Date all Taxes owed with respect to Taxable
Periods ending on or before December 31, 1997, even if such Taxes are not yet
due.
(iii) Seller's liability for unpaid Taxes did not, as
of the date of the Financial Statements exceed the liability for such Taxes
(excluding reserves for deferred Taxes) set forth on the Financial Statements.
Seller has no liability for unpaid income Taxes other than its Tax liability
attributable to Seller's allocable share of MMP's items of income, gain, loss,
deduction and credit accruing through the date hereof.
(iv) Seller has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with
respect to Seller and Seller has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect with respect to the assessment, collection or
payment of Taxes of Seller or for which Seller is liable.
(vii) No extension of the time within which to file
any Tax Return of Seller is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted, or assessed against Seller.
(ix) There are no liens on the assets of Seller
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) Seller is not and has not been at any time during
the preceding five years a "United States real property holding corporation"
within the
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meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under
Section 341(f) of the Code affecting Seller.
(xii) Seller has not agreed to, nor is it required
to, make any adjustments under Section 481 (a) of the Code as a result of a
change in accounting methods.
(xiii) Seller is not and has not at any time been a
party to a tax sharing, tax indemnity or tax allocation agreement, and Seller
has not assumed the Tax liability of any other entity or person under contract.
(xiv) Seller is not and has not at any time been a
member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MMP and the Television Licensees,
Seller is not a party to any joint venture, partnership or other arrangement
that is treated as a partnership for U.S. federal income tax purposes.
(xvi) None of Seller's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Seller has furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to Seller since January 1, 1994;
and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to Seller relating to Taxes.
(c) Schedule 5.2m(c) contains complete and accurate
descriptions of (i) Seller's basis in the stock of MTR and its tax capital
account in MMP, and (ii) material Tax elections made by or with respect to
Seller. Seller has no net operating losses or other Tax attributes presently
subject to limitation under Code Sections 382, 383 or 384, or the federal
consolidated return regulations.
n. RESERVED
o. ACCOUNTS RECEIVABLE. Seller has no accounts receivable
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<PAGE>
p. RESERVED
q. REPRESENTATIONS AS TO SELLER INTERESTS.
(i) Seller is the record and the beneficial owner of
5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units)
of MMP, sixty-nine (69) shares (out of a total one hundred (100) issued and
outstanding shares) of the issued and outstanding shares of MTR and a 2% limited
partnership interest in each Television Licensee (collectively, the "Seller
Interests"); (ii) Seller holds of record and owns beneficially Seller Interests
free and clear of any lien, security interest, pledge or encumbrance other than
those set forth on Schedule 5.2q hereof, all of which will be released at or
before the Closing; (iii) Seller has full power and authority to enter into this
Agreement, and the consummation of the transactions contemplated hereby has been
duly authorized by all necessary action on the part of Seller; (iv) this
Agreement has been duly executed and delivered by Seller and constitutes a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity); and (v)
except as described on Schedule 5.2q, Seller Interests are not subject to any
option(s) warrant(s), voting trusts, outstanding proxies, registration rights
agreement(s), or other agreements regarding voting rights.
5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE
ENTITIES.
Seller and MMP, jointly and severally, hereby represent and warrant to
Purchaser as to MMP and the FCC Licensee Entities as follows:
a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited
liability company duly organized and validly existing under the laws of Virginia
and has full corporate power and authority to carry on its business as it is now
being conducted and to own and use the assets owned and used by it. To the
extent required by law, MMP is qualified as a foreign limited liability company
and is in good standing under the laws of each jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification.
MMP owns 98% of the outstanding partnership interests in the FCC Licensee
Entities.
b. CAPITALIZATION OF MMP. The designations of each class of
the membership units of MMP and the number of authorized and issued and
outstanding membership units thereof is as described on Schedule 5.3b to the MRI
Agreement. All
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membership units have been validly issued and are fully paid and nonassessable
and are held of record by the respective members of MMP as set forth on Schedule
5.3b to the MRI Agreement. Except as described on Schedule 5.3b to the MRI
Agreement, (i) there are no other issued or outstanding equity securities of
MMP; (ii) there are no membership or value appreciation rights, phantom
membership rights, profit participation rights, or other similar rights with
respect to membership units outstanding; and (iii) there are no other issued or
outstanding membership interests or other securities of MMP convertible or
exchangeable at any time into equity securities of MMP. Except as set forth in
the Operating Agreement of MMP as amended, MMP is not subject to any commitment
or obligation that would require the issuance or sale of additional membership
interests or membership units of MMP at any time under options, subscriptions,
warrants, rights or any other obligations. Schedule 5.3b to the MRI Agreement
sets forth the equity interests in any corporation, partnership, limited
liability company, joint venture or other entity owned by MMP.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE
ENTITIES. Each FCC License Entity is a limited partnership duly organized and
validly existing under the laws of the Commonwealth of Virginia and has full
partnership power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. Each FCC License
Entity is qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. No FCC License Entity owns
any direct or indirect subsidiaries. MMP is the sole general partner and owns
ninety-eight percent (98%) of the partnership interests of each of the FCC
License Entities. Seller is the sole limited partner and owns two percent (2%)
of the partnership interests of each of the FCC License Entities other than
RLLP. MRI is the sole limited partner and owns two percent (2%) of the
partnership interests of RLLP. All such partnership interests have been validly
issued and are fully paid and nonassessable and are held of record by the
respective partners as set forth above. There are no (i) other issued or
outstanding equity securities of any FCC License Entity, (ii) partnership or
value appreciation rights, phantom partnership rights, profit participation
rights, or other similar rights with respect to partnership interests
outstanding and (iii) other issued or outstanding partnership interests or other
securities of any FCC License Entity convertible or exchangeable at any time
into equity securities of such FCC License Entity. No FCC License Entity is
subject to any commitment or obligation that would require the issuance or sale
of additional partnership interests of any FCC License Entity at any time under
options, subscriptions, warrants, rights or any other obligations. No FCC
License Entity holds any equity interest in any corporation, partnership,
limited liability company, joint venture or other entity.
d. NO CONFLICTS. Except as described on Schedule 5.3d to the
MRI Agreement, neither the execution and delivery of this Agreement nor the
consummation of
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the transactions contemplated hereby will (i) violate any provision of the
articles of organization or operating agreement of MMP or the limited
partnership agreements of the FCC Licensee Entities, (ii) violate any provision
of applicable material law, rule and regulation, or (iii) conflict with or
result in a breach of, or give rise to a right of termination of, or accelerate
the performance required by the terms of any judgment, court order or consent
decree, or any material agreement, indenture, mortgage or instrument to which
either MMP or any FCC Licensee Entity is a party or to which any of their
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would have a MMP Material
Adverse Effect.
e. REAL PROPERTY. The MMP Real Property owned and all
leaseholds and other interests in MMP Real Property used or useful in the
Business and all buildings, structures, towers, and improvements thereon used or
useful in the business and operations of the Stations are listed on Schedule
5.3e to the MRI Agreement and, except for Permitted Encumbrances and as
disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee
simple title (insurable at standard rates by a reputable national title insurer)
to all fee estates included in the Real Property, and good title to all other
MMP Real Property, in each case clear of all liens. The FCC Licensee Entities
own no real property, leaseholds or other interests in real property. No portion
of the MMP Real Property or any building, structure, fixture or improvement
thereon is the subject of, or affected by, any condemnation, eminent domain or
inverse condemnation proceeding currently instituted or pending or, to MMP's
Knowledge, threatened.
MMP has a valid leasehold interest in all leased property and subleases
to which it is a party, and MMP is the owner and holder of all the leased
property purported to be granted by such leases and subleases. The MMP Real
Property and the leases and subleases listed on Schedule 5.3e to the MRI
Agreement constitute all of the real property owned, leased or used by MMP in
the business and operations of the Stations, which is material to the business
and operations of the Stations. The Sellers have delivered or caused to be
delivered to the Purchaser correct and complete copies of the deeds, leases and
subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each
lease and sublease listed in Schedule 5.3e to the MRI Agreement:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with several principles of equity (whether applied by a
court of law or equity);
(b) MMP and, to MMP's knowledge, no other party to
the lease or sublease is in material breach or default, and no event has
occurred which, with notice
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or lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(c) MMP and, to MMP's knowledge, no other party to
the lease or sublease has repudiated any material provision thereof;
(d) MMP is not a party to and, to MMP's knowledge,
there are no material disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(e) except as set forth on Schedule 5.3e to the MRI
Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder
material to the operation of the Stations have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects.
f. PERSONAL PROPERTY. Schedule 5.3f to the MRI Agreement lists
as of the date hereof all items of Personal Property having a fair market value
in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI
Agreement, MMP has good and marketable title to all of its material items of
tangible personal property and assets used or useful by MMP located on its
premises or shown on the MMP Financial Statements are free and clear of all
liens, security interests and encumbrances other than those that would not
materially affect Purchaser's use or ownership of such personal property after
the Closing. The tangible personal property of MMP has been maintained in
accordance with normal industry practice and is in good condition and repair
given the age and use of such property (subject to normal wear and tear) and is
adequate for its present use by MMP.
g. FINANCIAL STATEMENTS. MMP has provided or made available to
Purchaser copies of the MMP Financial Statements. The MMP Financial Statements
have been prepared in accordance with GAAP consistently applied with prior
periods except in the case of the unaudited MMP Financial Statements, the
absence of year-end audit adjustments and notes. The MMP Financial Statements
present fairly the financial position of MMP as at and for the periods indicated
therein, and are consistent with the books and records of MMP. Except as set
forth on Schedule 5.3g to the MRI Agreement hereto, since December 31, 1996,
there has not been any Material Adverse Effect on the business, financial
condition, operations, or results of operations of MMP taken as a whole. Without
limiting the generality of the foregoing, since that date, except as described
on
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Schedule 5.3g to the MRI Agreement:
(i) MMP has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the ordinary
course of business;
(ii) MMP has not entered into any material
agreement, contract, lease, or license outside the ordinary course of business;
(iii) MMP has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which MMP is a party or by which MMP is bound;
(iv) MMP has not imposed any security interest upon
any of its assets, tangible or intangible;
(v) MMP has not made any material capital
expenditures outside the ordinary course of business;
(vi) MMP has not made any material capital
investment in, or any material loan to, any other Person outside the ordinary
course of business;
(vii) MMP has not created, incurred, assumed, or
guaranteed more than $45,000,000.00 in aggregate indebtedness for borrowed money
and capitalized lease obligations;
(viii) MMP has not granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property;
(ix) there has been no change made or authorized in
the operating agreement of MMP;
(x) MMP has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xi) MMP has not made any loan to, or entered into
any other transaction with, any of its managers, officers, and employees outside
the ordinary course of business;
(xii) MMP has not entered into any employment
contract outside the ordinary course of business or collective bargaining
agreement, written or oral, or modified the terms of any such existing contract
or agreement;
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(xiii) MMP has not granted any increase in the base
compensation of any of its members outside the ordinary course of business;
(xiv) MMP has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its managers, officers, and
employees (or taken any such action with respect to any other MMP Plan or MMP
Benefit Arrangement);
(xv) MMP has not made any other material change in
employment terms for any of its members or employees outside the ordinary course
of business;
(xvi) MMP has not made or changed any material Tax
election or taken any other action with respect to Taxes not in the ordinary
course of business and consistent with past practice;
(xvii) MMP has not made any distributions other
than in the ordinary course of business, and has not made any non-pro rata
distributions;
(xviii) MMP has not adopted any material change in
any method of accounting or accounting practice, except as contemplated or
required by GAAP; and
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(xix) except as contemplated by this Agreement, the
Investors Agreement, the Management Agreement, the MRI Agreement, and Assignment
and Assumption Agreement by and between MMP and the Max Media LLC II
Distribution Agreement, MMP has not committed to any of the foregoing.
h. FCC. MMP and the FCC Licensee Entities have been and
currently are operated in material compliance with the terms of the FCC
Licenses, the Communications Act of 1934, as amended, and applicable rules,
regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC
Licenses, a true and complete list of which is set forth on Schedule 5.3h to the
MRI Agreement, and true and complete copies of each of which have been delivered
to Purchaser, are valid and in full force and effect. Except as set forth on
Schedule 5.3h to the MRI Agreement, no application, action or proceeding is
pending for the renewal or modification of any of the FCC Licenses and, to
Sellers' and MMP's Knowledge, there is not now before the FCC any investigation
or complaint against MMP or the FCC Licensee Entities relating to the Stations,
the unfavorable resolution of which would impair the qualifications of the FCC
Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h
to the MRI Agreement, there is no proceeding pending before the FCC, and there
is no outstanding notice of violation from the FCC with respect to the Stations.
Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of
violation has been issued by any governmental entity which permits, revocation,
adverse modification or termination of any FCC License. Except as set forth on
Schedule 5.3h to the MRI Agreement and except for those conditions or
restrictions appearing on the face of the FCC Licenses, or other licenses, none
of the FCC Licenses or other licenses is subject to any restriction or condition
which would limit the operation of the Stations as currently operated. The FCC
Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect
and are not subject to any liens, or other encumbrances. No license renewal
applications are pending with respect to any of the FCC Licenses. As of the date
hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason
to believe that the FCC would not renew the FCC Licenses in the ordinary course
for a full license term without any adverse conditions, upon the timely filing
of appropriate applications and payment of the required filing fee. As of the
date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no
reason to believe that the FCC would not grant the FCC Application in the
ordinary course without any adverse conditions. All documents required by 47
C.F.R. Section 73.3526 to be kept in each Station's public inspection files are
in such file, and such file will be maintained in proper order and complete up
to and through the Closing Date.
i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the
MRI Agreement is a complete list of all Intellectual Property owned by or
licensed to MMP on the date hereof material to the operations of the Stations.
To MMP's Knowledge, except as
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otherwise set forth on Schedule 5.3i to the MRI Agreement hereto, MMP owns such
Intellectual Property free and clear of any royalty, lien, encumbrance or charge
and does not interfere with the rights of others. Except as set forth on
Schedule 5.3i to the MRI Agreement, MMP has not received any written notice or
written claim that any such Intellectual Property is not valid or enforceable,
or of any infringement upon or conflict with any patent, trademark, service
mark, copyright or trade name of any third party by MMP. Except as set forth on
Schedule 5.3i to the MRI Agreement, MMP has not given any notice of infringement
to any third party with respect to any of the Intellectual Property and to MMP's
Knowledge no such infringement exists. There is no Intellectual Property owned
by or licensed to the FCC Licensee Entities.
j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.3j to the MRI Agreement completely and
accurately lists all MMP Plans and MMP Benefit Arrangements currently in
existence and specifically identifies any that are Qualified Plans. Since
January 1, 1996 (the date of formation of MMP), MMP has maintained or
contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI
Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have
always qualified in form and operation under Code Section 401(a) and have a
currently applicable determination letter from the Internal Revenue Service, and
its trust has always been exempt under Code Section 501, and nothing has
occurred with respect to such plan and trust that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty, or
tax under ERISA or the Code.
(b) Each MMP Plan and each MMP Benefit Arrangement has been
maintained in accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other domestic and foreign laws, including
federal, state, and foreign securities laws and all laws respecting reporting
and disclosure. No MMP Plan holds employer securities.
(c) Neither MMP nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any
ERISA Affiliate has never made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit
Plan sponsored or maintained (or that has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that could reasonably be
expected to result in such liability, as a result of termination, withdrawal or
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funding waiver with respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that
would, if successful, result in liability for M MP, and no claims or lawsuits
(other than routine benefit claims) have been asserted, instituted or, to the
knowledge of Sellers and the Company after due inquiry of MMP, threatened by,
against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has
advised Sellers and the Company that MMP does not have knowledge of any fact
that could form the basis for any such claim or lawsuit. MMP Plans and MMP
Benefit Arrangements are not presently under audit or examination (and have not
received notice of a potential audit or examination) by any governmental
authority, and no matters are pending with respect to the Qualified Plan under
any governmental compliance programs.
(e) No MMP Plan or MMP Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and MMP has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, the Investors Agreement, the Management Agreement or the MRI
Agreement.
(f) With respect to each MMP Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for MMP or any Person required
to be indemnified by it.
(g) MMP has made all required contributions to each MMP
Plan as of the last day of each plan's most recent fiscal year, all benefits
accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been
paid, accrued, or otherwise adequately reserved in accordance with generally
accepted accounting principles; and all monies withheld from employee paychecks
with respect to MMP Plans have been transferred to the appropriate plan within
the timing required by governmental regulations.
(h) MMP and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of MMP nor beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
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(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of MMP that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
(j) The FCC Licensee Entities employ no employees and do
not and have not in the past maintained or contributed to any Benefit Plans or
Benefit Arrangements.
k. LABOR. Except as set forth on Schedule 5.3k to the MRI
Agreement, with respect to employees of and service providers to MMP and the FCC
Licensee Entities:
(a) MMP has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and have not and are not engaged in
any unfair labor practice.
(b) The employees of MMP are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, MMP or, to MMP's
Knowledge, no labor representation organization effort exists nor has there been
any such activity within the past three years.
(c) All Persons classified by MMP and the FCC Licensee
Entities as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and MMP has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, except as described on
Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the
loss of whom would have significant adverse effect on the business of MMP or the
FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate
his or their relationship with MMP or the FCC Licensee Entities, or (B) make any
demand for material payments or modifications of his or their arrangements with
MMP.
(e) There is no charge or compliance proceeding actually
pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee
Entities before the Equal Employment Opportunity Commission or any state, local,
or foreign agency
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responsible for the prevention of unlawful employment practices.
(f) The FCC Licensee Entities do not employ, and have not
in the past, employed employees.
l. INSURANCE. Schedule 5.3l to the MRI Agreement hereto
contains a list of all insurance policies concerning the Business and describes
coverage (including whether occurrence or claims made), other than
employee-benefit related insurance policies. All such policies are legal, valid,
binding, enforceable and in full force and effect subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and to the exercise of judicial discretion in
accordance with general principles of equity (whether applied by court of law or
equity). There are no existing breaches or defaults with respect to such
policies, and no notice of cancellation or termination has been received.
m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement
hereto contains a list of all the Material Contracts of MMP and the FCC Licensee
Entities (other than cash agreements for the sale of advertising time and
retransmission consent agreements) and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts are legal, valid and binding obligations of MMP or the FCC Licensee
Entities, as the case may be, enforceable in accordance with their terms and in
full force and effect. There exists no default or event which, with notice or
lapse of time, or both, would constitute a default by any party to any such
Material Contract or which would permit termination, modification or
acceleration. Neither MMP nor the FCC Licensee Entities have received notice,
nor to MMP's Knowledge, does any party to any Material Contract intend to cancel
or terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n
to the MRI Agreement, MMP and the FCC Licensee Entities are in material
compliance with all material applicable Federal, state and local laws, rules and
regulations, and there are no actions threatened or pending alleging
noncompliance therewith.
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o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee
Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of
the Business or operation of the Stations, or the transactions contemplated
hereby. There is no outstanding citation, order, judgment, writ, injunction, or
decree of any court, government, or governmental or administrative agency
against or affecting the Business, MMP or the FCC Licensee Entities, except as
disclosed on Schedule 5.3o to the MRI Agreement.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the
MRI Agreement hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of MMP or the FCC Licensee Entities
is required in connection with the execution and delivery of this Agreement by
Sellers or the consummation of any of the transactions contemplated hereby
(including any consents required under any MMP or FCC Licensee Entities contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the
MRI Agreement hereto:
(a) All of the operations of MMP at or from any MMP Real
Property comply in all material respects with applicable Environmental Laws. MMP
has not engaged in or permitted any operations or activities upon any of the MMP
Real Property for the purpose of or involving the treatment, storage, use,
generation, release, discharge, emission, or disposal of any Hazardous
Substances at the MMP Real Property, except in substantial compliance with
applicable Environmental Laws.
(b) None of the MMP Real Property is listed or, to MMP's
Knowledge, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. MMP has not received any notice from any governmental
entity or third party of any actual or threatened Environmental Liabilities with
respect to the MMP Real Property or the conduct of the Business.
(c) To MMP's Knowledge, after due inquiry, there are no
conditions existing at the MMP Real Property that require, or which with the
giving of notice or the passage of time or both would likely require remedial or
corrective action, removal or closure pursuant to the Environmental Laws.
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(d) To MMP's Knowledge, after due inquiry, MMP has all the
material permits, authorizations, licenses, consents and approvals necessary for
the current conduct of the Business and for the operations on, in or at the MMP
Real Property which are required under applicable Environmental Laws and are in
substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
(e) To MMP's Knowledge, after due inquiry, there are no
Hazardous Substances present on or in the MMP Real Property or at any
geologically or hydrologically adjoining property, including any Hazardous
Substances contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the MMP Real Property or such adjoining property, or
incorporated into any structure therein or thereon. Neither MMP or any other
Person for whose conduct it is or may be held responsible, nor to MMP's
Knowledge after due inquiry or any other Person, has permitted or conducted, or
was aware of, any Hazardous Substances, or any illegal activity conducted with
respect to the MMP Real Property or any other properties or assets (whether
real, personal, or mixed) in which MMP has or had an interest.
r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) to the
MRI Agreement hereto:
(i) All Tax Returns required to be filed by or
with respect to MMP have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to MMP for Taxable Periods
ending on or before December 31, 1997 will have been filed prior to the Closing
Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with
respect to MMP are true, correct and complete in all material respects.
(ii) MMP has paid in full on a timely basis
all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have
paid prior to the Closing Date all Taxes payable with respect to Taxable Periods
ending on or before December 31, 1997, even if such Taxes are not yet due.
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(iii) MMP's liability for unpaid Taxes
(including any liability of MMP for unpaid Taxes of any other Entity or Person)
(a) did not, as of the date of the MMP Financial Statements, exceed the current
liability accruals for such Taxes (excluding reserves for deferred Taxes) set
forth on the MMP Financial Statements, (b) does not exceed such accruals as
adjusted on the books of MMP for transactions and events through the date hereof
in accordance with the past custom and practice of MMP, and (c) will not as of
the Closing Date exceed its liabilities for such Taxes as reflected in the
Closing Date Tax Liabilities as finally determined pursuant to Section
2.2(b)(ii).
(iv) MMP has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending
with respect to MMP and MMP has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect or has been requested with respect to the
assessment, collection or payment of Taxes of MMP or for which MMP is liable.
(vii) No extension of the time within which to
file any Tax Return of MMP is currently in effect.
(viii) No deficiency for Taxes has been
proposed, asserted or assessed against MMP.
(ix) There are no liens on the assets of MMP
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) MMP is and has since its formation been
classified as a partnership for U.S. federal income tax purposes and has in
effect a valid election under Section 754 of the Code.
(xi) MMP has not agreed to, nor is it required
to, make any adjustments under Section 481(a) of the Code as a result of a
change in accounting methods.
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(xii) MMP is not and has not at any time been
a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has
not assumed the Tax liability of any other entity or person under contract.
(xiii) MMP does not have any liability for the
Taxes of another entity or person as a transferee or successor, or otherwise.
(xiv) Except for itself and the FCC Licensee
Entities, MMP is not and has not at any time been a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes.
(xv) None of MMP's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(xvi) The FCC Licensee Entities' sole asset is
the FCC Licenses, and the FCC Licensee Entities are not and have not been
required to file Tax Returns or pay Taxes.
(b) Sellers have furnished or otherwise caused to be made
available to Purchaser correct and complete copies of (i) all income, franchise
and other material Tax Returns filed by or with respect to MMP since January 1,
1996; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to MMP relating to Taxes.
(c) Schedule 5.3r(c) to the MRI Agreement contains complete
and accurate descriptions of (i) MMP's basis in its assets, and (ii) material
Tax elections made by or with respect to MMP.
s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that
are reflected on the MMP Financial Statements or on the accounting records of
MMP as of the Closing Date (collectively, the "MMP Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the MMP Accounts Receivable are or will be as of the
Closing Date current and collectable net of the respective reserve shown on the
MMP Financial Statements or on the accounting records of MMP as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the MMP Accounts Receivable as of the Closing Date than
the reserve reflected in the MMP Financial Statements represented of the MMP
Accounts Receivable reflected therein and will not represent a MMP Material
Adverse Effect in the composition of such MMP Accounts Receivable in terms of
aging).
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Subject to such reserves, each of the MMP Accounts Receivable either has been or
will be collected in full, without any setoff, within ninety (90) days after the
day on which it first becomes due and payable. There is no contest, claim, or
right of setoff, other than returns in the ordinary course of business, under
any contract with any obligor of an MMP Accounts Receivable relating to the
amount or validity of such MMP Accounts Receivable. MMP shall deliver on the
Closing Date a complete and accurate list of all MMP Accounts Receivable as of
the Closing Date.
t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record
and the beneficial owner of a 98% general partnership interest in each of the
Television Licensees; (ii) MMP holds of record and owns beneficially these
interests free and clear of any lien, security interest, pledge or encumbrance
other than those set forth on Schedule 5.3t to the MRI Agreement hereof, all of
which will be released at or before the Closing; (iii) MMP has full power and
authority to enter into this Agreement, and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary action on the part
of MMP; (iv) this Agreement has been duly executed and delivered by MMP and
constitutes a legal, valid and binding obligation of MMP, enforceable against
MMP in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity); and (v)
except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in
the Television Licensees are not subject to any option(s) warrant(s), voting
trusts, outstanding proxies, registration rights agreement(s), or other
agreements regarding voting rights.
5.4. REPRESENTATIONS AND WARRANTIES AS TO MTR.
Seller hereby represents and warrants to Purchaser as to MTR as
follows:
a. ORGANIZATION AND GOOD STANDING. MTR is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has full corporate power and authority to carry on
its business as it is now being conducted and to own and use the assets owned
and used by it. MTR is not qualified as a foreign corporation in any foreign
jurisdiction.
b. CAPITALIZATION. The designations of each class of the
capital stock of MTR and the number of authorized and issued and outstanding
shares thereof is as described on Schedule 5.4b to the MRI Agreement. All the
shares of capital stock of MTR have been validly issued and are fully paid and
nonassessable and are held of record by the respective shareholders as set forth
on Schedule 5.4b to the MRI Agreement hereto. Except as described on Schedule
5.4b to the MRI Agreement, (i) no shares of capital stock of MTR
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are held in treasury, (ii) there are no other issued or outstanding equity
securities of MTR, (iii) there are no stock appreciation rights, phantom stock
rights, profit participation rights, or other similar rights with respect to
shares outstanding; and (iv) there are no other issued or outstanding securities
of MTR convertible or exchangeable at any time into equity securities of MTR.
MTR is not subject to any commitment or obligation that would require the
issuance or sale of additional shares of capital stock of MTR at any time under
options, subscriptions, warrants, rights or any other obligations. Except for
its ownership interest in MMP, MTR holds no equity interests in any corporation,
partnership, limited liability company, joint venture or other entity owned by
MTR.
c. NO CONFLICTS. Neither the execution and delivery of this
Agreement by Sellers and MMP nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the articles of
incorporation or by-laws of MTR, (b) violate any provision of applicable law,
rule and regulation, which violation would prevent or interfere with Sellers'
ability to perform hereunder, or (c) conflict with or result in a breach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which MTR is a party or to which its
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would prevent or
materially interfere with the Company's ownership of 31% of the equity of MTR.
d. FINANCIAL MATTERS. Except as set forth on Schedule 5.4.d to
the MRI Agreement hereto, since January 1, 1996 (the date MTR first held any
assets), there has not been any material adverse effect on the business,
financial condition, operations or results of operations of MTR taken as a
whole. Without limiting the generality of the foregoing, since that date:
(i) MTR has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MTR has not entered into any material agreement,
contract, lease, or license outside the ordinary course of business;
(iii) MTR has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MTR is a party or by which MTR is bound;
(iv) MTR has not imposed any security interest upon any of
its assets, tangible or intangible;
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(v) MTR has not made any material capital expenditures
outside the ordinary course of business;
(vi) MTR has not made any material capital investment in,
or any material loan to, any other Person other than MMP;
(vii) MTR has not created, incurred, assumed, or guaranteed
any indebtedness for borrowed money and capitalized lease obligations;
(viii) MTR has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
charter or bylaws of MTR;
(x) other than its initial issuance of Stock to Seller and
MRI, MTR has not issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock;
(xi) MTR has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(xii) MTR has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) MTR has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;
(xiv) MTR, since its formation, has had no employees;
(xv) MTR has not made or changed any material Tax election
or taken any other action with respect to Taxes not in the ordinary course of
business and consistent with past practices;
(xvi) MTR has not adopted any material change in any method
of accounting or accounting practice, except as contemplated or required by
GAAP; and
(xvii) except as set forth in this Agreement and the MRI
Agreement,
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MTR has not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. MTR does not, and has not in the
past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither
MTR nor any ERISA Affiliate has sponsored, maintained, or had any liability
(direct or indirect, actual or contingent) with respect to any Benefit Plan
subject to Title IV of ERISA. Neither MTR nor any ERISA Affiliate has ever made
or been obligated to make, or reimbursed or been obligated to reimburse another
employer for, contributions to any multiemployer plan (as defined in ERISA
Section 3(37). MTR has no liability (whether actual, contingent, or otherwise)
with respect to any Benefit Plan or Benefit Arrangement.
f. LABOR. Prior to the date of this Agreement, MTR has not
employed any employees.
g. INSURANCE. MTR maintains no insurance policies.
h. MATERIAL CONTRACTS. Schedule 5.4h to the MRI Agreement
contains a list of all the Material Contracts and true copies of such agreements
have been furnished to Purchaser or have been made available to Purchaser. All
Material Contracts listed on Schedule 5.4h to the MRI Agreement are legal, valid
and binding obligations of MTR enforceable in accordance with their terms and in
full force and effect subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the right of creditors
generally and the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity). There exists
no default or event which, with notice or lapse of time, or both, would
constitute a default by any party to any such Material Contract or which would
permit termination, modification or acceleration. MTR has not received notice
(or otherwise has knowledge) that any party to any Material Contract intends to
cancel or terminate any such agreement or to exercise or not to exercise any
option to renew thereunder.
i. COMPLIANCE WITH LAWS. MTR is in material compliance with
all applicable Federal, state and local laws, rules and, regulations, and to
MTR's knowledge, there are no actions threatened or pending alleging
noncompliance therewith.
j. LITIGATION. There is no suit, claim, action, proceeding or
arbitration pending or threatened against MTR. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency against or affecting MTR.
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k. CONSENTS. No filing, consent, approval or authorization of
any governmental authority or of any third party on the part of MTR is required
in connection with the execution and delivery of this Agreement by Seller and
MMP or the consummation of any of the transactions contemplated hereby
(including any consents required under any MTR contract as a result of the
change in control contemplated hereby).
l. TAX MATTERS.
(a) Except as set forth on Schedule 5.4l(a) to the
MRI Agreement:
(i) All Tax Returns required to be filed by
or with respect to MTR have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to MTR for Taxable Periods
ending on or before December 31, 1997 will have been filed prior to the Closing
Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with
respect to MTR are true, correct and complete in all material respects.
(ii) MTR has paid in full on a timely basis
all Taxes owed by it, whether or not shown on any Tax Return, and MTR will have
paid prior to the Closing Date all Taxes payable with respect to Taxable Periods
ending on or before December 31, 1997, even if such Taxes are not yet due.
(iii) MTR has no liability for unpaid income
Taxes other than its Tax liability attributable to MTR's allocable share of
MMP's items of income, gain, loss, deduction and credit accruing through the
date hereof. MTR's actual liability for unpaid Taxes (determined consistently
with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability
for such Taxes as reflected in the Closing Date Tax Liabilities as finally
determined pursuant to Section 2.2(b)(ii).
(iv) MTR has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending
with respect to MTR and MTR has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is
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currently in effect with respect to the assessment, collection or payment of
Taxes of the MTR or for which MTR is liable.
(vii) No extension of the time within which
to file any Tax Return of MTR is currently in effect.
(viii) No deficiency for Taxes has been
proposed, asserted, or assessed against MTR.
(ix) There are no liens on the assets of MTR
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) MTR is not and has not been at any time
during the preceding five years a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made
under Section 341(f) of the Code affecting MTR.
(xii) MTR has not agreed to, nor is it
required to, make any adjustments under Section 481(a) of the Code as a result
of a change in accounting methods.
(xiii) MTR is not and has not at any time
been a party to a tax sharing, tax indemnity or tax allocation agreement, and
MTR has not assumed the Tax liability of any other entity or person under
contract.
(xiv) MTR is not and has not at any time been
a member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MTR's ownership of 100,000
Class C Membership Units of MMP, MTR is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes. (xvi) None of MTR's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Sellers have furnished or otherwise made available to
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Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to MTR since January 1, 1996; and
(ii) all examination reports, statements of deficiencies and closing agreements
with respect to MTR relating to Taxes.
(c) Schedule 5.4l(c) to the MRI Agreement contains complete
and accurate descriptions of (i) MTR's basis in its assets, (ii) the amount of
any net operating loss, net capital loss and any other Tax carryovers of MTR and
(iii) material Tax elections made by or with respect to MTR. MTR has no net
operating losses or other Tax attributes presently subject to limitation under
Code Sections 382, 383 or 384, or the federal consolidated return regulations.
m. DIVIDENDS. Since its formation, no dividends have been
declared, issued or otherwise approved by the Board of Directors of MTR. The
Company has no accounts receivable other than amounts due as Tax refunds from
certain Tax Authorities.
n. MTR ASSETS. Except for the 100,000 Class C Membership Units
of MMP and cash or cash equivalents received or due from Tax refunds, MTR owns
no other assets and has not engaged in any business other than in connection
with its ownership of the 100,000 Class C Membership Units.
o. REPRESENTATIONS AS TO MTR INTERESTS. (i) MTR is the record
and beneficial owner of 100,000 Class C Membership Units (out of a total
11,631,431 Membership Units) of MMP; (ii) MTR holds of record and owns
beneficially this interest free and clear of any lien, security interest, pledge
or encumbrance other than those set forth on Schedule 5.4o to the MRI Agreement
hereof, all of which will be released at or before the Closing; and (iii) except
as described on Schedule 5.4o to the MRI Agreement, MTR's interest in MMP is not
subject to any option(s) warrant(s), voting trusts, outstanding proxies,
registration rights agreement(s), or other agreements regarding voting rights.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and MMP that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
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6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI
Agreement hereof, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any of the
provisions of the articles of incorporation or by-laws of Purchaser, (ii)
violate any provision of applicable law, rule or regulation, which violation
would prevent or interfere with Purchaser's ability to perform hereunder, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Purchaser is a party or to which its property is subject,
or constitute a default thereunder, except where such conflict, breach, right of
termination, acceleration or default would not have a material adverse effect on
the business or financial condition of Purchaser or prevent or materially
interfere with Purchaser's ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI
Agreement hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of Purchaser is required in
connection with the execution and delivery of this Agreement by Purchaser or the
consummation of any of the transactions contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks
to enjoin or obtain damages in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
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6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially
qualified to be the Licensee of, acquire, own and operate the Stations under the
Communications Act and the rules, regulations and policies of the FCC. Purchaser
knows of no fact that would, under existing law and the existing rules,
regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an
assignee of the FCC Licenses or as the owner and operator of the Stations, or
(b) cause the FCC to fail to approve in a timely fashion the application for the
FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver
of any FCC rule or policy is necessary to be obtained for the grant of the
applications for the assignment of the FCC Licenses to Purchaser, nor will
processing pursuant to any exception or rule or general applicability be
requested or required in connection with the consummation of the transactions
contemplated by this Agreement Purchaser will have on hand at the Closing,
adequate financial resources to consummate the transactions contemplated by this
Agreement, the Investors Agreement, the Management Agreement and the MTC
Agreement.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES
7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2
of the Indemnification Escrow Agreement, and subject to the provisions of
Section 10.3, the representations and warranties herein and the obligations of
the parties shall survive the Closing for a period ending on the earlier to
occur of (i) 15 calendar months after the Closing Date and (ii) October 31,
1999, but in no event shall the period be less than 12 calendar months after the
Closing Date; and provided further, however, that representations and warranties
relating to any claims as to which notice shall have been given pursuant to
Section 10.4 on or before such date shall survive until the final resolution of
such claims.
SECTION 8
TAX MATTERS
8.1. SECTION 338 ELECTION. Purchaser shall not make an election under
Section 338 of the Code (or any comparable provision of state, local or foreign
law) with respect to the purchase of stock in MTR as provided herein.
8.2. TAX RETURNS.
(a) Seller shall prepare or cause to be prepared and file or
cause to be
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filed, within the time (including extensions) and manner provided by law, all
Tax Returns of Seller, MTR, MMP, and the FCC Licensee Entities that are required
to be filed on or before the Closing Date. In addition, Seller shall prepare or
cause to be prepared and file or cause to be filed prior to the Closing Date all
Tax Returns for Taxable Periods of Seller, MTR, MMP, and the FCC Licensee
Entities for Taxable Periods ending on or before December 31, 1997, even if such
Tax Returns are not yet due. Each of Seller, MTR, MMP and the FCC Licensee
Entities shall pay or cause to be paid all Taxes shown as due on its Tax
Returns. Purchaser shall have an opportunity to review and consent to the filing
of all such Tax Returns, which consent shall not be unreasonably withheld or
delayed.
(b) Purchaser shall prepare or cause to be prepared and file
or cause to be filed, within the time and manner provided by law, all Tax
Returns of MTR, MMP, and the FCC Licensee Entities (i) for Taxable Periods
ending on or before the Closing Date that are due after the Closing Date, except
as described in Section 8.2a, and (ii) for Taxable Periods beginning before and
ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause
to be paid all Taxes shown as due on such Tax Returns; provided that this
sentence shall not in any way limit or affect Purchaser's rights to
indemnification under other provisions of this Agreement. Purchaser shall
provide Seller a reasonable opportunity to review and consent to the filing of
such Tax Returns, which consent shall not be unreasonably withheld or delayed.
Purchaser shall not file amended Tax Returns with respect to Taxable Periods
ending on or before the Closing Date or Straddle Periods without Seller's
consent; provided, however, that Purchaser may file amended Tax Returns for such
Taxable Periods without Seller's consent if (i) such amended Tax Returns are
filed to correct errors or omissions in previously filed Tax Returns that either
constitute or are related to a breach of any representation or warranty set
forth in Sections 5.2m, 5.3r or 5.4l (determined without regard to the
limitation on the survival of such representations and warranties set forth in
Section 7.1), or (ii) the filing of such amended Tax Return would not increase
the Taxes of Sellers or Taxes for which Seller has indemnification
responsibility hereunder by more than $25,000.
(c) All Tax Returns prepared and filed pursuant to this
Section 8.2 shall be prepared and filed in accordance with applicable law and in
a manner consistent with past practices of MTR, and MMP (to the extent
consistent with applicable law).
8.3. APPORTIONMENT. The parties agree to cause MTR, MMP, and the FCC
Licensee Entities to file all Tax Returns for any Taxable Period that would
otherwise be a Straddle Period on the basis that the relevant Taxable Period
consists of two periods, one ending as of the close of business on the Closing
Date and one beginning the day after the Closing Date, unless the relevant Tax
Authority will not accept a Tax Return filed on that basis. For purposes of
apportioning any Tax to the portion of any Straddle Period that
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ends on the Closing Date, the determination shall be made assuming that there
was a closing of the books as of the close of business on the Closing Date and
that the taxable years of MTR, MMP and the FCC Licensee Entities ended on that
date, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Straddle Period
in question.
8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a)
cooperate fully, as reasonably requested, in connection with the preparation and
filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to Seller, MTR, MMP and the FCC
Licensee Entities for all Taxable Periods ending on or before the Closing Date
and Straddle Periods; and (c) preserve information, records or documents
relating to Tax matters pertinent to MTR, MMP and the FCC Licensee Entities that
is in their possession or under their control until the expiration of any
applicable statute of limitations.
8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Assets, and Seller shall at its own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee
Entities to make a Code Section 754 Election with respect to the Taxable Period
in which the Closing occurs or later Taxable Periods. Within ninety (90) days
after the Closing, Purchaser shall cause its accountant to prepare and deliver
to Seller a certificate (the "754 Certificate") setting forth the asset-by-asset
allocations based on the fair market value of the assets determined pursuant to
Code Sections 754, 755 and 743(b) and the regulations thereunder (the "754
Allocations"). The 754 Allocations, as set forth on the 754 Certificate, shall
be final unless Sellers' Agents notify Purchaser within thirty (30) days from
their receipt of the 754 Certificate that they dispute the 754 Allocations. If
Sellers' Agents and Purchaser are unable to agree on the amount of the 754
Allocations within fifteen (15) days after Sellers' Agents notice, the parties
shall jointly appoint and engage an independent accountant or Media appraiser of
national or regional repute (the "754
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Accountant") to perform an independent evaluation of the 754 Allocations. The
findings of the 754 Accountant as to the amount of the 754 Allocations shall be
final and binding on the parties hereto.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause MTR, MMP or the FCC Licensee Entities to take any actions on the Closing
Date other than in the ordinary course of their business, except (i) such
actions as are expressly contemplated by this Agreement, including the repayment
of MMP's Funded Debt, and (ii) such actions as would not increase Taxes of
Seller or Taxes for which Seller has indemnification responsibility hereunder.
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Seller and MMP (and
MMP shall cause the FCC Licensee Entities) to agree that each will execute and
deliver to the other any and all documents, in addition to those expressly
provided for herein, that may be necessary or appropriate to implement the
provisions of this Agreement, whether before, at, or after the Closing. The
parties agree to cooperate with each other to any extent reasonably required in
order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. Seller and MMP, from and after the date of
this Agreement and until the Closing Date or termination pursuant to Section
14.1, shall give Purchaser and Purchaser's employees and counsel full and
complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of
Seller, MMP, the FCC Licensee Entities or otherwise relating to the Business,
shall provide Purchaser with all financial statements of Seller, the FCC
Licensee Entities and MMP which are currently prepared in the ordinary course of
business, which shall be prepared and delivered to Purchaser each month between
the date hereof and the Closing Date, and shall provide copies of such
information concerning Seller, MMP, the FCC Licensees and the Business as
Purchaser may reasonably request; provided, however, that the foregoing shall
not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii)
contact any employee of Seller or MMP without providing reasonable prior notice
to Seller and allowing a representative of Seller or MMP to be present. The
Company and Seller will use their commercially reasonable efforts to obtain the
consent of its auditors to permit inclusion of the Financial Statements and the
MMP Financial Statements in applicable securities filings of Sinclair Broadcast
Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right,
without causing unreasonable disruption to the Business, to have the access
provided for in the first sentence hereof to conduct an audit of each Station's
financial information, and, subject to the
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foregoing, MMP and Seller shall cooperate with Purchaser's reasonable requests
in connection with such audit, including, without limitation, giving all
reasonable consents thereto as long as any expenses thereof are borne by
Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Seller and MMP shall cause the
Business to be conducted in the ordinary course. Except as contemplated by this
Agreement or as consented to by Purchaser (which consent shall not unreasonably
be withheld), from and after the date hereof, Seller and MMP shall act and cause
the FCC Licensee Entities to act, as follows:
(a) Seller and MMP will not adopt or cause the FCC Licensee
Entities to adopt any material change in any method of accounting or accounting
practice, except as contemplated or required by GAAP;
(b) Seller shall not change or amend its charter or by-laws
and MMP shall not change or amend the operating agreement dated as of January 1,
1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee
Entities to change or amend any limited partnership agreement;
(c) Except (i) for the disposition of obsolete equipment in
the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii)
the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to
Seller or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither
Seller nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets
or properties owned, leased or used in the operation of the Business;
(d) Neither Seller nor MMP or the FCC Licensee Entities will
merge or consolidate with, agree to merge or consolidate with, or purchase or
agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity other than Seller's acquisition of MMP II
pursuant to the MMP II Distribution;
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(e) MMP will not merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or substantially all
of the assets of, or otherwise acquire, any other business entity or cause the
FCC Licensee Entities to do likewise;
(f) Neither Seller nor MMP or the FCC Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital stock
or any securities or obligations convertible or exchangeable into shares of its
capital stock or issue or grant any option, warrant or other right to purchase
any shares of its capital stock;
(g) Neither Seller nor MMP or the FCC Licensee Entities will
incur, or agree to incur, any debt for borrowed money other than draws under the
Company's or MMP's, as the case may be, existing revolving credit agreements;
(h) Neither Seller nor MMP or the FCC Licensee Entities will
change its historical practices concerning the payment of accounts payable; and
(i) Neither Seller nor MMP or the FCC Licensee Entities will
declare, issue, or otherwise approve the payment of dividends or distributions
of any kind in respect of its stock or redeem, purchase or otherwise acquire any
of its stock.
(j) Seller and MMP shall maintain the existing insurance
coverages on the assets of the Stations or other policies providing
substantially similar coverages.
(k) Seller and MMP will not permit any increases in the
compensation of any of the employees of Seller or MMP except as required by law
or existing contract or agreement or enter into or amend any Company Plan, MMP
Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as
contemplated by MMP's operating budgets and in accordance with the past
practice.
(l) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into or renew any contract or commitment relating to the Stations or the
Assets of MMP, or incur any obligation that will be binding on Purchaser after
Closing, except in the ordinary course of business, and MMP shall not enter
into, modify, amend, renew, or change any contract with respect to programming
for the Stations for any period after the Closing Date without the prior
approval of Purchaser.
(m) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into any transactions with any Affiliate of Seller that will be binding
upon Purchaser, or the Stations following the Closing Date.
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(n) Seller and MMP shall use all commercially reasonable
efforts to maintain the assets of the Stations or replacements thereof in good
operating condition and adequate repair, normal wear and tear excepted.
(o) Seller and MMP shall, in connection with the operation of
the Stations, make expenditures materially consistent with the estimates of
expenses set forth in MMP's operating budgets of the Stations and, including,
without limitation, expenditures in respect of promotional, programming and
engineering activities for the Station (and any employee expenditures related to
such activities) for any period covered by the current operating budgets of the
Stations.
(p) Neither Seller nor MMP shall make or allow MTR or the FCC
Licensee Entities to make or change any material Tax election, amend any Tax
Return, or take or omit to take any other action not in the ordinary course of
business and consistent with past practice that would have the effect of
increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP
for any Post-Closing Tax Period.
(q) Except as provided by Section 2.2 hereof and the MMP II
Distribution, MMP and the FCC Licensee Entities shall not make distributions
other than in the ordinary course of business and consistent with past practice,
and shall not make non-pro rata distributions.
(r) MMP shall not enter into or renew any Tradeout Agreement
that would be binding on Purchaser after the Closing Date, except in the
ordinary course of business, as contemplated by MMP's operating budgets and in
accordance with past practice.
(s) Except as provided in Section 9.3(r) above, MMP shall not
enter into or renew any Time Sales Agreement except in the ordinary course of
business and which are for cash at prevailing rates for a term not exceeding
twelve (12) months.
(t) MMP shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior approval of Purchaser other than as
contemplated by this Agreement, the Management Agreement, the MRI Agreement, and
the Investor Agreement.
(u) Neither Seller nor MMP shall enter into or become subject
to any employment, labor, union or professional service contract not terminable
at will, or any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plans, or increase the
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compensation payable or to become payable to any employee, except in the
ordinary course of business, other than any value appreciation rights agreements
with current employees of MMP, all of which liabilities shall be paid by MMP at
or prior to Closing.
(v) Neither Seller nor MMP or the FCC Licensee Entities shall
take any action which may jeopardize the validity or enforceability of or rights
under the FCC Licenses.
(w) Before the Closing, MMP shall pay all one-time fees under
Section 3.1 of the Time Brokerage Agreements (LMAs") aggregating $1,430,000.00
and MMP shall amend LMAs with the LMA Stations to reflect the payment by MMP
before the Closing of the fees set forth in Section 3.1 of the LMAs and the
reduction of continuing fees as a result of such payments.
9.4. H-S-R ACT. Each of Purchaser and Seller shall, within ten Business
Days following the date hereof, file duly completed and executed Pre-Merger
Notification and Report Forms as required under the H-S-R Act and shall
otherwise use their respective best efforts to comply promptly with any requests
made by the Federal Trade Commission ("FTC") or the Department of Justice
("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder.
Seller shall cause MMP, to the extent required by law, to join in or provide
information in connection with such filing, including, but not limited to, any
response to any request by the FTC or DOJ. All filing fees and other similar
payments in connection with the H-S-R Act shall be split equally by Purchaser
and the Seller.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP and Seller shall, within seven
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC Application and
to secure such consents or approvals as expeditiously as practicable; and
provided further that MMP shall cause the FCC Licensee Entities, to the extent
deemed reasonably necessary by counsel to Purchaser to join in and provide
information in connection with the FCC Application and comply with the
immediately preceding provisions and 9.5(b) below. If the Closing shall not have
occurred for any reason within the initial effective periods of the granting of
FCC approval of the FCC Application, and no party shall have terminated this
Agreement under Section 14, the parties shall jointly request and use their
respective best efforts to obtain one or more extensions of the effective
periods of such grants. No party shall knowingly take, or fail to take, any
action the intent or reasonably anticipated consequence of which would be to
cause the FCC not to grant approval of the FCC Application.
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(b) Seller and MMP, as the case may be, shall publish (and
cause the FCC Licensee Entities to publish) the notices required by the FCC
Rules and Regulations relative to the filing of the FCC Application. Copies of
all applications, documents and papers filed after the date hereof and prior to
the Closing, or filed after the Closing with respect to the transaction under
this Agreement, by Purchaser, Seller, MMP, or the FCC Licensee Entities with the
FCC shall be mailed to the other simultaneously with the filing of the same with
the FCC. Each party shall bear its own costs and expenses (including the fees
and disbursements of its counsel) in connection with the preparation of the
portion of the application to be prepared by it and in connection with the
processing of that application. All filing and grant fees, if any, paid to the
FCC, shall be split equally by Purchaser and the Seller. None of the information
contained in any filing made by Purchaser or Seller with the FCC with respect to
the transaction contemplated by this Agreement shall contain any untrue
statement of a material fact.
(c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Seller
and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for
Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee,
within five (5) Business Days following the date hereof, to file with the FCC
the MMP II FCC Applications and take all reasonable steps necessary to expedite
the processing of the MMP II FCC Applications to secure the Consent of the FCC
to the transfer of control of the FCC Licenses from MMP to MTC.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
Seller (a) to have reasonable access to the books and records of Purchaser and
those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
records for a period of four (4) years following the Closing.
9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or
contemplating, and has not made or taken, any decisions or actions concerning
the employees of the Stations after the Closing Date that would require the
service of notice under the Worker Adjustment and Retraining Notification Act of
1988, as amended, (the so-called WARN Act) or any other similar law.
9.8. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment,
confiscation or condemnation of any of the assets of the Stations prior to the
completion of the Closing
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that interferes with the normal operation of the Stations, MMP shall notify
Purchaser of same in writing immediately, specifying with particularity the
loss, damage or impairment, confiscation or condemnation incurred, the cause
thereof, if known or reasonably ascertainable, and the insurance coverage. MMP
shall apply the proceeds of any insurance policy, judgment or award with respect
thereto and take such other commercially reasonable actions, as determined in
its sole discretion, as are necessary to repair, replace or restore such assets
of any Station so damaged to their prior condition as soon as possible after
such loss, damages or impairment, confiscation or condemnation.
(b) If before the Closing Date, due to damage or destruction
of the assets of any Station (other than WMMP-TV in the Charleston, South
Carolina market), the regular broadcast transmission of one (1) or more
Television Stations or two (2) or more Radio Stations in the normal and usual
manner is interrupted for a period of twelve (12) continuous hours or more, MMP
shall give prompt written notice thereof to Purchaser. If on the Closing Date,
due to damages or destruction of the assets of one (1) or more Television
Stations (other than WMMP-TV in the Charleston, South Carolina market) or two
(2) or more Radio Stations the regular broadcast transmission of one (1) or more
Television Stations (other than WMMP-TV in the Charleston, South Carolina
market) or two (2) or more Radio Stations in the normal and usual manner is
interrupted such that the regular broadcast signal of any such Station
(including its effective radiated power) is diminished in any material respect,
then (i) MMP shall immediately give written notice thereof to Purchaser; and
(ii) Purchaser shall have the right, by giving prompt written notice to the
other, to postpone the Closing Date for a period of up to sixty (60) days
provided, however, that the Closing shall occur no later than ten (10) Business
Days after regular broadcast transmission has been restored.
(c) In the event any one (1) or more Television Stations
(other than WMMP-TV in Charleston, South Carolina market) or two (2) or more
Radio Stations normal and usual transmission has not been resumed by the Closing
Date as postponed pursuant to section (b) above, Purchaser may, pursuant to
Section 14.1(e), terminate this Agreement by written notice to the Sellers'
Agent. Notwithstanding the foregoing, however, Purchaser may, at its option,
proceed to close this Agreement and complete the restoration and replacement of
any damaged assets of the Station in question after the Closing Date, MMP shall
deliver or assign to Purchaser all insurance or other proceeds received in
connection therewith to the extent such proceeds are received by or payable to
the Company or MMP and have not therefore been used in or committed to the
restoration or replacement of the assets.
(d) If before the Closing Date, due to damage or destruction
of the assets the regular broadcast transmission of any Station (other than
WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner
is interrupted for a
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period of seven (7) continuous days or more, MMP shall give prompt written
notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the
Interruption Notice, Purchaser shall have the right, in its sole and absolute
discretion, by giving prompt written notice thereof to Seller and MMP within two
(2) Business Days of the date of the Interruption Notice, to terminate this
Agreement with the effect specified in Section 14.2(b) hereof.
(e) Until the Closing Date, MMP will maintain and cause MMP to
maintain the existing insurance coverages listed on Schedule 5.3l to the MRI
Agreement on the Stations and each Station's assets.
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not relying on the specification of any dollar amount in any representation
or warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
9.10. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) At the Closing, Sellers' Agents shall designate Purchaser
as its agent solely for the purposes of collecting the MMP Accounts Receivable.
Purchaser will collect the MMP Accounts Receivable during the period beginning
on the Closing Date and ending on the 180th day after the Closing Date (the
"Collection Period") with the same care and diligence Purchaser uses with
respect to its own accounts receivable and hold all such MMP Accounts Receivable
in trust for Sellers until remitted by Purchaser to the Indemnification Escrow
Agent or the Collections Account pursuant hereto. Purchaser shall not make any
referral or compromise of any of the MMP Accounts Receivable to a collection
agency or attorney for collection and shall not settle or adjust the amount of
any of the MMP Accounts Receivable without the written approval of Sellers'
Agent. If, during the Collection Period, Purchaser receives monies from an
account debtor of Purchaser that is also an account debtor of MMP with respect
to any MMP Accounts Receivable, Purchaser shall credit the sums received to the
oldest account due, except where an account is disputed by the account debtor as
properly due, and the account debtor has so notified Purchaser in writing, in
which case, payments received shall be applied in accordance with the account
debtor's instructions; provided that upon resolution of such dispute if any
amounts in dispute are received by Purchaser, Purchaser shall remit such amounts
to the Indemnification Escrow Agent in accordance with the Indemnification
Escrow Agreement up to the amount of the Additional Indemnification Amount
Deposit and, thereafter, to the Collections Account.
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(b) On the ninetieth (90th) day after the Closing Date and on
or before the fifth Business Day after the end of each full fifteen (15) day
period thereafter during the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of the amounts collected by Purchaser before the end of
such period with respect to the Accounts Receivable. On or before the fifth
Business Day after the end of the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of all of the Accounts Receivable that remain
uncollected.
(c) Sellers' Agents shall establish and maintain during the
Collection Period (and for as long after the Collection Period as Sellers deem
appropriate) a bank account (the "Collections Account") at a commercial bank in
Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for
the deposit of collections of the MMP Accounts Receivable in accordance with
this Section 9.10. Sellers' Agents shall have sole disbursement authority over
the Collections Account. On the ninetieth (90th) day after the Closing Date (or
if such day is not a Business Day, on the next succeeding Business Day),
Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to
the Indemnification Escrow Agreement all amounts collected with respect to any
MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the
Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii)
deposit in the Collections Account any other MMP Accounts Receivable collected
by Purchaser as of such date. On and after the ninetieth (90th) day after the
Closing Date until the expiration of the Collections Period, within five (5)
Business Days of the end of each full fifteen (15) day period, Purchaser shall
deposit all amounts collected with respect to the Accounts Receivable with the
Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement
until the total of all amounts deposited pursuant to the previous sentence and
this sentence equals the Additional Indemnification Amount Deposit and,
thereafter, in the Collections Account. Sellers' Agents shall be entitled to
dispose of all amounts deposited in the Collections Account from time to time as
it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow
Agent shall have no rights therein; provided, however, that Purchasers shall
have no liability whatsoever to Sellers with respect to Sellers' Agents
disposition of any amounts disbursed by Sellers' Agent from the Collections
Account.
(d) After the expiration of the Collection Period, Purchaser
shall have no further obligation hereunder other than (1) so long as Sellers'
Agents continue to maintain the Collections Account, to deposit in such account
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives.
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(e) Any MMP Accounts Receivable remaining uncollected 180 days
after the Closing Date shall be transferred to Sellers' Agents, together with
all files concerning the collection or attempt to collect such MMP Accounts
Receivable hereunder, and Purchaser shall thereafter have no further
responsibility with respect thereto.
(f) Purchaser shall have no right to setoff any amounts
collected for MMP Accounts Receivable against any amounts owed to Purchaser by
Seller; provided that this Section 9.10 shall not be deemed to limit the right
of Purchaser to make claims against the Indemnification Amount in accordance
with, and subject to, the terms and conditions of this Agreement and the
Indemnification Escrow Agreement.
9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this
Agreement, prior to the Closing, without the prior written consent of Sellers'
Agents, neither Purchaser nor any of its subsidiaries or any party acting
directly or indirectly by or on behalf of any of them shall acquire or enter
into any agreement to acquire a television station or radio station in any
markets in which any Television Station or Radio Station currently broadcasts,
if such acquisition would materially delay the granting of the FCC Application;
provided, however, that nothing in this Section 9.11 shall be construed to
preclude Purchaser proceeding to closing with respect to any transaction pending
as of the date hereof.
9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Seller and MMP
shall comply in all respects with their obligations under Section 2.2(b) of this
Agreement.
9.13. RESERVED
9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP
shall make all payments, discharge all obligations and terminate any and all
Value Appreciation Rights Agreements ("VARS"), and the Management Incentive
Agreements ("Incentive Agreements"), including, but not limited to, the VARS and
Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement.
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SECTION 10
INDEMNIFICATION
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10.1. INDEMNIFICATION OF PURCHASER BY SELLER.
(a) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, however incurred, which arise out of or result from any breach by Seller
of any representation or warranty of Seller in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, howsoever incurred, which arise out of or result from:
(i) any breach of any representation or warranty
of Seller set forth in Sections 5.2, 5.3 or 5.4 of this Agreement; provided,
however, for purposes of this Section 10.1(b)(i), the representation set forth
in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP
Material Adverse Effect;
(ii) the material failure by Seller to perform
any covenant of Seller contained herein;
(iii) breaches by Seller, MMP, MTR or any of the
FCC License Entities of other agreements and certificates specifically
contemplated hereby;
(iv) any and all Taxes of MTR, MMP and the FCC
Licensee Entities (including ay liability of MTR, MMP or the FCC Licensee
Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period
except to the extent that such Taxes are specifically identified in the Closing
Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii);
(v) RESERVED
(vi) any liabilities under the Shareholder
Settlement Agreements; or
(vii) the Closing Date Liabilities, to the extent
the Closing Date Liabilties exceed (A) the aggregate cash equivalents and other
cash items retained as
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provided by Section 2.2(b) and (B) payments made from the Indemnification Escrow
as provided by Section 2.2(b)(iii).
(c) For purposes of Section 10.1(b)(iv), Taxes of MTR for
Pre-Closing Tax Periods shall be deemed to include Taxes payable by MTR,
Purchaser, or Purchaser's Affiliates that are attributable to items of income,
gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing
through the Closing Date, determined on the basis of a closing of the books of
MMP and the FCC Licensee Entities as of that date, notwithstanding that such
items may be reported in Taxable Periods ending after the Closing Date.
10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3
hereof after the Closing, Purchaser shall indemnify and hold Seller harmless
from and against any and all Losses, howsoever incurred, which arises out of or
results from:
(a) any breach by Purchaser of any representation or warranty
of Purchaser set forth in Section 6 of this Agreement; or
(b) the material failure by Purchaser to perform any covenant
of Purchaser contained herein.
(c) any and all Taxes of MTR, MMP and the FCC Licensee
Entities (including any liability of MTR, MMP or the FCC Licensee Entities for
Taxes of any other persons) for any Post-Closing Tax Period except to the extent
that (i) such Taxes should have been but were not specifically identified in the
Closing Date Liabilities or are described in Section 10.1(c), or (ii) such Taxes
arise out of, result from or are attributable to a breach of any representation,
warranty or covenant of Sellers set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Seller's obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Purchaser agrees that the payment of any claim
(whether such claim is framed in tort, contract, or otherwise) made by Purchaser
for indemnification hereunder subsequent to the Closing Date, for whatever
reason, shall be limited to, and shall only be made from, the Indemnification
Amount in accordance with the Indemnification Escrow Agreement and, except for
claims against the Indemnification Amount, Purchaser waives and releases, and
shall have no recourse against, Seller as a result of the breach of any
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representation, warranty, covenant or agreement of Seller contained herein, or
otherwise arising out of or in connection with the transactions contemplated
hereby or the operation of the Stations, and such indemnification shall be the
sole and exclusive remedy for Purchaser with respect to any such claim for
indemnification after the Closing Date; provided, however, that nothing herein
shall be deemed to limit any rights or remedies that Purchaser may have for
Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with
the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Purchaser that, other
than with respect to Seller (but not including any partner, director, officer,
employee, agent or Affiliate Seller (including any shareholder, director,
officer, employee, agent or Affiliate of the Seller)) as expressly provided for
in Section 10.1, no partner, director, officer, employee, agent or Affiliate of
Seller (including any shareholder, director, officer, employee, agent or
Affiliate of Seller) shall have (i) any personal liability to Purchaser as a
result of the breach of any representation, warranty, covenant or agreement of
Sellers contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations,
or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's
claims pursuant to Section 10.1 and Purchaser waives and releases and shall have
no recourse against any of such parties described in this Section 10.3(c) as a
result of the breach of any representation, warranty, covenant or agreement of
Seller contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations;
provided, however, that nothing herein shall be deemed to limit any rights or
remedies that Purchaser may have for Seller's fraud.
(c) Notwithstanding any other provision of this Agreement to
the contrary, Seller shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement, the MRI Agreement, the Investors Agreement and the
Management Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Basket Amount"), and then only to the extent of the excess of Losses over
the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided,
however, that this paragraph shall not apply to (i) payments pursuant to Section
2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi),
and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii)
relates to an item disclosed on a Schedule and/or set forth on the Estimate
Certificate or the Accountant's Certificate), or (iii) indemnification pursuant
to Sections 10.1(b)(i) for breaches of the representations and warranties set
forth in Sections 5.2m, 5.3r, and 5.41.
(d) In determining the amount of any Tax or other Loss for
which
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indemnification is provided under this Agreement, such Loss shall be (i) net of
any insurance recovery made by the indemnified party, (ii) reduced to take into
account any net Tax benefit realized by the indemnified party arising from the
deductibility of such Tax or Loss, and (iii) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Losses, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless a final determination with respect to the indemnified party or
any of its affiliates causes any such payment not to be treated as an adjustment
to the Purchase Price.
(e) No claim for indemnification for Losses shall be made
after expiration of the applicable period set forth in Section 7.1 hereof.
(f) Anything to the contrary in this Section 10.3
notwithstanding, the terms, conditions and limitations set forth in this Section
10.3 do not apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the Sellers'
Agent notice of any matter which an indemnified party has determined has given
or could give rise to a right of indemnification under this Agreement, stating
the nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice promptly thereafter of all developments
coming to Sellers' Agent's attention materially
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affecting any matter relating to any indemnification claims.
(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly
after receipt by an indemnified party of notice of the commencement of any
action or the presentation or other assertion of any claim which could result in
any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such
indemnified party shall give prompt notice thereof to Sellers' Agent and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume
the defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the indemnified party from all liability arising out
of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects
to assume the defense of any action or claim, the indemnifying part(ies) shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest
extent possible in connection with any claim for which indemnification is or may
be sought under this Agreement, including, without limitation, making available
all witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect
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the indemnification provided hereunder except to the extent that the failure to
give such notice materially prejudices the indemnifying party.
(b) Seller, acting through Sellers' Agents, shall have the
right, at its own expense, to control and make all decisions with respect to any
Tax Proceeding relating solely to Taxes of Seller and MTR for Taxable Periods
ending on or before the Closing Date; provided, that Purchaser and counsel of
its own choosing shall have the right, at Purchaser's own expense, to
participate fully in all aspects of the prosecution or defense of such Tax
Proceeding; and provided further that Seller shall not settle any such Tax
Proceeding without the prior written consent of Purchaser if such settlements
could increase the past, present or future Tax liability of Purchaser or any of
its Affiliates, or any Tax Liability of MTR for any Post-Closing Tax Period by
an amount greater than $25,000.
(c) Seller, acting through Sellers' Agents, shall have the
right, at its own expense, to jointly control and participate with Purchaser in
all Tax Proceedings relating to Taxes of MTR for a Straddle Period. If Seller
exercises such right, neither party shall settle any such Tax Proceeding without
the prior written consent of the other.
(d) If Seller, acting through Sellers' Agents, does not
exercise its right to assume control of or participate in any Tax Proceeding as
provided under this Section 10.5, Purchaser may, without waiving any rights to
indemnification hereunder, defend or settle the same in such manner as it may
deem appropriate in its sole and absolute discretion.
(e) Purchaser shall control all Tax Proceedings relating to
Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax
Proceedings relating solely to Taxable Periods of MMP ending on or before the
Closing Date and Straddle Periods of MMP, Purchaser shall keep Seller's Agents
fully informed as to the status of any such Tax Proceeding and shall not settle
such a Tax Proceeding without the prior written consent of Seller's Agents,
which consent shall not be unreasonably withheld; provided that Seller's Agents'
consent to a settlement shall only be required if such settlements could
increase Sellers' Taxes or Taxes for which Seller has indemnification
responsibility hereunder by an amount greater than $25,000.
(f) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
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SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
- -----------------------------------------------------------
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Seller shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Seller contained herein shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate of one of Sellers' Agents, dated as
of the Closing Date and signed by Sellers' Agent, certifying as to the
fulfillment of the condition set forth in this Section 11.1(a) ("Sellers'
Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Assets or the assets of the Station.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) All consents identified on Schedules 5.2h hereto and
Schedules 5.3e and 5.3m to the MRI Agreement as required consents shall have
been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses (other than the MMP II Licenses) shall have been
obtained. All the material conditions contained in the Final Order required to
be satisfied on or prior to the Closing Date shall have been duly satisfied and
performed. Notwithstanding the foregoing, other than conditions relating the
broadcast industry generally, if the consent of the FCC is conditional or
qualified in any manner that has a material adverse effect on Purchaser or
requires Purchaser or any of its subsidiaries to divest any television or radio
station owned, operated or programmed by Purchaser or any of its subsidiaries.
Purchaser may, nevertheless, in its sole discretion, require the consummation of
the transactions contemplated by this Agreement, but shall not be required to do
so.
(f) Seller shall have delivered to Purchaser at the Closing
each document required by Section 12.1 hereof.
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(g) Since the date of this Agreement through the Closing Date,
there shall not have been either a Material Adverse Effect with respect to the
Assets or a MMP Material Adverse Effect with respect to the business,
operations, properties, assets, or condition of MMP, and no event shall have
occurred or circumstance exist that reasonably could be expected to result in
either a Material Adverse Effect or an MMP Material Adverse Effect.
(h) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the
distribution of MMP II to Seller shall have occurred pursuant to the Assignment
and Assumption Agreement and the Distribution Agreement substantially in the
form attached hereto as Exhibit C, and MMP and MMP II shall have entered into
one or more Time Brokerage Agreements generally in the form (subject to such
revisions, additions, and deletions as determined by counsel to MMP II and
Purchaser prior to the Closing) attached hereto as Exhibit D.
(i) The closings under the Investors Agreement, the MRI
Agreement and the Management Agreement shall have occurred or will occur
simultaneously with the Closing.
(j) Seller or MMP, as the case may be, shall have complied
with its obligations under Section 9.12.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation
of Seller to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects
with its agreements and covenants contained herein to be performed at or prior
to the Closing, and the representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except that representations and warranties that were made as of a specified date
shall continue on the Closing Date to have been true as of the specified date,
and Seller shall have received a certificate of Purchaser, dated as of the
Closing Date and signed by an officer of Purchaser, certifying as to the
fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's
Bring-Down Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Seller
from consummating the transactions contemplated hereby.
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(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Seller at the Closing
the Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the Investors Agreement, the MRI
Agreement and the Management Agreement shall have occurred or occur
simultaneously with the Closing.
SECTION 12
DELIVERIES AT THE CLOSING
12.1. DELIVERIES BY SELLERS. At the Closing, Seller will deliver or
cause to be delivered at the Closing to Purchaser:
(a) Seller's Bring-Down Certificate;
(b) a legal opinion of Clark & Stant, P.C., counsel to
Seller and MMP substantially in the form attached as Exhibit E hereto;
(c) a legal opinion of counsel to the FCC Licensee
Entities in the form attached hereto as Exhibit F;
(d) a bill of sale, assignment and other transfer
documents, dated as of the Closing Date and executed by the Seller, transferring
the Assets to Purchaser;
(e) [RESERVED];
(f) a certificate as to the existence of Seller issued by
the Secretary of the State Corporation Commission of the Commonwealth of
Virginia dated not more than five (5) Business Days before the Closing Date;
(g) a certificate as to the existence and good standing of
MMP issued by
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the Secretary of the State Corporation Commission of the Commonwealth of
Virginia not more than five (5) Business Days before the Closing Date and
certificates issued by the appropriate governmental authorities in each
jurisdiction in which MMP is qualified to do business and a certificate as to
the existence for each of the FCC Licensee Entities of the Secretary of the
State Corporation Commission of the Commonwealth of Virginia dated not more than
five (5) Business Days before the Closing Date;
(h) receipt for Purchase Price;
(i) [RESERVED];
(j) the certificate(s) required by Section 8.6;
(k) a copy of any instrument evidencing any consents
received;
(l) the Indemnification Escrow Agreement duly executed by
Seller and Sellers' Agent;
(m) a copy of any instrument evidencing any consent
received, including, but not limited to, estoppel certificates from MMP's
landlords with respect to the Real Property;
(n) RESERVED;
(o) the Estimate Certificate;
(p) RESERVED
(q) the amendments to the LMAs in a form reasonably
satisfactory to Purchaser duly executed by the necessa ry parties thereto; and
(r) evidence reasonably satisfactory to Purchaser that the
Limited Partnership Agreements of the FCC Licensee Entities have been amended,
and that sufficient actions have been taken by or with respect to MMP, to
require allocation of items of income, gain, loss, deduction and credit with
respect to transferred interests in the FCC Licensee Entities and MMP based on
the interim closing of the books method authorized by Code Section 706 and the
regulations promulgated thereunder;
(s) release and indemnity agreements properly executed by
Seller and the shareholders of Seller in a form reasonably satisfactory to
Purchaser releasing MMP from all liabilities of Taxes of such persons under
certain Assignment and Assumption
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Agreements dated as of January 1, 1996, and indemnifying and holding harmless
MMP from and against all such liabilities; and
(t) such other documents as Purchaser shall reasonably
request.
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Seller, the Disbursing Agent or the Indemnification
Escrow Agent, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit G hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement duly executed by
Purchaser;
(e) a certificate as to the existence and good standing of
the Purchaser issued by the Maryland Department of Assessments and Taxation of
the State of Maryland dated as of the Closing Date;
(f) one or more fully executed Time Brokerage Agreements
as negotiated pursuant to Section 11.1(h); and
(g) such other documents as Seller shall reasonably
request.
SECTION 13
EXPENSES
Except as provided in Sections 9.4 and 9.5, each party will pay its own
fees, expenses, and disbursements and those of its counsel in connection with
the subject matter of this Agreement (including the negotiations with respect
hereto and the preparation of any documents) and all other costs and expenses
incurred by it in the performance and compliance with all conditions and
obligations to be performed by it pursuant to this Agreement or as contemplated
hereby.
SECTION 14
TERMINATION
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14.1 TERMINATION. This Agreement may be terminated:
(a) At any time by mutual written consent of Purchaser and
Seller;
(b) By either Purchaser or Seller, if the terminating party is
not in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before October 31,
1998, except where the Closing has been postponed pursuant to the provisions of
Section 9.8, in which case the applicable date shall be upon the expiration of
the period referred to in Section 9.8(b) (the "Termination Date");
(c) by Seller, if Seller's not in default or breach in any
respect of their obligations under this Agreement, if all of the conditions in
Section 11.2 have not been satisfied or waived by the date scheduled for the
Closing (as such date may be postponed pursuant to Section 9.8);
(d) by Purchaser, if Purchaser is not in default or breach in
any material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing (as such date may be postponed pursuant to
Section 9.8);
(e) by Purchaser, pursuant to Section 9.8.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Seller pursuant to Sections 9.8 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein, all
filings, applications and other submissions relating to the transactions
contemplated hereby as to which termination has occurred shall, to the extent
practicable, be withdrawn from the agency or other Person to which such filing
is made.
(b) If this Agreement is terminated pursuant to Section
14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be
returned to Purchaser and Purchaser shall have the right to pursue all remedies
available hereunder at law or in equity, including, without limitation, the
right to seek specific performance and/or actual monetary
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damages, but excluding consequential and incidental damages. In recognition of
the unique character of the property to be sold hereunder, and the damages which
Purchaser will suffer in the event of a termination pursuant to the foregoing
Sections of this Agreement, Seller hereby waives any defense that Purchaser has
an adequate remedy at law for the breach of this Agreement by Seller.
(c) If this Agreement is terminated pursuant to Section
14.1(c) and Purchaser shall be in breach in any material respect of its
representations, warranties, covenants, agreements, or obligations set forth in
this Agreement, then and in that event, Seller shall have the right to retain
the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated
damages, and as the sole and exclusive remedy of Seller as a consequence of
Purchaser's default (which aggregate amount the parties agree is a reasonable
estimate of the damages that will be suffered by Seller as a result of the
default by Purchaser and does not constitute a penalty), the parties hereby
acknowledging the inconvenience and nonfeasability of otherwise obtaining
inadequate remedy.
(d) If this Agreement is terminated pursuant to Sections
14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section
3.1(1) shall be returned to Purchaser.
(e) A notice of termination made under any provision of
Section 14.1 of this Agreement shall be deemed to be a notice of termination
under the termination provisions of the Investor Agreement, the Management
Agreement and the MRI Agreement.
(f) In the event of a default by either party that results in
a lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
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SECTION 15
NOTICES
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as follows:
To Purchaser: SINCLAIR COMMUNICATIONS, INC.
------------ 2000 W. 41st Street
Baltimore, Maryland 21211
Attention: David D. Smith
Telecopy: (410) 467-5043
Telephone: (410) 662-1008
with copies Sinclair Communications, Inc.
(which shall not constitute 2000 W. 41st Street
notice) to: Baltimore, Maryland 21211
Attention: General Counsel
Telecopy: (410) 662-4707
Telephone: (410) 662-1422
and
Thomas & Libowitz, P.A.
Suite 1100
100 Light Street
Baltimore, Maryland 21202
Attention: Steven A. Thomas
Telecopy: (410) 752-2046
Telephone: (410) 752-2468
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To Sellers' Agents: Anthony R. Ignaczak
------------------ Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Telecopy: (804) 979-1145
Telephone: (804) 979-9227
Allen B. Rider, III
Colonnade Capital, L.L.C.
13th Floor
901 East Byrd
Richmond, Virginia 23219
Telecopy: (804) 782-6606
Telephone: (804) 782-3512
Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B.
Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the
"Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall
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be unanimous. In the event of the death, incapacity or liquidation of any of
Sellers' Agents, such person or entity shall not be replaced, and the remaining
Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the
Sellers' Agents from and against and in respect of any and all liabilities,
damages, claims, costs, and expenses, including, but not limited to attorneys'
fees, arising out of or due to any action by them as the Sellers' Agents and any
and all actions, proceedings, demands, assessments, or judgments, costs, and
expenses incidental thereto, except to the extent that the same result from bad
faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be
entitled to rely exclusively upon any communications given by the Sellers'
Agents on behalf of Seller, and shall not be liable for any action taken or not
taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to
disregard any notices or communications given or made by Seller unless given or
made through the Sellers' Agents.
SECTION 17
MISCELLANEOUS
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to or referenced in this Agreement constitute an integral part of this
Agreement as if fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the
Management Agreement, the MRI Agreement and the FCC Licensee Transfer Agreement,
the Annexes, Schedules and Exhibits and the documents to be delivered hereunder
and thereunder constitute the entire understanding and agreement between the
parties hereto concerning the subject matter hereof. All negotiations and
writings between the parties hereto are merged into this Agreement, the
Investors Agreement, the Management Agreement, the MRI Agreement, the FCC
Licensee Transfer Agreement, and there are no representations, warranties,
covenants, understandings, or agreements, oral or otherwise, in
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relation thereto between the parties other than those incorporated herein or to
be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended
except in writing signed by each of the Purchaser and Seller's Agent.
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its obligations hereunder; and provided further that any change of control in
respect of Purchaser's parent, SBGI, shall not require the consent of Seller. In
the event of such permitted assignment or other transfer, all of the rights,
obligations, liabilities, and other terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against, the
respective successors and assigns of the parties hereto, whether so expressed or
not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
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17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if required by applicable law or otherwise as a result of its, or
its Affiliate's, being a public company, provided that prior notice of such
disclosure is given to the other party hereto.
17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will
have no adequate remedy at law if Seller fails to perform its obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however, that all
transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Seller. Purchaser hereby waives compliance with the provisions of any applicable
bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Seller acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits hereto are
the result of the efforts of all parties to this Agreement and every covenant,
term, and provision of this Agreement shall be construed according to its fair
meaning and shall not be construed against any particular party as the drafter
of such covenant, term, and/or provision. The
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Purchaser and Seller agree that this Agreement is to be construed in a manner
consistent with the terms of the Investors Agreement, the Management Agreement
and the MRI Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
MAX TELEVISION COMPANY,
a Virginia corporation
By _________________________________
its _____________________________
SINCLAIR COMMUNICATIONS, INC.,
a Maryland corporation
By _________________________________
its _____________________________
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ANNEX 1
DEFINITIONS
As used in the attached Asset Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Allocable Portion" shall mean 0% in the case of each of Investors and
MRI, 96.470% in the case of Seller and 3.530% in the case of Management.
"Assets" has the meaning set forth in the Recitals.
"Basket Amount" has the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
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"Broadcast Time Sales Agreement" shall mean all contracts and
agreements pursuant to which MMP has sold commercial air time on the Stations
for cash.
"Business" means the business of owning and operating the Stations.
"Business Day" means any day on which banks in New York City are open
for business.
"Cash Price" shall mean the excess of $252 million over the Funded Debt
immediately prior to the Closing.
"CERCLA" has the meaning set forth in Section 5.3q of the Agreement.
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Liabilities" has the meaning set forth in Section 2.2(b)
of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Estimated Accounts Receivable" has the meaning of an
amount equal to the Seller's good faith estimate of Accounts Receivable of MMP
as of the Closing Date, which have been outstanding for no more than 120 days,
as set forth in the Certificate of Seller's Agent delivered to Purchaser five
(5) days before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" refers to Seller in this Agreement.
"Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
or may have any liability (whether actual, contingent, with respect to any of
its assets or otherwise) as of the Closing Date, in each case with respect to
any present or former directors, employees, or agents of the Company.
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"Company Plan" shall mean, as of the Closing Date, any Benefit Plan for
which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments, in each case with respect to any present or former
employees of the Company. Company Plan shall include any Qualified Plan
terminated within the preceding six years.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock and the Station assets to Purchaser to maintain the validity and
effectiveness (any default or violation of the terms thereof) of any Material
Contract and any licenses (including, without limitation, the FCC Licenses) to
be transferred to Purchaser, or otherwise to consummate the transactions
contemplated by this Agreement.
"Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of
the Agreement.
"Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and
Stephen W. Burke.
"Disbursement Agreement" means that certain Disbursement Agreement
dated not later thirty (30) days prior to the Closing, among the Disbursing
Agent and the Seller.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" shall mean any Person that together with the Company
or MMP, as applicable, would be or was at any time treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which the Company or MMP, as applicable, is or has been a general
partner.
"Estimate Certificate" shall have the meaning set forth in Section
2.2(b)(i).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Application" means the applications requesting approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Licensee Entities" shall have the meaning set forth in the
Recitals.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3h
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"Financial Statements" means the unaudited balance sheet of Seller as
of December 31, 1996 and the unaudited income statement for the year then ended.
"Funded Debt" means indebtedness of MMP for borrowed money, including
any and all fees, costs or other payments associated with its payoff or
retirement other than (i) any indebtedness due after the Closing Date with
respect to program contract liabilities, and (ii) Closing Date Liabilities.
"GAAP" means generally accepted accounting principles.
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"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.
"H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Deposit" means $12,750,000 less an amount equal to the lesser
of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts
Receivable.
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service mark registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Incentive Agreements" has the meaning set forth in Section 9.14.
"Indemnification Amount" means $12,750,000.00 deposited or collected
pursuant to the Indemnification Escrow Agreement.
"Indemnification Escrow Agreement" has the meaning set forth in
Section 3.1 of the Agreement.
"Indemnification Escrow" has the meaning set forth in Section 3.1 of
the Agreement.
"Investors Agreement" has the meaning set forth in the Recitals.
"Investors" has the meaning set forth in the Recitals.
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"Knowledge or knowledge" shall mean with respect to Seller, MMP, MTR
and the FCC Licensee Entities the actual knowledge (without any requirement of
inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr.,
John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J.
Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the
managers and officers of MMP, and the officers and directors of Seller.
"LMA Stations" shall have the meaning set forth in the Recitals.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Accounts Receivable" has the meaning given in Section 5.3s.
"MMP's Benefit Arrangements" means any Benefit arrangement sponsored or
maintained by MMP or by the FCC Licensee Entities or with respect to which MMP
or the FCC Licensee Entities has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former director, employees, or
agent of MMP or the FCC Licensee Entities.
"MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan
for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC
Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make
payments, in each case with respect to any present or former employees of MMP or
the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan
terminated within the preceding six (6) years.
"MMP II FCC Applications" means the application requesting the approval
and consent of the FCC to the transfer of control of Television Stations WKEF-TV
and WEMT-TV from MMP to MTC.
"MMP Financial Statements" means the audited consolidated balance sheet
of MMP at December 31, 1996, the audited consolidated statements of operations
and cash flows for the year then ended, all notes thereto and the independent
auditor's audit report thereon, together with the unaudited balance sheet of MMP
at September 30, 1997 and the unaudited statement of operations for the nine (9)
months then ended.
"MMP Material Adverse Effect" shall mean a material adverse effect on
the business, or financial condition of any Television Station with the
exception of WMMP-TV
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in the Charleston, South Carolina market or the Radio Stations taken as a whole.
"MMP Real Property" means all real property owned or leased by MMP.
"MRI" shall have the meaning set forth in the Recitals.
"MRI Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Management Agreement" shall have the meaning set forth in the
Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of the Company taken as a whole.
"Material Contract" means all agreements to which Seller or MMP is a
party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
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"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
"Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167%
in the case of Management, 26.6519% in the case of MRI and 44.7881% in the case
of Seller.
"Purchase Price" shall mean the sum of (a) the Pro Rata Share of the
excess of the Cash Price over 40% of the Step-Up, plus (b) the Allocable Portion
of 40% of the Step-Up.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
"Qualified Plan" shall mean any Company Plan or MMP Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by Seller.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller Interests" shall have the meaning set forth in Section 5.2q.
"Sellers' Agents" shall have the meaning set forth in Section 16.1.
"Seller's Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Shareholder Settlement Agreements" shall have the meaning set forth
in Section 2.2(b).
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"Stations" has the meaning set forth in the recitals to the Agreement.
"Step-Up" shall mean the amount of Code Section 754 basis step-up,
calculated as the present value (determined using an 8.0% discount rate over a
15-year period assuming straight line amortization) of 45.812% of the Cash Price
minus (or plus in the case of a negative) the aggregate tax basis capital
accounts of Seller and Management in MMP immediately prior to the Closing.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Television Licensee" shall have the meaning set forth in the Recitals.
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"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
"VARS" has the meaning set forth in Section 9.14.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
MAX TELEVISION COMPANY
MAX MEDIA PROPERTIES LLC
AND
MAX MEDIA PROPERTIES II LLC
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS.................................................................3
2. SALE OF ASSETS/EXCLUDED ASSETS..............................................3
2.1. Sale of Assets.......................................................3
2.2. RESERVED.............................................................3
3. PURCHASE PRICE..............................................................4
3.1. Payment..............................................................4
4. CLOSING.....................................................................4
5. REPRESENTATIONS AND WARRANTIES OF SELLERS...................................4
5.1. RESERVED.............................................................4
5.2. Representations and Warranties as to the Company.....................4
5.3. Representations and Warranties as to the MMP and the FCC Licensee
Entities......................4
a. Organization and Good Standing....................................5
b. Capitalization of MMP.............................................5
c. Organization and Capitalization of the FCC License Entities.......5
d. No Conflicts......................................................6
e. Real Property.....................................................6
f. Personal Property.................................................6
g. Financial Statements..............................................6
h. FCC...............................................................6
i. Intellectual Property.............................................7
j. Employee Benefit Plans............................................7
k. Labor.............................................................8
l. Insurance.........................................................8
m. Material Contracts................................................8
n. Compliance with Laws..............................................8
o. Litigation........................................................9
p. Consents..........................................................9
r. Tax Matters.......................................................9
s. Accounts Receivable..............................................11
t. RESERVED.........................................................11
5.4. RESERVED............................................................11
i
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6. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................11
6.1. Organization and Good Standing......................................11
6.2. Execution and Effect of Agreement...................................12
6.3. No Conflicts........................................................12
6.4. Consents............................................................12
6.5. Litigation..........................................................12
6.6. No Brokers..........................................................12
6.7. Purchaser Qualifications............................................13
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES.............13
7.1. Limitation; Survival................................................13
8. TAX MATTERS................................................................13
8.1. RESERVED............................................................13
8.2. Tax Returns.........................................................13
8.3. Apportionment.......................................................14
8.4. Cooperation in Tax Matters..........................................15
8.5. Certain Taxes.......................................................15
8.6. FIRPTA..............................................................15
8.7. [Section 754 Election...............................................15
8.8. Closing Date Actions................................................15
9. ADDITIONAL COVENANTS AND UNDERTAKINGS......................................16
9.1. Further Assurances and Assistance..................................16
9.2. Access to Information..............................................16
9.3. Conduct of Business Prior to Closing...............................16
9.4. H-S-R Act..........................................................19
9.5. FCC Application....................................................19
9.6. Books and Records..................................................20
9.7. RESERVED...........................................................20
9.8. RESERVED...........................................................20
9.9. Interpretation of Certain Provisions...............................20
9.10. RESERVED...........................................................20
9.11. RESERVED...........................................................20
9.12. RESERVED...........................................................20
9.13. RESERVED...........................................................20
9.14. RESERVED...........................................................20
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10. INDEMNIFICATION...........................................................21
10.1. Indemnification of Purchaser by Sellers.............................21
10.2. Indemnification of Sellers by Purchaser.............................21
10.3. Limitations and Other Provisions Regarding Indemnification
Obligations.........................................................22
10.4. Notice of Claim Defense of Action...................................24
10.5 Tax Contests........................................................25
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE...............26
11.1. Conditions Precedent to the Obligation of Purchaser................26
12. DELIVERIES AT THE CLOSING.................................................29
12.1. Deliveries by Sellers..............................................29
12.2. Deliveries by Purchaser............................................30
13. EXPENSES..................................................................30
14. TERMINATION...............................................................31
14.1 Termination........................................................31
14.2 Procedure and Effect of Termination................................31
15. NOTICES...................................................................32
16. SELLERS' AGENTS...........................................................34
16.1. Sellers' Agents....................................................34
17. MISCELLANEOUS.............................................................35
17.1. Headings..........................................................35
17.2. Schedules and Exhibits............................................35
17.3. Execution in Counterparts.........................................35
17.4. Entire Agreement..................................................35
17.5. Governing Law.....................................................36
17.6. Modification......................................................36
17.7. Successors and Assigns............................................36
17.8. Waiver............................................................36
17.9. Severability......................................................36
17.10. Announcements.....................................................37
17.11. Specific Performance..............................................37
iii
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17.12 Fees and Expenses.................................................37
17.13 Third Party Beneficiaries.........................................37
17.14 Interpretation....................................................37
ANNEX 1 - DEFINITIONS
---------------------
ANNEX 2 - SELLERS
-----------------
EXHIBITS
A - MMP II Assignment and
Assumption Agreement
B - Opinion of Counsel,
Clark & Stant, P.A.
C - Opinion of Sellers' FCC Counsel
D - Opinion of Counsel,
Thomas & Libowitz, P.A.
SCHEDULES
2.2 -
5.1 - Encumbrances on Stock
5.2 - Organization of Companies
5.3 - Capitalization of Companies
5.4 - Conflicts
5.5 List of Real Property; Permitted
Exceptions
5.6 - Existing Liens and Security Interests
5.7 - Changes Since 1994
5.8 - FCC
5.9 - Exceptions to Intellectual Property
5.10 - Employee Benefits
5.11 - Employee Matters
5.12 - Insurance
5.13 - Material Contracts
5.14 - Compliance with Law
5.15 - Litigation
5.17 - Consents
5.18 - Environmental
5.19 - Taxes
iv
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6.3 -
6.4 - Consents
6.5 -
6.7 -
9.3 - Transactions Prior to Closing
9.7 - Employees
v
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of January, 1998, is entered into by and among Sinclair
Communications, Inc., a Maryland corporation ("Purchaser"), Max Television
Company, a Virginia corporation ("Seller"), Max Media Properties LLC, a Virginia
limited liability company ("MMP"), and Max Media Properties II LLC, a Virginia
limited liability company ("MMP II").
RECITALS:
---------
WHEREAS, Seller owns 100% of the membership interests of MMP II (the
"Assets"); and
WHEREAS, Seller desires to sell, assign and transfer the Assets, and
Purchaser desires to acquire the Assets, all on the terms described herein; and
WHEREAS, on December 2, 1997, the Purchaser entered into a Stock
Purchase Agreement (the "MRI Agreement") to acquire all of the issued and
outstanding shares of Max Radio Inc. ("MRI"). MRI is the owner of 31% of the
equity of MTR Holding Corp., a Virginia corporation ("MTR"), 3,069,000 Class A
Membership Units (out of a total 11,631,431 Membership Units) of MMP, and a 2%
limited partnership interest in Radio License L.P., a Virginia limited
partnership ("RLLP"), the holder of the FCC Licenses of the Radio Stations (as
defined below); and
WHEREAS, on December 2, 1997, the Purchaser entered into a Stock
Purchase Agreement (the "Investors Agreement") to acquire all of the issued and
outstanding shares of Max Investors, Inc., a Virginia corporation ("Investors").
Investors is the owner of 3,133,897 Class C Membership Units (out of a total
11,631,431 Membership Units) of MMP; and
WHEREAS, on December 2, 1997, the Purchaser entered into an Asset
Purchase Agreement (the "Management Agreement") to acquire from Max Management
LLC, a Virginia limited liability company ("Management"), 188,034 Class C
Membership Units (out of a total of 11,631,431 Membership Units) of MMP; and
WHEREAS, on December 2, 1997, the Purchaser entered into an Asset
Purchase Agreement to acquire from Seller 5,140,500 Class B Membership Units
(out of a total of 11,631,431 Membership Units) of MMP, 69% of the equity of MTR
and a 2% limited partnership interest in the Television Licensees (as defined
below); and
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a
total 11,631,431 Membership Units) of MMP; and
<PAGE>
WHEREAS, MMP is the owner of the operating assets (other than the FCC
Licenses) and operator of television stations WSYT-TV in the Syracuse, New York
market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton,
Ohio market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau,
Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and
collectively, the "Television Stations"); and
WHEREAS, MMP is the owner of the operating assets (other than the FCC
Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North
Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in
Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina
("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM,
in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM,
in Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky,
pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television
station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement
with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas
pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA
Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, Seller, MMP and MMP II, pursuant to the terms and conditions
hereof, have agreed to file with the FCC an application to transfer (the "MMP II
Transfers") all partnership interests MMP holds in Dayton LP (the licensee of
WKEF-TV) and Tri-Cities LP (the licensee of WEMT-TV, collectively, "the MMP II
Licensee Entities") to MMP II; and
2
<PAGE>
WHEREAS, in connection with the MMP II Transfers, MMP and MMP II have
agreed to enter into a Distribution Agreement and an Assignment and Assumption
Agreement; and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the Assets, which Assets
Purchaser shall acquire pursuant to the terms of this Agreement.
SECTION 1
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meaning
specified in the text hereof on Annex 1 hereto which are incorporated herein by
reference, and which meaning shall be applicable to both the singular and plural
forms of the terms defined.
SECTION 2
SALE OF ASSETS
--------------
2.1. SALE OF ASSETS. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date (as hereinafter defined), Seller
hereby agrees to transfer, convey, assign and deliver to Purchaser, and
Purchaser agrees to acquire, all of Seller's right, title and interest in the
Assets, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever at the Closing (as defined below).
2.2. RESERVED
3
<PAGE>
SECTION 3
PURCHASE PRICE
--------------
3.1. PAYMENT. At the Closing (as defined below), in consideration for
the sale of the Assets, Purchaser shall pay to Seller the amount of
$3,000,000.00 (the "Purchase Price").
SECTION 4
CLOSING
-------
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One
Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on such
day), on the later to occur of (a) five Business Days after, to the extent a
filing is necessary under the H-S-R Act, all applicable waiting periods under
the H-S-R Act shall have expired or terminated, or (b) five Business Days after
the Final Order (the date of Closing being the "Closing Date"), unless (i)
Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser
shall give Sellers reasonable notice of the Closing, or (ii) the parties shall
mutually agree upon a different date or location; provided, however, that in no
event shall the Closing be held before the Closings under the MMP Acquisition
Documents. In no event shall Closing occur after the Termination Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
5.1. RESERVED
5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER. The representations
and warranties set forth in Section 5.2 of the MTC Agreement are incorporated by
reference herein as if fully set forth.
5.3. REPRESENTATIONS AND WARRANTIES AS TO MMP II AND MMP II LICENSEE
ENTITIES.
Seller and MMP, jointly and severally, hereby represent and warrant to
Purchaser as to MMP II and the MMP II Licensee Entities as follows:
4
<PAGE>
a. MMP II ORGANIZATION AND GOOD STANDING. MMP II is a limited
liability company duly organized and validly existing under the laws of Virginia
and has full power and authority to carry on its business. To the extent
required by law, MMP II shall be, as of the Closing Date, qualified as a foreign
limited liability company and shall be in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification. Seller owns 100% of the outstanding
membership interests in MMP II.
b. CAPITALIZATION OF MMP II. MMP owns 100% of the membership
units of MMP II. All membership units have been validly issued and are fully
paid and non-assessable and held of record by MMP. Except as described on
Schedule 5.2b, (i) there are no other issued or outstanding equity securities of
MMP II; (ii) there are no membership or value appreciation rights, phantom
membership rights, profit participation rights or other similar rights with
respect to membership units outstanding; and (iii) there are no other issued or
outstanding membership units or securities of MMP II, convertible or
exchangeable, at any time into equity securities of MMP II. MMP is not subject
to any commitment or obligation that would require the issuance or sale of
additional membership interests or membership units of MMP II at any time under
options, subscriptions, warrants, rights or other obligations. Other than the
MMP II Licensee Entities, MMP II has no other equity interests in any other
corporation, partnership, limited liability company, joint venture or other
entity.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE
ENTITIES. Each MMP II Licensee Entity is a limited partnership duly organized
and validly existing under the laws of the Commonwealth of Virginia and has full
partnership power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. Each MMP II
Licensee Entity is qualified as a foreign limited partnership under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a material adverse effect. Neither of the MMP II
License Entities own any direct or indirect subsidiaries. MMP II, as of the date
hereof, is the sole general partner and owns ninety-eight percent (98%) of the
partnership interests of each of the MMP Licensee Entities. Seller, as of the
date hereof, is the sole limited partner and owns two percent (2%) of the
partnership interests of each of the MMP II Licensee Entities. All such
partnership interests have been validly issued and are fully paid and
nonassessable and are held of record by the respective partners as set forth
above. There are no (i) other issued or outstanding equity securities of the MMP
II Licensee Entities, (ii) partnership or value appreciation rights, phantom
partnership rights, profit participation rights, or other similar rights with
respect to partnership interests outstanding and (iii) other issued or
outstanding partnership interests or other securities of
5
<PAGE>
either of the MMP II Licensee Entities convertible or exchangeable at any time
into equity securities of such MMP II Licensee Entity. Neither MMP II Licensee
Entity is subject to any commitment or obligation that would require the
issuance or sale of additional partnership interests of either MMP II Licensee
Entity at any time under options, subscriptions, warrants, rights or any other
obligations. No MMP II Licensee Entity holds any equity interest in any
corporation, partnership, limited liability company, joint venture or other
entity.
d. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate any provision of the articles of organization or operating agreement of
MMP II or the limited partnership agreements of the MMP II Licensee Entities,
(ii) other than with respect to the matters for which waivers are sought in the
FCC Application from the FCC, violate any provision of applicable material law,
rule and regulation, which violation would prevent or interfere with Seller's
ability to perform hereunder, or (iii) conflict with or result in a breach of,
or give rise to a right of termination of, or accelerate the performance
required by the terms of any judgment, court order or consent decree, or any
material agreement, indenture, mortgage or instrument to which either MMP II or
either MMP II Licensee Entity is a party or to which any of their property is
subject, or constitute a default thereunder.
e. REAL PROPERTY. Other than the License Assets, neither MMP
II nor the MMP II Licensee Entities own or lease any real property.
f. PERSONAL PROPERTY. Other than the License Assets, neither
MMP II nor either of the MMP Licensee Entities own nor lease personal property.
g. FINANCIAL STATEMENTS. Neither MMP II nor the MMP II
Licensee Entities prepare or maintain Financial Statements.
h. FCC. MMP II and the MMP II Licensee Entities have been and
currently are operated in material compliance with the terms of the FCC
Licenses, the Communications Act of 1934, as amended, and applicable rules,
regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC
Licenses held by the MMP II Licensee Entities, a true and complete list of which
is set forth on Schedule 5.3h to the MRI Agreement, and true and complete copies
of each of which have been delivered to Purchaser, are valid and in full force
and effect. Except as set forth on Schedule 5.3h to the MRI Agreement, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses and, to Seller's and MMP's Knowledge, there is not now
before the FCC any investigation or complaint against MMP II or the MMP II
Licensee Entities relating to the MMP II Stations, the unfavorable resolution of
which
6
<PAGE>
would impair the qualifications of the MMP II Licensee Entities to hold any FCC
Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement, there is no
proceeding pending before the FCC, and there is no outstanding notice of
violation from the FCC with respect to the MMP II Stations. Except as set forth
on Schedule 5.3h to the MRI Agreement, no order or notice of violation has been
issued by any governmental entity which permits, revocation, adverse
modification or termination of any FCC License. Except as set forth on Schedule
5.3h to the MRI Agreement and except for those conditions or restrictions
appearing on the face of the FCC Licenses, or other licenses, none of the FCC
Licenses or other licenses is subject to any restriction or condition which
would limit the operation of the MMP II Stations as currently operated. The FCC
Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect
and are not subject to any liens, or other encumbrances. No license renewal
applications are pending with respect to any of the FCC Licenses. As of the date
hereof, Seller, MMP, MMP II and the MMP II Licensee Entities have no reason to
believe that the FCC would not renew the FCC Licenses in the ordinary course for
a full license term without any adverse conditions, upon the timely filing of
appropriate applications and payment of the required filing fee. Other than the
waivers requested in the FCC Application, as of the date hereof, Seller, MMP II,
MMP and the MMP II Licensee Entities have no reason to believe that the FCC
would not grant the FCC Application in the ordinary course without any adverse
conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in
each of the MMP II Station's public inspection files are in such file, and such
file will be maintained in proper order and complete up to and through the
Closing Date.
i. INTELLECTUAL PROPERTY. MMP II and the MMP II Licensee
Entities do not own any Intellectual Property.
j. BENEFIT PLANS. MMP II and the MMP II Licensee Entities do
not and have not in the past maintained or contributed to Benefit Plans. Neither
MMP II nor MMP II Licensee Entities, nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV or ERISA. Neither MMP II nor MMP
II Licensee Entities, nor any ERISA Affiliate has ever made or been obligated to
make, or reimbursed or been obligated to reimburse another employer for,
contributions to any multiemployer plan (as defined in ERISA Section 3(37). MMP
II and the MMP II Licensee Entities have no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement, and no facts exist that could reasonably be expected to result in
such liability, as a result of termination, withdrawal, or funding waiver with
respect to any such plan, program, or arrangement.
k. LABOR. Other than the FCC Employees, neither MMP II nor the
MMP II Licensee Entities have employed or currently employ employees. With
respect
7
<PAGE>
to employees of and service providers to MMP II and MMP II Licensee Entities:
(i) MMP II and MMP II Licensee Entities have been in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws respecting
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and have not and are not engaged in any unfair labor practice.
(ii) The employees of MMP II and MMP II Licensee
Entities are not and have never been represented by any labor union, and no
collective bargaining agreements are binding and in force against, or currently
being negotiated by MMP II and MMP II Licensee Entities, and to MMP II and MMP
II Licensee Entities' knowledge, no labor representation organization effort
exists nor have there been any such activity within the past three years.
(iii) All Persons classified by MMP II and MMP II
Licensee Entities as independent contractors satisfy and have satisfied the
requirement of law to be so classified, and MMP II and MMP II Licensee Entities
have fully and accurately reported their compensation on IRS Forms 1099 when
required to do so.
(iv) There is no charge or compliance proceeding
actually pending or threatened against MMP II and MMP II Licensee Entities
before the Equal Employment Opportunity Commission or any state, local, or
foreign agency responsible for the prevention of unlawful employment practices.
l. INSURANCE. Other than insurance policies covering the
License Assets, neither MMP II nor the MMP II Licensee Entities maintain
insurance policies.
m. MATERIAL CONTRACTS. There are no material contracts of MMP
II or the MMP II Licensee Entities.
n. COMPLIANCE WITH LAWS. MMP II and the MMP II Licensee
Entities are in material compliance with all material applicable Federal, state
and local laws, rules and regulations, and there are no actions pending or, to
Seller's Knowledge, threatened alleging noncompliance therewith.
o. LITIGATION. There is no suit, claim, action, proceeding or
arbitration pending or, to Seller's Knowledge, threatened against MMP II or the
MMP II Licensee Entities that seeks to enjoin or obtain damages in respect of
MMP II's conduct of its
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Business, or the transactions contemplated hereby. There is no outstanding
citation, order, judgment, writ, injunction, or decree of any court, government,
or governmental or administrative agency against or affecting the Business, MMP
II or the MMP II Licensee Entities.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p, (b) for
filings pursuant to the H-S-R Act (to the extent required by law), or (c) the
FCC Application, no filing, consent, approval or authorization of any
governmental authority or of any third party on the part of MMP II or the MMP II
Licensee Entities is required in connection with the execution and delivery of
this Agreement by Sellers or the consummation of any of the transactions
contemplated hereby (including any consents required under any MMP II or MMP II
Licensee Entities contract as a result of the change in control contemplated
hereby).
q. RESERVED
r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) to the MRI
Agreement hereto:
(i) All Tax Returns required to be filed by or with
respect to MMP II and the MMP II Licensee Entities have been filed when due in a
timely fashion, and all Tax Returns, if any, required to be filed by or with
respect to MMP II and the MMP II Licensee Entities for Taxable Periods ending on
or before December 31, 1997 will have been filed prior to the Closing Date, even
if such Tax Returns are not yet due. All Tax Returns filed by or with respect to
MMP II and the MMP II Licensee Entities, if any, are true, correct and complete
in all material respects.
(ii) MMP II and each of the MMP II Licensee Entities
has paid in full on a timely basis all Taxes owed by it, whether or not shown on
any Tax Return, and MMP II and each of the MMP II Licensee Entities will have
paid prior to the Closing Date all Taxes payable with respect to Taxable Periods
ending on or before December 31, 1997, even if such Taxes are not yet due.
(iii) Neither MMP II nor the MMP II Licensee Entities
have any liability for any unpaid Taxes.
(iv) MMP II and each of the MMP II Licensee Entities
has withheld and paid over to the proper governmental authorities all Taxes, if
any, required to have been withheld and paid over, and complied with all
information reporting and
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backup withholding requirements, if any, including maintenance of required
records with respect thereto, in connection with amounts paid to any employee,
independent contractor, creditor or other third party.
(v) No Tax Proceeding is currently pending with
respect to MMP II or either of the MMP II Licensee Entities. Neither MMP II nor
either of the MMP II Licensee Entities have received notice from any Tax
Authority that it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect or has been requested with respect to the
assessment, collection or payment of Taxes of MMP II or the MMP II Licensee
Entities, or for which MMP II or the MMP II Licensee Entities are liable.
(vii) No extension of the time within which to file
any Tax Return of MMP II or either of the MMP II Licensee Entities is currently
in effect.
(viii) No deficiency for Taxes has been proposed,
asserted or assessed against MMP II or either of the MMP II Licensee Entities.
(ix) There are no liens on the assets of MMP II or
the MMP II Licensee Entities relating or attributable to Taxes (except liens for
Taxes not yet due).
(x) Neither MMP II nor either of the MMP II Licensee
Entities is or has ever been classified as an association or otherwise taxable
as a corporation for United States federal income tax purposes.
(xi) Neither MMP II nor either of the MMP II Licensee
Entities has in effect an election under Section 754 of the Code.
(xii) Neither MMP II nor either of the MMP II
Licensee Entities has agreed to, nor is it required to, make any adjustments
under Section 481(a) of the Code as a result of a change in accounting methods.
(xiii) Neither MMP II nor either of the MMP II
Licensee Entities is or has at any time been a party to a tax sharing, tax
indemnity or tax allocation agreement. Neither MMP II nor either of the MMP II
Licensee Entities has assumed the Tax Liability of any other entity or person
under contract.
(xiv) Neither MMP II nor either of the MMP II
Licensee
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Entities has any liability for the Taxes of another entity or person as a
transferee or successor, or otherwise.
(xv) Except for the MMP II Licensee Entities, neither
MMP II nor either of the MMP II Licensee Entities is or has at any time been a
party to any joint venture, partnership or other arrangement that is treated as
a partnership for U.S. federal income tax purposes.
(xvi)None of MMP II's assets and none of the assets
of the MMP II Licensee Entities are treated as "tax exempt use property" within
the meaning of Section 168(h) of the Code.
(b) To date, no Tax Returns have been filed by or with
respect to MMP II or the MMP II Licensee Entities. There are no and have not
been any examination reports, statements of deficiencies or closing agreements
with respect to MMP II or the MMP II Licensee Entities relating to Taxes.
(c) Schedule 5.3r(c) to the MRI Agreement contains complete
and accurate descriptions of material Tax elections made by or with respect to
MMP II and the MMP II Licensee Entities.
s. ACCOUNTS RECEIVABLE. Neither MMP II nor the MMP II Licensee
Entities have any accounts receivable.
t. RESERVED
5.4 RESERVED
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Seller, MMP and MMP II
that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power
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and authority to enter into this Agreement. The consummation of the transactions
contemplated hereby has been duly authorized by all necessary corporate action
on the part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity (whether applied by a
court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI
Agreement hereof, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any of the
provisions of the articles of incorporation or by-laws of Purchaser, (ii)
violate any provision of applicable law, rule or regulation, which violation
would prevent or interfere with Purchaser's ability to perform hereunder, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Purchaser is a party or to which its property is subject,
or constitute a default thereunder, except where such conflict, breach, right of
termination, acceleration or default would not have a material adverse effect on
the business or financial condition of Purchaser or prevent or materially
interfere with Purchaser's ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI
Agreement hereto, (ii) for filings pursuant to the H-S-R Act (to the extent
required by law), or (iii) the FCC Application, no filing, consent, approval or
authorization of any governmental authority or of any third party on the part of
Purchaser is required in connection with the execution and delivery of this
Agreement by Purchaser or the consummation of any of the transactions
contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks
to enjoin or obtain damages in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially
qualified to be the Licensee
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of, acquire and own and operate the MMP II Stations under the Communications Act
and the rules, regulations and policies of the FCC. Purchaser knows of no fact
that would, under existing law and the existing rules, regulations, policies and
procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC
Licenses or as the owner and operator of the MMP II Stations, or (b) cause the
FCC to fail to approve in a timely fashion the application for the FCC Consent.
Except as described on Schedule 6.7 to the MRI Agreement, no waiver of any FCC
rule or policy is necessary to be obtained for the grant of the applications for
the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to
any exception or rule or general applicability be requested or required in
connection with the consummation of the transactions contemplated by this
Agreement Purchaser will have on hand at the Closing, adequate financial
resources to consummate the transactions contemplated by this Agreement and the
MMP Acquisition Documents.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND
WARRANTIES
----------
7.1. LIMITATION; SURVIVAL. The terms and conditions of Section 7 of the
MTC Agreement are incorporated in this Section 7 as if fully set forth.
SECTION 8
TAX MATTERS
-----------
8.1. RESERVED
8.2. TAX RETURNS.
(a) Seller shall prepare or cause to be prepared and file or
cause to be filed, within the time (including extensions) and manner provided by
law, all Tax Returns of MMP II and the MMP II Licensee Entities, if any, that
are required to be filed on or before the Closing Date. In addition, Seller
shall prepare or cause to be prepared and file or cause to be filed prior to the
Closing Date all Tax Returns, if any, required to be filed for Taxable Periods
of MMP II and the MMP II Licensee Entities for Taxable Periods ending on or
before December 31, 1997, even if such Tax Returns are not yet due. Each of MMP
II and the MMP II Licensee Entities shall pay or cause to be paid all Taxes
shown as due on its Tax Returns. Purchaser shall have an opportunity to review
and consent to the filing of all such Tax Returns, which consent shall not be
unreasonably withheld or delayed.
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(b) Purchaser shall prepare or cause to be prepared and file
or cause to be filed, within the time and manner provided by law, all Tax
Returns of MMP II and the MMP II Licensee Entities, if any, required to be filed
(i) for Taxable Periods ending on or before the Closing Date that are due after
the Closing Date, except as described in Section 8.2(a), and (ii) for Taxable
Periods beginning before and ending after the Closing Date ("Straddle Periods").
Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax
Returns; provided that this sentence shall not in any way limit or affect
Purchaser's rights to any indemnification to which it may be entitled under
other provisions of this Agreement or under the MMP Acquisition Documents.
Purchaser shall provide Seller a reasonable opportunity to review and consent to
the filing of such Tax Returns, which consent shall not be unreasonably withheld
or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable
Periods ending on or before the Closing Date or Straddle Periods without
Seller's consent; provided, however, that Purchaser may file amended Tax Returns
for such Taxable Periods without Seller's consent if (i) such amended Tax
Returns are filed to correct errors or omissions in previously filed Tax Returns
that either constitute or are related to a breach of any representation or
warranty set forth in Sections 5.2 or 5.3r (determined without regard to the
limitation on the survival of such representations and warranties set forth in
Section 7.1), or (ii) the filing of such amended Tax Return would not increase
the Taxes of Seller or Taxes for which Seller has indemnification responsibility
hereunder or under the MMP Acquisition Documents by more than $25,000.
(c) All Tax Returns prepared and filed pursuant to this
Section 8.2 shall be prepared and filed in accordance with applicable law and in
a manner consistent with past practices of MMP II and the MMP II Licensee
Entities (to the extent consistent with applicable law).
8.3. APPORTIONMENT. The parties agree to cause MMP II and the MMP II
Licensee Entities to file all Tax Returns for any Taxable Period that would
otherwise be a Straddle Period on the basis that the relevant Taxable Period
consists of two periods, one ending as of the close of business on the Closing
Date and one beginning the day after the Closing Date, unless the relevant Tax
Authority will not accept a Tax Return filed on that basis. For purposes of
apportioning any Tax to the portion of any Straddle Period that ends on the
Closing Date, the determination shall be made assuming that there was a closing
of the books as of the close of business on the Closing Date and that the
taxable years of MMP II and the MMP II Licensee Entities ended on that date,
except that real, personal and intangible property Taxes shall be apportioned
ratably on a daily basis between the portions of the Straddle Period in
question.
8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a)
cooperate
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fully, as reasonably requested, in connection with the preparation and filing of
all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available
to the other, as reasonably requested, all information, records or documents
with respect to Tax matters pertinent to MMP II and the MMP II Licensee Entities
for all Taxable Periods ending on or before the Closing Date and Straddle
Periods; and (c) preserve information, records or documents relating to Tax
matters pertinent to MMP II and the MMP II Licensee Entities that is in their
possession or under their control until the expiration of any applicable statute
of limitations.
8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Assets, and Seller shall at its own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause the MMP II Licensee Entities to
make a Code Section 754 Election with respect to the Taxable Period in which the
Closing occurs or later Taxable Periods.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause MMP II or the MMP II Licensee Entities to take any actions on the Closing
Date other than in the ordinary course of their business, except (i) such
actions as are expressly contemplated by this Agreement, and (ii) such actions
as would not increase Taxes of Seller or Taxes for which Seller has
indemification responsibility hereunder.
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SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
-------------------------------------
9.1. FURTHER ASSURANCES AND ASSISTANCE. Each of Purchaser, Seller and
MMP II will (and MMP II shall cause the MMP II Licensee Entities to) execute and
deliver to the other any and all documents, in addition to those expressly
provided for herein, that may be necessary or appropriate to implement the
provisions of this Agreement, whether before, at, or after the Closing. The
parties agree to cooperate with each other to any extent reasonably required in
order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. Seller and MMP II, from and after the date
of this Agreement and until the Closing Date or termination pursuant to Section
14.1, shall give Purchaser and Purchaser's employees and counsel full and
complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of
Seller, MMP II, the MMP II Licensee Entities or otherwise relating to the
Business, shall provide Purchaser with all financial statements of Seller, the
MMP II Licensee Entities and MMP II, if any, prepared in the future, and shall
provide copies of such information concerning Seller, MMP II, the MMP II
Licensees and the Business as Purchaser may reasonably request. Seller will use
its commercially reasonable efforts to obtain the consent of its auditors to
permit inclusion of financial statements, if any, in applicable securities
filings of Sinclair Broadcast Group, Inc. ("SBGI").
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement or as consented to by Purchaser (which consent shall not
unreasonably be withheld), from and after the date hereof, Seller and MMP II
shall act and cause the MMP II Licensee Entities to act, as follows:
(a) MMP II will not adopt or cause the MMP II Licensee Entities
to adopt any change in any method of accounting or accounting practice, except
as contemplated or required by GAAP;
(b) Seller shall not change or amend its charter or by-laws and
MMP II shall not change or amend the operating agreement or cause or allow any
of the MMP II Licensee Entities to change or amend any limited partnership
agreement;
(c) Neither MMP II nor the MMP II Licensee Entities shall sell,
mortgage, pledge or otherwise dispose of any assets or properties owned, leased
or used in the operation of the Business other than in the ordinary course of
business;
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(d) Neither Seller nor MMP II or the MMP II Licensee Entities
will merge or consolidate with, agree to merge or consolidate with, or purchase
or agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity;
(e) RESERVED;
(f) Neither MMP II nor the MMP II Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital
stock, membership units, or partnership interests, as the case may be, or any
securities or obligations convertible or exchangeable into shares of its capital
stock, partnership interests or membership units or issue or grant any option,
warrant or other right to purchase any shares of its capital stock, partnership,
or membership units;
(g) Neither MMP II nor the MMP II Licensee Entities will incur,
or agree to incur, any debt for borrowed money;
(h) Neither MMP II nor the MMP II Licensee Entities will change
its historical practices concerning the payment of accounts payable;
(i) Neither MMP II nor the MMP II Licensee Entities will declare,
issue, or otherwise approve the payment of dividends or distributions of any
kind in respect of its stock or membership units, as the case may be, or redeem,
purchase or otherwise acquire any of its stock or membership units.
(j) Seller and MMP II shall maintain the existing insurance
coverages on the License Assets.
(k) Seller and MMP II will not permit any increases in the
compensation of any of the FCC Employees of Seller or MMP II except (i) as
required by law, or (ii) in the ordinary course of business.
(l) Other than the Time Brokerage Agreement, neither Seller nor
MMP II nor the MMP II Licensee Entities shall enter into or renew any contract
or commitment relating to the FCC Licenses or the MMP II Stations, or incur any
obligation that will be binding on Purchaser after Closing.
(m) Neither MMP II nor the MMP II Licensee Entities shall enter
into any transactions with any Affiliate of Seller binding upon or affecting MMP
II or the MMP II Licensee Entities.
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(n) Seller and MMP II shall use all commercially reasonable
efforts to maintain the assets of MMP II or the MMP II Licensee Entities or
replacements thereof in good operating condition and adequate repair, normal
wear and tear excepted.
(o) Other than permitted or contemplated by the Time Brokerage
Agreement, MMP II shall not make any expenditures except to maintain the FCC
Licenses and the License Assets.
(p) Neither Seller nor MMP II nor the MMP II Licensee Entities
shall make or change any material Tax election, amend any Tax Return, or take or
omit to take any other action (other than in the ordinary course of business and
consistent with past practice) that would have the effect of increasing any
Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP II or the MMP
II Licensee Entities for any Post-Closing Tax Period.
(q) MMP II and the MMP II Licensee Entities shall not make
distributions to its members or general or limited partners, respectively, other
than of cash.
(r) RESERVED
(s) RESERVED
(t) MMP II shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior consent of Purchaser (which consent
shall not be unreasonably withheld) other than as contemplated by this Agreement
or the MMP Acquisition Documents.
(u) MMP II shall not enter into or become subject to any
employment, labor, union or professional service contract not terminable at
will, or any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plans, or increase the compensation payable or to become payable
to any FCC Employee except as required by law.
(v) Neither Seller nor MMP II or the MMP II Licensee Entities
shall take any action which may jeopardize the validity or enforceability of or
rights under the FCC Licenses.
(w) Neither Seller nor MMP II or the MMP II Licensee Entities
shall
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breach of cause any other person to breach any provision of the Time Brokerage
Agreement required as a condition of closing under the MMP Acquisition Documents
and attached thereto as Exhibit D.
9.4. H-S-R ACT. To the extent required by law, each of Purchaser and
Seller shall, within ten Business Days following the date hereof, file duly
completed and executed Pre-Merger Notification and Report Forms as required
under the H-S-R Act and shall otherwise use their respective best efforts to
comply promptly with any requests made by the Federal Trade Commission ("FTC")
or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the
regulations promulgated thereunder. Seller shall cause MMP II, to the extent
required by law, to join in or provide information in connection with such
filing, including, but not limited to, any response to any request by the FTC or
DOJ. All filing fees and other similar payments in connection with the H-S-R Act
shall be split equally by Purchaser and the Seller.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP II and Seller shall, within two (2)
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC Application and
to secure such consents or approvals as expeditiously as practicable; and
provided further that MMP II shall and shall cause the MMP II Licensee Entities,
to the extent deemed reasonably necessary by counsel to Purchaser to join in and
provide information in connection with the FCC Application and comply with the
immediately preceding provisions and 9.5(b) below. If the Closing shall not have
occurred for any reason within the initial effective periods of the granting of
FCC approval of the FCC Application, and no party shall have terminated this
Agreement under Section 14, the parties shall jointly request and use their
respective best efforts to obtain one or more extensions of the effective
periods of such grants. No party shall knowingly take, or fail to take, any
action the intent or reasonably anticipated consequence of which would be to
cause the FCC not to grant approval of the FCC Application.
(b) Seller and MMP II, as the case may be, shall publish (and
cause the MMP II Licensee Entities to publish) the notices required by the FCC
Rules and Regulations relative to the filing of the FCC Application. Copies of
all applications, documents and papers filed after the date hereof and prior to
the Closing, or filed after the Closing with respect to the transaction under
this Agreement, by Purchaser, Seller, MMP II, or the MMP II Licensee Entities
with the FCC shall be mailed to the other simultaneously with the filing of the
same with the FCC. Each party shall bear its own costs and expenses
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(including the fees and disbursements of its counsel) in connection with the
preparation of the portion of the application to be prepared by it and in
connection with the processing of that application. All filing and grant fees,
if any, paid to the FCC, shall be split equally by Purchaser and the Seller.
None of the information contained in any filing made by Purchaser or Seller with
the FCC with respect to the transaction contemplated by this Agreement shall
contain any untrue statement of a material fact.
(c) RESERVED
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
Seller (a) to have reasonable access to the books and records of Purchaser and
those retained or maintained by Seller relating to the operation of the Business
prior to the Closing or after the Closing to the extent related to transactions
or events occurring prior to the Closing, and (b) to have reasonable access to
employees of Purchaser to obtain information relating to such matters. Purchaser
shall maintain such books and records for a period of four (4) years following
the Closing.
9.7. RESERVED
9.8. RESERVED
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not relying on the specification of any dollar amount in any representation
or warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
9.10. RESERVED
9.11. RESERVED
9.12. RESERVED
9.13. RESERVED
9.14. RESERVED
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SECTION 10
INDEMNIFICATION
---------------
10.1. INDEMNIFICATION OF PURCHASER BY SELLER.
(a) Subject to Section 10.3 of this Agreement, after the Closing
Date, Seller shall indemnify and hold Purchaser harmless from and against any
and all Losses, howsoever incurred, which arise out of or result from:
(i) any breach of any representation or warranty of Seller
set forth in Sections 5.2 or 5.3 of this Agreement; provided, however, for
purposes of this Section 10.1(a)(i), the representation set forth in Section
5.2c of the MTC Agreement (as incorporated by reference herein) will be deemed
not to include the requirement of a Material Adverse Effect;
(ii) the material failure by Seller to perform any covenant
of Seller contained herein;
(iii) breaches by Seller, MMP II or the MMP II Licensee
Entities of other agreements and certificates specifically contemplated hereby;
(iv) any and all Taxes of Seller, MMP II and the MMP II
Licensee Entities (including any liability of Seller, MMP II or the MMP II
Licensee Entities for Taxes of any other entity or person) for any Pre-Closing
Tax Period;
(v) RESERVED;
(vi) RESERVED;
(vii) RESERVED.
(b) RESERVED.
10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3
of this Agreement after the Closing, Purchaser shall indemnify and hold Seller
harmless from and against any and all Losses, howsoever incurred, which arise
out of or result from:
(a) any breach by Purchaser of any representation or warranty of
Purchaser set forth in Section 6 of this Agreement;
(b) the material failure by Purchaser to perform any covenant of
Purchaser contained herein; or
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(c) any and all Taxes of MMP II and the MMP II Licensee Entities
(including any liability of MMP or the MMP II Licensee Entities for Taxes of any
other persons) for any Post-Closing Tax Period except to the extent that such
Taxes arise out of, result from or are attributable to a breach of any
representation, warranty or covenant of Sellers set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Seller's obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Purchaser agrees that the payment of any claim
(whether such claim is framed in tort, contract, or otherwise) made by Purchaser
for indemnification hereunder subsequent to the Closing Date, for whatever
reason, shall be limited to, and shall only be made from, the Indemnification
Amount in accordance with the Indemnification Escrow Agreement and, except for
claims against the Indemnification Amount, Purchaser waives and releases, and
shall have no recourse against, Seller as a result of the breach of any
representation, warranty, covenant or agreement of Seller contained herein, or
otherwise arising out of or in connection with the transactions contemplated
hereby, or the operation or the business of MMP II or the MMP II Licensee
Entities prior to the Closing, and such indemnification shall be the sole and
exclusive remedy for Purchaser with respect to any such claim for
indemnification after the Closing Date; provided, however, that nothing herein
shall be deemed to limit any rights or remedies that Purchaser may have for
Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with
the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Purchaser that, other
than with respect to Seller (but not including any partner, director, officer,
employee, agent or Affiliate Seller (including any shareholder, director,
officer, employee, agent or Affiliate of the Seller)) as expressly provided for
in Section 10.1, no partner, director, officer, employee, agent or Affiliate of
Seller (including any shareholder, director, officer, employee, agent or
Affiliate of Seller) shall have (i) any personal liability to Purchaser as a
result of the breach of any representation, warranty, covenant or agreement of
Seller contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby, or the operations or the business
of MMP II or the MMP II Licensee Entities prior to the Closing, or (ii) any
personal obligation to indemnify Purchaser for any of Purchaser's claims
pursuant to Section 10.1 and Purchaser waives and releases and shall
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have no recourse against any of such parties described in this Section 10.3(b)
as a result of the breach of any representation, warranty, covenant or agreement
of Seller contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations or the business of
MMP II or the MMP II Licensee Entities prior to the Closing; provided, however,
that nothing herein shall be deemed to limit any rights or remedies that
Purchaser may have for Seller's fraud.
(c) Notwithstanding any other provision of this Agreement to the
contrary, Seller shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement and the MMP Acquisition Documents exceeds Two Hundred Fifty
Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the
extent of the excess of Losses over the amount of One Hundred Twenty Five
Thousand Dollars ($125,000.00); provided, that this paragraph shall not apply to
indemnification pursuant to Section 10.1(a)(iv) and indemnification pursuant to
Section 10.1(a)(i) for breaches of the representations and warranties set forth
in Section 5.3r of this Agreement and Section 5.2m of the MTC Agreement as
incorporated by reference herein.
(d) In determining the amount of any Tax or other Loss for which
indemnification is provided under this Agreement, such Loss shall be (i) net of
any insurance recovery made by the indemnified party, (ii) reduced to take into
account any net Tax benefit realized by the indemnified party arising from the
deductibility of such Tax or Loss, and (iii) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Losses, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless a final determination with respect to the indemnified party or
any of its affiliates causes any such payment not to be treated as an adjustment
to the Purchase Price.
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(e) No claim for indemnification for Losses shall be made after
expiration of the applicable period set forth in Section 7.1 of the MTC
Agreement as incorporated by reference herein; provided that if Closing
hereunder takes place after expiration of all applicable periods referenced in
Section 7.1 of the MTC Agreement as incorporated by reference herein, no party
hereunder shall have any right of indemnification.
(f) Anything to the contrary in this Section 10.3
notwithstanding, the terms, conditions and limitations set forth in this Section
10.3 do not apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the indemnifying
party notice of any matter which an indemnified party has determined has given
or could give rise to a right of indemnification under this Agreement, stating
the nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice to the indemnifying party promptly thereafter
of all developments coming to such indemnified part(ies)' attention materially
affecting any matter relating to any indemnification claims.
(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified
party shall give prompt notice thereof to the indemnifying part(ies) and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume the
defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified
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party for any fees of other counsel or any other expenses, in each case incurred
by such indemnified party in connection with the defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the indemnified party from all liability arising out
of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects to
assume the defense of any action or claim, the indemnifying part(ies) shall not
be liable for any compromise or settlement of any such action or claim effected
without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement, including, without limitation, making available all
witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such notice
materially prejudices the indemnifying party.
(b) Seller shall have the right, at its own expense, to
control and make all decisions with respect to any Tax Proceeding relating
solely to Taxes of MMP II and the MMP II Licensee Entities for Taxable Periods
ending on or before the Closing Date; provided, that Purchaser and counsel of
its own choosing shall have the right, at Purchaser's own expense, to
participate fully in all aspects of the prosecution or defense of such Tax
Proceeding; and provided further that Seller shall not settle any such Tax
Proceeding without the prior written consent of Purchaser if such settlements
could increase the past, present or future Tax liability of Purchaser or any of
its Affiliates, or any Tax Liability of MMP II or the MMP II Licensee Entities
for any Post-Closing Tax Period by an amount greater than $25,000.
(c) Seller shall have the right, at its own expense, to
jointly control and participate with Purchaser in all Tax Proceedings relating
to Taxes of MMP II and the
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MMP II Licensee Entities for a Straddle Period. If Seller exercises such right,
neither party shall settle any such Tax Proceeding without the prior written
consent of the other.
(d) If Seller does not exercise its right to assume control of
or participate in any Tax Proceeding as provided under this Section 10.5,
Purchaser may, without waiving any rights to indemnification hereunder, defend
or settle the same in such manner as it may deem appropriate in its sole and
absolute discretion.
(e) RESERVED.
(f) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
-----------------------------------------------------------
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Seller shall have complied in all material respects with its
agreements and covenants contained herein and in the Time Brokerage Agreement to
be performed at or prior to the Closing, and the representations and warranties
of Seller contained herein shall be true and correct in all material respects on
and as of the Closing Date with the same effect as though made on and as of the
Closing Date, except that representations and warranties that were made as of a
specified date shall continue on the Closing Date to have been true as of the
specified date, and Purchaser shall have received a certificate of one of
Sellers' Agents, dated as of the Closing Date and signed by Sellers' Agent,
certifying as to the fulfillment of the condition set forth in this Section
11.1(a) ("Sellers' Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Assets.
(c) In the event the parties are required to file a Pre-merger
Notification and Report Form under the H-S-R Act, all applicable waiting periods
under the H-S-R Act shall have expired or been terminated.
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(d) The Final Order approving the applications for transfer of
control of the FCC Licenses shall have been obtained. All the material
conditions contained in the Final Order required to be satisfied on or prior to
the Closing Date shall have been duly satisfied and performed. Notwithstanding
the foregoing, other than conditions relating the broadcast industry generally,
if the consent of the FCC is conditional or qualified in any manner that has a
material adverse effect on Purchaser or requires Purchaser or any of its
subsidiaries to divest any television or radio station owned, operated or
programmed by Purchaser or any of its subsidiaries (other than those acquired
pursuant to the MMP Acquisition Documents), Purchaser may, nevertheless, in its
sole discretion, require the consummation of the transactions contemplated by
this Agreement, but shall not be required to do so.
(e) Seller shall have delivered to Purchaser at the Closing each
document required by Section 12.1 hereof.
(f) Since the date of this Agreement through the Closing Date,
there shall not have been a material adverse effect with respect to the Assets.
(g) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the
distribution of MMP II to Seller shall have occurred pursuant to the Assignment
and Assumption Agreement and the Distribution Agreement substantially in the
form attached to the MTC Agreement as Exhibit C, and MMP and MMP II shall have
entered into one or more Time Brokerage Agreements generally in the form
(subject to such revisions, additional and deletions as determined by counsel to
MMP II and Purchaser prior to the Closing) attached to the MTC Agreement as
Exhibit D.
(h) The closings under the MMP Acquisition Documents shall have
occurred or occur simultaneously with the Closing.
(i) RESERVED
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11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation
of Seller to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Seller shall have received a certificate of Purchaser, dated as of the Closing
Date and signed by an officer of Purchaser, certifying as to the fulfillment of
the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down
Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Seller
from consummating the transactions contemplated hereby.
(c) In the event the parties are required to file a Pre-merger
Notification and Report Form under the H-S-R Act, all applicable waiting periods
under the H-S-R Act shall have expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Seller at the Closing the
Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the MMP Acquisition Documents shall have
occurred or occur simultaneously with the Closing.
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SECTION 12
DELIVERIES AT THE CLOSING
-------------------------
12.1. DELIVERIES BY SELLERS. At the Closing, Seller will deliver or
cause to be delivered at the Closing to Purchaser:
(a) Sellers' Bring-Down Certificate;
(b) a legal opinion of Clark & Stant, P.C., counsel to Seller
and MMP II substantially in the form attached as Exhibit B to the MTC Agreement;
(c) a legal opinion of FCC counsel to the MMP II Licensee
Entities in the form attached hereto as Exhibit C to the MTC Agreement;
(d) a bill of sale, assignment and other transfer documents,
dated as of the Closing Date and executed by Seller transferring the Assets to
Purchaser;
(e) RESERVED;
(f) a certificate as to the existence and good standing of
Seller issued by the Secretary of the State Corporation Commission of the
Commonwealth of Virginia dated not more than five (5) Business Days before the
Closing Date;
(g) a certificate as to the existence of MMP II issued by the
Secretary of the State Corporation Commission of the Commonwealth of Virginia
not more than five (5) Business Days before the Closing Date and certificates
issued by the appropriate governmental authorities in each jurisdiction in which
MMP II is qualified to do business and a certificate as to the existence for
each of the MMP II Licensee Entities of the Secretary of the State Corporation
Commission of the Commonwealth of Virginia dated not more than five (5) Business
Days before the Closing Date;
(h) receipt for Purchase Price;
(i) RESERVED;
(j) RESERVED;
(k) RESERVED;
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(l) RESERVED;
(m) RESERVED;
(n) RESERVED;
(o) RESERVED
(p) RESERVED;
(q) RESERVED;
(r) such other documents as Purchaser shall reasonably
request.
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Seller or MMP II, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit D to the MTC Agreement
hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) RESERVED;
(e) a certificate as to the existence and good standing of the
Purchaser issued by the Maryland Department of Assessments and Taxation of the
State of Maryland dated as of the Closing Date;
(f) RESERVED;
(g) such other documents as Seller shall reasonably request.
SECTION 13
EXPENSES
--------
Except as provided in Sections 9.4, 9.5 and 17.12, each party will pay
its own fees, expenses, and disbursements and those of its counsel in connection
with the subject matter of this Agreement (including the negotiations with
respect hereto and the
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preparation of any documents) and all other costs and expenses incurred by it in
the performance and compliance with all conditions and obligations to be
performed by it pursuant to this Agreement or as contemplated hereby.
SECTION 14
TERMINATION
-----------
14.1 TERMINATION. This Agreement shall terminate upon a termination of
any of the MMP Acquisition Documents. In addition, this Agreement may be
terminated:
(a) At any time by mutual written consent of Purchaser and
Seller;
(b) By either Purchaser or Seller, if the terminating party is
not in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before December
31, 2000 (the "Termination Date");
(c) by Seller, if Seller's not in default or breach in any
material respect of their obligations under this Agreement, if all of the
conditions in Section 11.2 have not been satisfied or waived by the date
scheduled for the Closing;
(d) by Purchaser, if Purchaser is not in default or breach in
any material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing;
(e) RESERVED
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Seller pursuant to Section14.1 hereof, prompt written
notice thereof shall forthwith be given to the other party and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned
without further action by any of the parties hereto, but subject to and without
limiting any other rights of the parties specified herein in the event a party
is in default or breach in any material respect of its obligations under this
Agreement. If this Agreement is terminated as provided herein, all filings,
applications and other submissions relating to the transactions contemplated
hereby as to which termination has occurred shall, to the extent practicable, be
withdrawn from the agency or other Person to which such filing is made.
(b) If this Agreement is terminated pursuant to Section
14.1(d),
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Purchaser shall have the right to pursue all remedies available hereunder at law
or in equity, including, without limitation, the right to seek specific
performance and/or actual monetary damages, but excluding consequential and
incidental damages. In recognition of the unique character of the property to be
sold hereunder, and the damages which Purchaser will suffer in the event of a
termination pursuant to the foregoing Sections of this Agreement, Seller hereby
waives any defense that Purchaser has an adequate remedy at law for the breach
of this Agreement by Seller.
(c) If this Agreement is terminated pursuant to Section
14.1(c) Seller shall have the right to pursue all remedies available hereunder
at law or in equity, including, without limitation, the right to seek specific
performance and/or actual monetary damages, but excluding consequential and
incidental damages. In recognition of the unique character of the property to be
sold hereunder, and the damages which Seller will suffer in the event of a
termination pursuant to the foregoing Sections of this Agreement, Purchaser
hereby waives any defense that Purchaser has an adequate remedy at law for the
breach of this Agreement by Seller.
(d) RESERVED
(e) Prior to the First Closing, a notice of termination made
under any provision of Section 14.1 of this Agreement shall be deemed to be a
notice of termination under the termination provisions of the MMP Acquisition
Documents.
(f) In the event of a default by either party that results in
a lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
SECTION 15
NOTICES
-------
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as follows:
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To Purchaser: SINCLAIR COMMUNICATIONS, INC.
2000 W. 41st Street
Baltimore, Maryland 21211
Attention: David D. Smith
Telecopy: (410) 467-5043
Telephone: (410) 662-1008
with copies Sinclair Communications, Inc.
(which shall not 2000 W. 41st Street
constitute notice) to: Baltimore, Maryland 21211
Attention: General Counsel
Telecopy: (410) 662-4707
Telephone: (410) 662-1422
and
Thomas & Libowitz, P.A.
Suite 1100
100 Light Street
Baltimore, Maryland 21202
Attention: Steven A. Thomas
Telecopy: (410) 752-2046
Telephone: (410) 752-2468
To MMP: Anthony R. Ignaczak
Quad C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Telecopy: (804) 979-1145
Telephone: (804) 979-9227
Allen B. Rider, III
Colonade Capital, L.L.C.
13th Floor
901 East Byrd
Richmond, Virginia 23219
Telecopy: (804) 782-6606
Telephone: (804) 782-3512
33
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Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
Telephone: (757) 499-880
If to Seller and Max Television Company
MMP II: 900 Laskin Road
Virginia Beach, Virginia 23451
Telecopy: (757) 437-0034
Telephone: (757) 437-9000
Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B.
Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the
"Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall
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be unanimous. In the event of the death, incapacity or liquidation of any of
Sellers' Agents, such person or entity shall not be replaced, and the remaining
Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the
Sellers' Agents from and against and in respect of any and all liabilities,
damages, claims, costs, and expenses, including, but not limited to attorneys'
fees, arising out of or due to any action by them as the Sellers' Agents and any
and all actions, proceedings, demands, assessments, or judgments, costs, and
expenses incidental thereto, except to the extent that the same result from bad
faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be
entitled to rely exclusively upon any communications given by the Sellers'
Agents on behalf of Seller, and shall not be liable for any action taken or not
taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to
disregard any notices or communications given or made by Seller unless given or
made through the Sellers' Agents.
SECTION 17
MISCELLANEOUS
-------------
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to or referenced in this Agreement or incorporated by reference in this
Agreement constitute an integral part of this Agreement as if fully rewritten
herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the MMP Acquisition Documents,
and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and
the documents to be delivered hereunder and thereunder constitute the entire
understanding and agreement between the parties hereto concerning the subject
matter hereof. All negotiations and writings between the parties hereto are
merged into this Agreement, the MMP Acquisition Documents, the FCC Licensee
Transfer Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise,
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in relation thereto between the parties other than those incorporated herein or
to be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended except
in writing signed by each of the Seller, MMP, Purchaser and MMP II.
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise by Seller, MMP or MMP II, without the prior written consent of
Purchaser. Purchaser may assign its rights and obligations hereunder to any
Person without the prior written consent of any other party hereto so long as
Purchaser is not relieved of its obligations hereunder. Purchaser shall promptly
notify Seller of any assignment. In the event of such permitted assignment or
other transfer, all of the rights, obligations, liabilities, and other terms and
provisions of this Agreement shall be binding upon, inure to the benefit of, and
be enforceable by and against, the respective successors and assigns of the
parties hereto, whether so expressed or not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
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<PAGE>
17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if required by applicable law or otherwise as a result of its, or
its Affiliate's, being a public company, provided that prior notice of such
disclosure is given to the other party hereto.
17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will
have no adequate remedy at law if Seller fails to perform its obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however, that all
transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Seller. Purchaser hereby waives compliance with the provisions of any applicable
bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The parties hereto acknowledge and agree that the
preparation and drafting of this Agreement and the Exhibits hereto are the
result of the efforts of all parties to this Agreement and every covenant, term,
and provision of this Agreement shall be construed according to its fair meaning
and shall not be construed against any particular party as the drafter of such
covenant, term, and/or provision. The
37
<PAGE>
parties agree that this Agreement is to be construed in a manner consistent with
the terms of the MMP Acquisition Documents; provided, however, that in the event
the terms and conditions of this Agreement vary or are inconsistent with the
terms and conditions of the Time Brokerage Agreement as executed by the parties
thereto and in effect, the terms and conditions of the Time Brokerage Agreement
shall prevail over the terms and conditions of this Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
MAX TELEVISION COMPANY,
a Virginia corporation
By
-------------------------------------
its
----------------------------
MAX MEDIA PROPERTIES LLC
By
-------------------------------------
its
----------------------------
MAX MEDIA PROPERTIES II LLC,
a Virginia limited liability company
By
-------------------------------------
its
----------------------------
SINCLAIR COMMUNICATIONS, INC.,
a Maryland corporation
By
-------------------------------------
its
----------------------------
<PAGE>
ANNEX 1
DEFINITIONS
As used in the attached Asset Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Assets" has the meaning set forth in the Recitals.
"Basket Amount" shall have the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligations,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
"Business" means the business of owning the FCC Licenses.
"Business Day" means any day on which banks in New York City are open
for business.
<PAGE>
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" refers to Seller in this Agreement.
"Company Interests" shall have the meaning set forth in Section 5.3t.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Assets to Purchaser to maintain the validity and effectiveness (any default
or violation of the terms thereof) of any Material Contract and any licenses
(including, without limitation, the FCC Licenses) to be transferred to
Purchaser, or otherwise to consummate the transactions contemplated by this
Agreement.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any Person that together with MMP II, as
applicable, would be or was at any time treated as a single employer under
Section 414 of the Code or Section 4001 of ERISA and any general partnership of
which the Company or MMP, as applicable, is or has been a general partner.
2
<PAGE>
"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Application" means the applications requesting approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control or the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Employees" means those employees employed by Seller, MMP II and
the MMP II Licensee Entities necessary for each of those entities to discharge
its obligations under the Time Brokerage Agreement.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3f
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"First Closing" means the closing under the MMP Acquisition Documents.
"GAAP" means generally accepted accounting principles.
"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.
"H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
3
<PAGE>
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service mark registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Investors Agreement" has the meaning set forth in the Recitals.
"Investors" has the meaning set forth in the Recitals.
"Knowledge or knowledge" shall mean with respect to Seller, MMP, MMP II
and the MMP II FCC Licensee Entities the actual knowledge (without any
requirement of inquiry except as otherwise provided in the Agreement) of A. E.
Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb,
David J. Wilhelm and Jacquelyn D. Smullen, the managers and officers of MMP II,
and the officers and directors of Seller.
"LMA Stations" shall have the meaning set forth in the Recitals.
"License Assets" means those assets maintained by MTC, MMP II and the
MMP II Licensee Entities in order for those entities to comply with their
obligations under the Time Brokerage Agreement.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Acquisition Documents" shall mean collectively the MRI Agreement,
the MTC Agreement, the Investors Agreement, and the Management Agreement.
"MMP II Licensee Entities" shall have the meaning set forth in the
Recitals.
"MMP II FCC Applications" means the application requesting the approval
and
4
<PAGE>
consent of the FCC to the transfer of control of Television Stations WKEF-TV and
WEMT-TV from MMP to MTC.
"MMP II Stations" means television broadcast stations WKEF-TV and
WEMT-TV.
"MMP Real Property" means all real property owned or leased by MMP.
"MRI" shall have the meaning set forth in the Recitals.
"MRI Agreement" shall have the meaning set forth in the Recitals.
"MTC Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Management Agreement" shall have the meaning set forth in the
Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of MMP II or either of the MMP II Licensee
Entities.
"Material Contract" means all agreements to which MMP II is a party or
by or to which it or its assets or properties are bound, except: (i) agreements
for the cash sale of advertising time with a term of less than six months, (ii)
agreements cancelable on no more than 90 days' notice without material penalty,
or (iii) agreements which are otherwise immaterial to the Business and the MMP
II Stations.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative
5
<PAGE>
(at any level of government), a corporation, partnership, joint venture or other
entity or association, as the context requires.
"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
"Purchase Price" has the meaning set forth in Section 3.1 of the
Agreement.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
"Qualified Plan" shall mean any MMP II Benefit Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by Seller.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Sellers' Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Stations" has the meaning set forth in the recitals to the Agreement.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this
6
<PAGE>
Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Television Licensee" shall have the meaning set forth in the Recitals.
"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
7
<PAGE>
"Time Brokerage Agreement" means that agreement entered into by
Purchaser, MMP II and the MMP II Licensee Entities at the First Closing.
"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
8
ASSET PURCHASE AGREEMENT
BY AND AMONG
TUSCALOOSA BROADCASTING, INC.,
WPTZ LICENSEE, INC.,
WNNE LICENSEE, INC.
AS SELLERS
AND
STC BROADCASTING OF VERMONT, INC.
AS BUYER
DATED AS OF FEBRUARY 3, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND REFERENCES........................................2
ARTICLE 2. SALE AND PURCHASE OF ASSETS.......................................2
2.1. Asset Sale and Purchase of Assets.................................2
2.1.1. FCC Licenses............................................3
2.1.2. Real and Leased Property Interests......................3
2.1.3. Tangible Personal Property..............................3
2.1.4. Intellectual Property...................................4
2.1.5. Program Contracts.......................................4
2.1.6. Trade-out Agreements....................................4
2.1.7. Broadcast Time Sales Agreement..........................4
2.1.8. Network Affiliation Agreements..........................4
2.1.9. Operating Contracts.....................................5
2.1.10. Vehicles................................................5
2.1.11. Files and Records.......................................5
2.1.12. Auxiliary Facilities....................................5
2.1.13. Permits and Licenses....................................5
2.1.14. Goodwill................................................5
2.1.15. Other Assets............................................6
2.2. Excluded Assets...................................................6
2.2.1. Cash....................................................6
2.2.2. Accounts Receivable.....................................6
2.2.3. Personal Property Disposed Of...........................6
2.2.4. Insurance...............................................6
2.2.5. Employee Plans and Assets...............................7
2.2.6. Right to Tax Refunds....................................7
2.2.7. Certain Books and Records...............................7
2.2.8. Third-Party Claims......................................7
2.2.9. Rights Under this Agreement and the Heritage Agreement..7
2.2.10. Names...................................................7
2.2.11. Deposit and Prepaid Expenses............................7
2.2.12. WFFF Licenses...........................................7
2.2.13. Miscellaneous Excluded Assets...........................8
2.3. Escrow Deposit....................................................8
2.4. Purchase Price....................................................8
2.5. Payment of Purchase Price.........................................8
2.6. Proration Amount..................................................8
<PAGE>
TABLE OF CONTENTS (continued)
Page
----
2.7. Allocation of Base Purchase Price................................10
2.8. Assumption of Liabilities........................................11
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLERS........................12
3.1. Organization and Standing........................................12
3.2. Authorization....................................................12
3.3. Compliance with Laws.............................................12
3.4. Consents and Approvals; No Conflicts.............................13
3.5. Financial Statements; Undisclosed Liabilities....................13
3.6. Absence of Certain Changes or Events.............................14
3.7. Absence of Litigation............................................14
3.8. Assets...........................................................14
3.9. FCC Matters......................................................15
3.10. Real Property....................................................15
3.11. Intellectual Property............................................16
3.12. Station Contracts................................................17
3.13. Taxes............................................................17
3.14. Employee Benefit Plans...........................................18
3.15. Labor Relations..................................................20
3.16. Environmental Matters............................................21
3.17. Insurance........................................................21
3.18. Reports..........................................................21
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER..........................22
4.1. Organization and Standing........................................22
4.2. Authorization....................................................22
4.3. Consents and Approvals; No Conflicts.............................22
4.4. Availability of Funds............................................23
4.5. Qualification of Buyer...........................................23
4.6. WARN Act.........................................................24
4.7. No Outside Reliance..............................................24
4.8. Interpretation of CertainProvisions..............................24
ARTICLE 5. PRE-CLOSING FILINGS..............................................25
5.1. Applications for FCC Consent.....................................25
5.2. Hart-Scott-Rodino................................................25
5.3. Non-Required Actions.............................................25
ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLERS..............................25
6.1. Negative Covenants...............................................25
6.1.1. Dispositions; Mergers..................................26
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<PAGE>
TABLE OF CONTENTS (continued)
Page
----
6.1.2. Accounting Principles and Practices....................26
6.1.3. Trade-out Agreements...................................26
6.1.4. Broadcast Time Sales Agreements........................26
6.1.5. Network Affiliation Agreements and LMAs................26
6.1.6. Additional Agreements..................................26
6.1.7. Breaches...............................................27
6.1.8. Employee Matters.......................................27
6.1.9. Actions Affecting FCC Licenses.........................27
6.1.10. Programming............................................27
6.1.11. Encumbrances...........................................28
6.1.12. Transactions With Affiliates...........................28
6.2. Affirmative Covenants............................................28
6.2.1. Preserve Existence.....................................28
6.2.2. Normal Operations......................................28
6.2.3. Maintain FCC Licenses..................................29
6.2.4. Network Affiliation....................................29
6.2.5. Station Contracts......................................29
6.2.6. Taxes..................................................29
6.2.7. Access.................................................29
6.2.8. Insurance..............................................30
6.2.9. Financial Statements...................................30
6.2.10. Consents...............................................31
6.2.11. Corporate Action.......................................32
6.2.12. Environmental Audit....................................32
6.2.13. Heritage Agreement.....................................32
6.3. Confidentiality..................................................32
6.4. Heritage Acquisition.............................................33
ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER................................33
7.1. Confidentiality..................................................33
7.2. Corporate Action.................................................34
7.3. Access...........................................................34
7.4. Collection of Receivables........................................35
ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLERS AND BUYER........35
8.1. Possession and Control...........................................35
8.2. Risk of Loss.....................................................35
8.3. Public Announcements.............................................36
8.4. Employee Matters.................................................37
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<PAGE>
8.5. Disclosure Schedules.............................................38
8.6. Bulk Sales Laws..................................................39
8.7. Tax Matters......................................................39
8.8. Preservation of Books and Records................................39
8.9. TBA Agreement....................................................39
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER....................40
9.1. Closing Under the Heritage Agreement.............................40
9.2. Representations and Covenants....................................40
9.3. No Transmission Defects..........................................40
9.4. Delivery of Documents............................................41
9.5. FCC Order........................................................41
9.6. Hart-Scott-Rodino................................................41
9.7. Legal Proceedings................................................41
ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS...................41
10.1. Closing Under the Heritage Agreement.............................41
10.2. Representations and Covenants....................................42
10.3. Delivery by Buyer................................................42
10.4. FCC Order........................................................42
10.5. Hart-Scott-Rodino................................................42
10.6. Legal Proceedings................................................42
ARTICLE 11. CLOSING; NON-LICENSE TRANSFER....................................43
11.1. Closing..........................................................43
11.2. Non-License Transfer.............................................44
11.3. Time and Place of Non-License Transfer and Closing...............44
11.4. Deliveries by Sellers............................................44
11.4.1. Agreements and Instruments.............................44
11.4.2. Consents...............................................45
11.4.3. Certified Resolutions..................................45
11.4.4. Officers' Certificates.................................45
11.4.5. Good Standing Certificates.............................45
11.5. Deliveries by Buyer..............................................46
11.5.1. Purchase Price Payment.................................46
11.5.2. Agreements and Instruments.............................46
11.5.3. Certified Resolutions..................................46
11.5.4. Officers' Certificate..................................46
ARTICLE 12. SURVIVAL; INDEMNIFICATION.........................................46
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<PAGE>
TABLE OF CONTENTS (continued)
Page
----
12.1. Survival of Representations......................................47
12.2. Indemnification By Sellers.......................................47
12.3. Indemnification By Buyer.........................................47
12.4. Limitations on Indemnification...................................48
12.5. Conditions of Indemnification....................................49
12.6. Cure of Breach...................................................50
ARTICLE 13. TERMINATION......................................................51
13.1. Termination by the Parties.......................................51
13.2. Automatic Termination............................................51
13.3. Effect ofTermination.............................................51
ARTICLE 14. REMEDIES.........................................................52
14.1. Default by Buyer.................................................52
14.2. Liquidated Damages...............................................52
14.3. Specific Performance.............................................52
ARTICLE 15. GENERAL PROVISIONS...............................................53
15.1. Additional Actions, Documents and Information....................53
15.2. Brokers..........................................................53
15.3. Expenses and Taxes...............................................53
15.4. Notices..........................................................54
15.5. Waiver...........................................................56
15.6. Benefit and Assignment...........................................56
15.7. Entire Agreement; Amendment......................................56
15.8. Severability.....................................................57
15.9. Headings.........................................................57
15.10. Governing Law....................................................57
15.11. Signature in Counterparts........................................57
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<PAGE>
SCHEDULES
Schedule 2.1.1 FCC Licenses
Schedule 2.1.2 Real Property Interests
Schedule 2.1.3 Tangible Personal Property
Schedule 2.1.5 Program Contracts
Schedule 2.1.6 Trade-out Agreements
Schedule 2.1.8 Network Affiliation Agreements
Schedule 2.1.9 Operating Contracts
Schedule 2.1.10 Vehicles
Schedule 2.2.13 Excluded Assets
Schedule 3.4 Consents
Schedule 3.6 Absence of Certain Changes or Events
Schedule 3.7 Litigation
Schedule 3.8 Encumbrances on Assets
Schedule 3.9 FCC Matters
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Employee Matters
Schedule 3.16 Environmental Matters
Schedule 3.17 Insurance
Schedule 4.5.1 Buyer Stations
Schedule I License Assets
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<PAGE>
EXHIBITS
EXHIBIT A Form of Bill of Sale and Assignment of Assets
EXHIBIT B Form of Assignment of FCC Licenses
EXHIBIT C Form of Assignment of Contracts and Leases
EXHIBIT D Form of Assumption Agreement
EXHIBIT E Form of TBA Agreement
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 3rd day of February, 1998, by and among STC BROADCASTING OF VERMONT, INC.,
a Delaware corporation ("Buyer"), TUSCALOOSA BROADCASTING, INC., a Maryland
corporation ("Tuscaloosa"), WPTZ LICENSEE, INC., a Maryland corporation ("WPTZ
Licensee"), and WNNE LICENSEE, INC., a Maryland corporation ("WNNE Licensee")
(Tuscaloosa, WPTZ Licensee and WNNE Licensee, collectively, the "Sellers" and,
individually a "Seller").
WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 16,
1997 (the "Heritage Agreement"), by and among Sinclair Broadcast Group, Inc., a
Maryland corporation ("Sinclair") and certain indirect subsidiaries of Heritage
Media Corporation, a Delaware corporation ("HMC"), Sinclair has agreed to buy,
and such subsidiaries have agreed to sell, certain broadcast stations owned,
controlled or operated by such subsidiaries, including (i) television broadcast
station WPTZ-TV, Channel 5, North Pole, New York ("WPTZ"); (ii) certain assets
and rights relating to television broadcast station WFFF-TV, Channel 44,
Burlington, Vermont ("WFFF"); and (iii) television broadcast station WNNE-TV,
Channel 31, Hartford, Vermont ("WNNE") (WPTZ, WFFF and WNNE each, individually,
a "Station" and, collectively, the "Stations") (such subsidiaries of HMC
transferring assets related to the Stations pursuant to the Heritage Agreement
are referred to herein as the "Heritage Subsidiaries");
WHEREAS, each Seller is a wholly-owned indirect subsidiary of Sinclair,
and Sinclair has assigned to Sellers Sinclair's rights to acquire the Stations,
subject to and in accordance with the terms and conditions of the Heritage
Agreement;
WHEREAS, pursuant to a Transfer Agreement dated as of May 2, 1997,
among William G. Evans (the "Trustee"), HMC, The News Corporation Limited, a
South Australia corporation and Heritage Media Services, Inc., a Iowa
corporation and wholly-owned subsidiary of HMC ("HMSI"), on August 20, 1997,
HMSI transferred to the Trustee to hold in trust for the benefit of HMSI, all of
the outstanding capital stock of HMI Broadcasting Corp., a Delaware corporation
and owner of all of the outstanding capital stock of the Heritage Subsidiaries;
WHEREAS, pursuant to a guaranty given as of the date hereof by Sinclair
to Buyer, Sinclair has guaranteed to Buyer the prompt and complete performance
of the obligations of Sellers arising under this Agreement and the other Seller
Documents;
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WHEREAS, Buyer is a wholly-owned indirect subsidiary of STC
Broadcasting, Inc., a Delaware corporation ("STC");
WHEREAS, pursuant to a guaranty given as of the date hereof by STC to
Sellers, STC has guaranteed to Sellers the prompt and complete performance of
the obligations of Buyer arising under this Agreement and the other Buyer
Documents;
WHEREAS, the parties hereto desire to enter into this Agreement to
provide for the sale, assignment and transfer by Sellers to Buyer of the assets
of the Stations, all subject to the terms described in this Agreement; and
WHEREAS, upon the satisfaction of certain conditions set forth herein,
the parties desire to enter into operating agreements pursuant to which Buyer
will commence operating the Stations, subject to compliance with all
requirements of the FCC.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in Annex I attached hereto and incorporated
herein for all purposes of this Agreement (such definitions to be equally
applicable to both the singular and plural forms of the terms defined). Unless
otherwise specified, all references herein to "Articles" or "Sections" are to
Articles or Sections of this Agreement.
ARTICLE 2.
SALE AND PURCHASE OF ASSETS
2.1. ASSET SALE AND PURCHASE OF ASSETS.
Subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, Sellers shall sell,
assign, transfer, convey and deliver to Buyer free and clear of any Encumbrances
other than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for
and accept from Sellers, all right, title and interest of Sellers in, to and
under all real, personal and mixed assets, rights, benefits and privileges, both
tangible and
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intangible, owned, leased, used or useful by Sellers in connection with the
business and operations of the Stations (collectively, the "Assets"); but
excluding the Excluded Assets described in Section 2.2.
The Assets shall include, without limitation, all right, title and
interest of Sellers in, to and under the following:
2.1.1. FCC LICENSES.
All licenses, permits and other authorizations issued by the
FCC to any Seller or any Heritage Subsidiary for the operation of the Stations
(the "FCC Licenses"), including without limitation those listed in Schedule
2.1.1, and all applications therefor, together with any renewals, extensions or
modifications thereof and additions thereto.
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property owned by any Seller or any Heritage
Subsidiary including, without limitation, all land, fee interests, easements and
other interests of every kind and description in real property, buildings,
structures, fixtures, appurtenances, towers and antennae, and other improvements
thereon owned by any Seller or any Heritage Subsidiary used or useful in
connection with the business and operations of the Stations ("Real Property"),
including, without limitation, all of those items listed in Schedule 2.1.2.
(b) All the real property leasehold interests of any Seller
or any Heritage Subsidiary including, without limitation, leases and subleases
of any land, easements and other real property leasehold interests of every kind
and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon leased by any
Seller or any Heritage Subsidiary in connection with the business and operations
of the Stations ("Leased Property"), including, without limitation, all of those
items listed in Schedule 2.1.2.
2.1.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures, furnishings, machinery,
computers, equipment, inventory, spare parts, supplies, office materials and
other tangible property of every kind and description owned, leased or used by
any Seller or any Heritage Subsidiary in connection with the business and
operations of the Stations, together with any replacements thereof and additions
thereto made before the Closing Date, and less any retirements or dispositions
thereof made before the Closing Date in the Ordinary Course of Business,
including, without limitation, those items which have a book value in excess of
Five Thousand Dollars ($5,000),
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all of which as of the date of the Heritage Agreement are set forth and
identified in Schedule 2.1.3.
2.1.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises, trademarks,
trade names, jingles, slogans, logotypes and other similar intangible assets
maintained, owned, leased or used by any Seller or any Heritage Subsidiary in
connection with the business and operations of the Stations (including any and
all applications, registrations, extensions and renewals relating thereto) (the
"Intellectual Property"), and all of the rights, benefits and privileges
associated therewith including, without limitation, the right to use the call
letters for the Stations.
2.1.5. PROGRAM CONTRACTS.
The program licenses and contracts under which any Seller or
Heritage Subsidiary is authorized to broadcast programs on the Stations
(collectively the "Program Contracts") including, without limitation, (a) all
program (cash and non-cash) licenses and contracts listed on Schedule 2.1.5, and
(b) any other such program contracts that are entered into between the date of
this Agreement and the Closing Date in accordance with the terms of this
Agreement.
2.1.6. TRADE-OUT AGREEMENTS.
All contracts and agreements (excluding Program Contracts)
pursuant to which any Seller or Heritage Subsidiary has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash (collectively, the "Trade-out
Agreements") including, without limitation, those set forth and identified in
Schedule 2.1.6.
2.1.7. BROADCAST TIME SALES AGREEMENT.
All contracts and agreements pursuant to which any Seller or
Heritage Subsidiary has sold commercial air time on the Stations for cash
(collectively the "Time Sales Agreements").
2.1.8. NETWORK AFFILIATION AGREEMENTS.
All network affiliation agreements or other contracts of the
Stations with any television broadcast network (collectively, the "Network
Agreements") including, without limitation, those listed on Schedule 2.1.8.
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2.1.9. OPERATING CONTRACTS.
All other operating contracts and agreements relating to the
business or operations of the Stations, all material such contracts as of the
date of the Heritage Agreement being listed on Schedule 2.1.9 (including,
without limitation, any LMA, all employment agreements and talent contracts, all
leases and subleases relating to the Leased Property, all agreements relating to
any motor vehicles, and all national and local advertising representation
agreements for the Stations), together with all contracts and agreements that
are entered into between the date of the Heritage Agreement and the Closing Date
in accordance with the terms of this Agreement (collectively, the "Operating
Contracts" and together with the Program Contracts, Trade-out Agreements, Time
Sales Agreements and the Network Agreements, the "Station Contracts").
2.1.10. VEHICLES.
All automotive equipment and motor vehicles maintained,
owned, leased or otherwise used by any Seller or any Heritage Subsidiary in
connection with the business and operations of the Stations, including, without
limitation, those set forth and described in Schedule 2.1.10.
2.1.11. FILES AND RECORDS.
All engineering, business and other books, papers, logs,
files and records pertaining to the business and operations of the Stations, but
not the organizational documents and records described in Section 2.2.7.
2.1.12. AUXILIARY FACILITIES.
All translators, earth stations, and other auxiliary
facilities, and all applications therefor owned, leased or otherwise used or
useful by any Seller or any Heritage Subsidiary in connection with the business
and operations of the Stations.
2.1.13. PERMITS AND LICENSES.
All permits, approvals, orders, authorizations, consents,
licenses, certificates, franchises, exemptions of, or filings or registrations
with, any court or Governmental Authority (other than the FCC) in any
jurisdiction, which have been issued or granted to or are owned or used or
useful by any Seller or any Heritage Subsidiary in connection with the business
and operations of the Stations and all pending applications therefor.
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2.1.14. GOODWILL.
The business of the Stations as a "going concern", customer
relationships and goodwill.
2.1.15. OTHER ASSETS.
All other real, personal and mixed assets, rights, benefits
and privileges, both tangible and intangible, acquired by Sellers pursuant to
the Heritage Agreement that are owned, leased, used or useful in connection with
the business and operations of the Stations.
2.2. EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this Agreement, there shall
be excluded from the Assets and retained by Sellers, to the extent in existence
as of the Closing Date, the following assets (collectively, the "Excluded
Assets").
2.2.1. CASH.
All cash, cash equivalents or deposits held by Sellers, all
interest payable in connection with any such cash, cash equivalents or deposits
or short term investments, bank balances and rights in and to bank accounts,
marketable and other securities of Sellers.
2.2.2. ACCOUNTS RECEIVABLE.
All Accounts Receivable arising out of the business and
operations of the Stations.
2.2.3. PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of or consumed in the
Ordinary Course of Business as permitted by this Agreement.
2.2.4. INSURANCE.
All contracts of insurance and all insurance plans and the
assets thereof.
2.2.5. EMPLOYEE PLANS AND ASSETS.
All Plans, Benefit Arrangements (except for any Station
Contracts, Proration Items or other matters which are specifically assumed by
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Buyer pursuant to the terms hereof), Qualified Plans and Welfare Plans and the
assets thereof.
2.2.6. RIGHT TO TAX REFUNDS.
Any and all claims of Sellers with respect to any Tax
refunds.
2.2.7. CERTAIN BOOKS AND RECORDS.
All of each Seller's (a) organizational documents, corporate
books and records (including minute books and stock ledgers and records), and
originals of account books of original entry, (b) duplicated copies of any
books, records, accounts, checks, payment records, Tax records (including
payroll, unemployment, real estate and other Tax records) and other similar
books, records and information relating to such Seller's operation of the
business of the Stations prior to the Closing Date, (c) records prepared by or
on behalf of such Seller in connection with the sale of the Stations, and (d)
records and documents relating to any Excluded Assets.
2.2.8. THIRD-PARTY CLAIMS.
All rights and claims of Sellers whether mature, contingent
or otherwise, against third parties relating to the Assets or the Stations,
whether in tort, contract, or otherwise.
2.2.9. RIGHTS UNDER THIS AGREEMENT AND THE HERITAGE AGREEMENT.
All rights of Sellers under or pursuant to this Agreement and
the Heritage Agreement or any other rights in favor of Sellers pursuant to the
other agreements contemplated hereby or thereby.
2.2.10. NAMES.
All rights to the names "Sinclair Broadcasting", "Heritage
Broadcasting" and "Heritage Media" and any logo or variation thereof and the
goodwill associated therewith.
2.2.11. DEPOSIT AND PREPAID EXPENSES.
All deposits and prepaid expenses of Sellers, provided,
however, any deposit and prepaid expenses shall be included in the Assets
conveyed pursuant hereto to the extent that any Seller receives a credit
therefor in the calculation of the Proration Amount pursuant to Section 2.6.
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2.2.12. WFFF LICENSES.
All licenses, permits and other authorizations issued by the
FCC for the operation of WFFF (all of such licenses, permits and authorizations
being issued to Champlain Valley Telecasting).
2.2.13. MISCELLANEOUS EXCLUDED ASSETS.
The assets listed and identified on Schedule 2.2.13.
2.3. ESCROW DEPOSIT.
For and in partial consideration of the execution and delivery of this
Agreement, simultaneously with the execution and delivery of this Agreement,
Buyer is depositing in escrow with the Deposit Escrow Agent an original,
irrevocable letter of credit (the "Letter of Credit") issued for the benefit of
Sellers and the Deposit Escrow Agent by The Chase Manhattan Bank for an amount
equal to SEVEN MILLION TWO HUNDRED THOUSAND DOLLARS ($7,200,000) (the
"Deposit"), such Letter of Credit to be held in accordance with the terms and
conditions of the Deposit Escrow Agreement. Buyer and Sellers shall cause the
Letter of Credit to be returned to Buyer on the Transfer Date.
2.4. PURCHASE PRICE.
For and in consideration of the conveyances and assignments of the
Assets described herein and in addition to the assumption of Liabilities as set
forth in Section 2.8, Buyer agrees to pay to Sellers, and Sellers agree to
accept from Buyer, an amount equal to SEVENTY TWO MILLION DOLLARS ($72,000,000)
(the "Base Purchase Price"), plus or minus (as the case may be) the Proration
Amount (collectively, the "Purchase Price").
2.5. PAYMENT OF PURCHASE PRICE.
2.5.1. At the Non-License Transfer pursuant to Section 11.2, Buyer
shall pay to Sellers by wire transfer of immediately available funds to an
account which will be identified by Sellers not less than two (2) days prior to
the Non-License Transfer Date, an amount equal to SEVENTY MILLION DOLLARS
($70,000,000) of the Base Purchase Price (plus or minus, as the case may be, the
Proration Amount).
2.5.2. The Purchase Price (less any amounts paid to Sellers at a
Non-License Transfer) shall be payable to Sellers at the Closing by wire
transfer of
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immediately available federal funds to an account which will be identified by
Sellers not less than two (2) days prior to the Closing Date.
2.6. PRORATION AMOUNT.
2.6.1. At least five (5) days prior to the Transfer Date, Sellers shall
make a good faith estimate of the adjustments to the Base Purchase Price
customary in television broadcast station transactions for Proration Items (the
"Proration Amount") to reflect that all Proration Items of the Stations shall be
apportioned between Buyer and Sellers in accordance with the principle that
Sellers shall receive the benefit of all revenues, refunds, deposits (other than
deposits for Program Contracts which shall be prorated based on the percentage
of the term that the film or program was aired on the Stations before the
Transfer Date and the percentage available to be aired on and after the Transfer
Date) and prepaid expenses, and shall be responsible for all expenses, costs and
liabilities allocable to the conduct of the businesses or operations of the
Stations for the period prior to the Transfer Date, and Buyer shall receive the
benefit of all revenues, refunds, deposits and prepaid expenses, and shall be
responsible for all expenses, costs and liabilities allocable to the conduct of
the businesses or operations of the Stations from and after the Transfer Date;
provided, however, that there shall be no adjustment or proration for any
negative or positive net trade balance except to the extent that the negative
trade balance (i.e., the amount by which the value of goods or services to be
received is less than the value of any advertising time remaining to be run) for
any Station exceeds Fifty Thousand Dollars ($50,000) as of the Transfer Date;
provided, further, that if there shall be a Non-License Transfer, then
prorations and adjustments for Proration Items related to the License Assets
shall be made pursuant to this Section 2.6 as of the Closing Date.
Determinations pursuant to this Section 2.6.1 shall be made in accordance with
generally accepted accounting principles consistently applied for the period
prior to the Non-License Transfer Date or the Closing Date, as applicable.
2.6.2 Within ninety (90) days after the Transfer Date, Buyer shall
deliver to Sellers in writing and in reasonable detail a good faith final
determination of the Proration Amount determined as of the Transfer Date under
Section 2.6.1 ("Final Proration Amount"). Sellers shall assist Buyer in making
such determination, and Buyer shall provide Sellers with reasonable access to
the properties, books and records relating to the Stations for the purpose of
determining the Final Proration Amount. Sellers shall have the right to review
the computations and workpapers used in connection with Buyer's preparation of
the Final Proration Amount. If Sellers disagree with the amount of the Final
Proration Amount determined by Buyer, Sellers shall so notify Buyer in writing
within thirty (30) days after the date of receipt of Buyer's Final Proration
Amount, specifying in detail any point of disagreement; provided, however, that
if Sellers fail to notify
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Buyer in writing of Sellers' disagreement within such thirty (30) day period,
Buyer's determination of the Final Proration Amount shall be final, conclusive
and binding on Sellers and Buyer. After the receipt of any notice of
disagreement, Buyer and Sellers shall negotiate in good faith to resolve any
disagreements regarding the Final Proration Amount. If any such disagreement
cannot be resolved by Sellers and Buyer within thirty (30) days after Buyer has
received notice from Sellers of the existence of such disagreement, Buyer and
Sellers shall jointly select a nationally recognized independent public
accounting firm (the "Accounting Firm"), to review Buyer's determination of the
Final Proration Amount and to resolve as soon as possible all points of
disagreement raised by Sellers. All determinations made by the Accounting Firm
with respect to the Final Proration Amount shall be final, conclusive and
binding on Buyer and Sellers. The fees and expenses of the Accounting Firm
incurred in connection with any such determination shall be shared one-half by
Buyer and one-half by Sellers.
If the Final Proration Amount is such that Buyer's payment of
the Proration Amount was an underpayment to Sellers, then Buyer shall pay such
underpayment amount to Sellers in cash, within two (2) business days following
the final determination of the Final Proration Amount. If the Final Proration
Amount is such that Buyer's payment of the Proration Amount was an overpayment
to Sellers, then Sellers shall pay such overpayment amount to Buyer in cash
within two (2) business days following the final determination of the Final
Proration Amount. Any amounts paid pursuant to this Section 2.6.2 shall be by
wire transfer of immediately available funds for credit to the recipient at a
bank account identified by such recipient in writing.
Buyer and Sellers agree that prior to the date of the final
determination of the Final Proration A mount pursuant to this Section 2.6.2 (by
the Accounting Firm or otherwise), neither party will destroy any records
pertaining to, or necessary for, the final determination of the Final Proration
Amount.
Each Seller hereby appoints Sinclair as its attorney-in-fact
with power and authority to act for and on behalf of each Seller in connection
with all matters arising under this Section 2.6. Buyer shall be entitled to rely
on such appointment and treat Sinclair as the duly appointed attorney-in-fact of
each Seller.
2.7. ALLOCATION OF BASE PURCHASE PRICE.
Each party hereto represents, warrants, covenants and agrees with each
other party hereto that the Base Purchase Price shall be allocated among the
classes of Assets for each Station as agreed by the parties within sixty (60)
days after the date hereof; provided, however, that if the parties are unable to
agree on such allocation within such sixty (60) day period, each party shall
have the right to
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allocate the classes of Assets for each Station based upon its own
determination. The parties agree, pursuant to Section 1060 of the Code, that the
Base Purchase Price shall be allocated in accordance with this Section 2.7, and
that all Tax returns and reports shall be filed consistent with such allocation.
The parties acknowledge and agree that the payment of the Purchase Price as
contemplated herein does not reflect the allocation among the classes of Assets
for each Station as determined pursuant to this Section 2.7. Notwithstanding any
other provision of this Agreement, the provisions of this Section 2.7 shall
survive the Closing Date without limitation.
2.8. ASSUMPTION OF LIABILITIES.
2.8.1. At the Non-License Transfer, Buyer shall assume, pay, perform,
discharge and indemnify and hold Sellers harmless from and against (a) all
Liabilities arising out of events occurring on or after the Non-License Transfer
Date related to the businesses or operations of the Stations by Buyer or Buyer's
ownership of the Non-License Assets, (b) all Liabilities arising on or after the
Non-License Transfer Date under the Station Contracts (including, without
limitation, Trade-out Agreements) pursuant to their terms (except for
Liabilities for any breaches thereunder by any Seller occurring prior to the
Non-License Transfer Date), (c) all Liabilities for which there is a downward
adjustment to the Base Purchase Price in connection with the calculation of the
Proration Amount, and (d) all Liabilities to employees of the Stations to be
assumed by Buyer in accordance with Section 8.4 hereof.
2.8.2. To the extent not assumed by Buyer at the Non-License Transfer,
at the Closing, Buyer shall assume, pay, perform, discharge and indemnify and
hold Sellers harmless from and against (a) all Liabilities arising out of events
occurring on or after the Closing Date related to the businesses or operations
of the Stations or Buyer's ownership of the Assets, (b) all Liabilities arising
out of events occurring on or after the Closing Date with respect to the FCC
Licenses, (c) all Liabilities arising on or after the Closing Date under the
Station Contracts (including, without limitation, Trade-out Agreements) pursuant
to their terms (except for Liabilities for any breaches thereunder by any Seller
occurring prior to the Closing Date), (d) all Liabilities for which there is a
downward adjustment to the Base Purchase Price in connection with the
calculation of the Proration Amount, and (e) all Liabilities to employees of the
Stations to be assumed by Buyer in accordance with Section 8.4 hereof.
2.8.3. Except for the Assumed Liabilities, Buyer assumes no other
Liabilities of any kind or description including, without limitation, any
obligations under or pursuant to the Heritage Agreement.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLERS
Each Seller, jointly and severally with the other Sellers, represents
and warrants to Buyer as follows:
3.1. ORGANIZATION AND STANDING.
Each Seller is duly organized, validly existing and in good standing
under the laws of the state of its organization and will at Closing be duly
qualified to do business and is in good standing in any jurisdiction where such
qualification is necessary in order to consummate the transactions contemplated
under this Agreement, except for those jurisdictions where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Prior to the Transfer Date, each Seller will have the corporate power
and authority to own, lease and otherwise to hold and operate such Seller's
Assets, and to carry on the business of the Stations as now conducted. Each
Seller has the corporate power and authority to enter into and perform the terms
of this Agreement, the other Seller Documents and the transactions contemplated
hereby and thereby.
3.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the
other Seller Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action (none of which actions has been
modified or rescinded and all of which actions are in full force and effect).
This Agreement and the Deposit Escrow Agreement constitute, and upon execution
and delivery each other Seller Document to which it is a party will constitute,
valid and binding agreements and obligations of each Seller, enforceable against
it in accordance with their respective terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
3.3. COMPLIANCE WITH LAWS.
To the knowledge of Sellers and the Heritage Subsidiaries, Sellers and
the Heritage Subsidiaries are in material compliance with all Laws applicable to
the Assets and to the business and operations of the Stations. The Heritage
Subsidiaries have obtained and hold (and Sellers will obtain and hold prior to
the Transfer Date) all material permits, licenses and approvals (none of which
has been modified or rescinded and all of which are in full force and effect)
from all
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Governmental Authorities necessary in order to conduct the operations of the
Stations as presently conducted.
3.4. CONSENTS AND APPROVALS; NO CONFLICTS.
3.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Sellers, will not require
any consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority, except as follows: (a)
filings required under Hart-Scott-Rodino, (b) consents to the assignment of the
FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real
estate transfer taxes, (d) filings with the Securities and Exchange Commission,
and (e) certain of the Station Contracts may be assigned only with the consent
of third parties, as specified in Schedule 3.4.
3.4.2. Assuming all consents, approvals, authorizations and other
actions described in Section 3.4.1 have been obtained and all filings and
notifications described in Section 3.4.1 have been made, the execution, delivery
and performance of this Agreement and the other Seller Documents by each Seller
do not and will not (a) conflict with or violate in any material respect any Law
applicable to such Seller, the Assets or Stations or by which any of the Assets
or Stations is subject or affected, (b) conflict with or result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) of any Station Contract or other material agreement to
which such Seller is a party or by which such Seller is bound or to which any of
the Assets or Stations is subject or affected, (c) result in the creation of any
Encumbrance upon the Assets, or (d) conflict with or violate the organizational
documents of such Seller.
3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
3.5.1. Seller has provided to Buyer an unaudited balance sheet of the
Stations as of December 31, 1997 (the "Balance Sheet"), and an unaudited
statement of income and operating cash flows for the Stations for the twelve
(12) month period ending December 31, 1997. The financial statements referred to
in this Section 3.5.1 (a) present fairly in all material respects the financial
condition of the Stations as of the date and the results of operations and
operating cash flows for the period indicated, and (b) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except that the financial statements referred to in this Section 3.5.1 do
not contain all footnotes and cash flow information from investing and financing
activities required under generally accepted accounting principles and are
subject to customary year-end adjustments).
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3.5.2. There exist no Liabilities of the Stations relating to, or
arising out of, the business or operations of the Stations, contingent or
absolute, matured or unmatured, known or unknown, except (a) as reflected on the
Balance Sheet and (b) for Liabilities that (i) were incurred after December 31,
1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business, or
(ii) were not required to be reflected on the Balance Sheet in accordance with
generally accepted accounting principles applied on a consistent basis.
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth and described in Schedule 3.6, since the Current
Balance Sheet Date, there has been no Material Adverse Effect. Since the Current
Balance Sheet Date, the business of the Stations has been conducted in the
Ordinary Course of Business, and neither any Seller nor any Heritage Subsidiary
has (a) incurred any extraordinary loss of, or injury to, any of the Assets as
the result of any fire, explosion, flood, windstorm, earthquake, labor trouble,
riot, accident, act of God or public enemy or armed forces, or other casualty;
(b) incurred, or become subject to, any Liability, except current Liabilities
incurred in the Ordinary Course of Business; (c) discharged or satisfied any
Encumbrance or paid any Liability other than current Liabilities shown in the
Balance Sheet, current Liabilities incurred since the Current Balance Sheet Date
in the Ordinary Course of Business, and Liabilities (including, without
limitation, partial and complete prepayments) arising under any credit or loan
agreement between any Seller and its lenders; (d) mortgaged, pledged or
subjected to any Encumbrance any of the Assets (except for Permitted
Encumbrances); (e) made any material change in any method of accounting or
accounting practice; (f) sold, leased, assigned or otherwise transferred any of
the material Assets other than obsolete Assets which have been replaced by
suitable replacements; (g) made any material increase in compensation or
benefits payable to any employee other than in the Ordinary Course of Business;
or (h) made any agreement to do any of the foregoing.
3.7. ABSENCE OF LITIGATION.
Except as set forth on Schedule 3.7, as of the date of the Heritage
Agreement, there is no material or, to the knowledge of Sellers and the Heritage
Subsidiaries, immaterial action, suit, investigation, claim, arbitration,
litigation or similar proceeding, nor any order, decree or judgment pending or,
to the knowledge of Sellers and the Heritage Subsidiaries, threatened against
any Seller, any Heritage Subsidiary, the Assets or Stations before any
Governmental Authority.
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3.8. ASSETS.
Except for the Excluded Assets, the Assets include all of the assets or
property used or useful in the businesses of the Stations as presently operated
and all of the assets or property acquired by Sellers under the Heritage
Agreement. Except for leased or licensed Assets, the Heritage Subsidiaries are
(and Sellers will be prior to the Transfer Date) the owner of, and have (and
Sellers will have prior to the Transfer Date) good title to, the Assets free and
clear of any Encumbrances, except for Permitted Encumbrances (including, without
limitation, those items set forth on Schedule 3.8). At the Non-License Transfer
and the Closing, Buyer shall acquire good title to, and all right, title and
interest in and to the Assets being transferred at the Non-License Transfer and
the Closing, respectively, free and clear of all Encumbrances, except for the
Permitted Encumbrances.
3.9. FCC MATTERS.
The Heritage Subsidiaries hold (and Sellers will hold prior to the
Transfer Date) the FCC Licenses listed as held by the Heritage Subsidiaries on
Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and
authorizations from the FCC which have been issued to the Heritage Subsidiaries
or the Sellers that are required for the business and operations of the
Stations. Except as set forth on Schedule 3.9, such FCC Licenses are valid and
in full force and effect through the dates set forth on Schedule 2.1.1,
unimpaired by any condition, other than as set forth in the FCC Licenses. Except
as set forth on Schedule 3.9, no application, action or proceeding is pending
for the renewal or modification of any of the FCC Licenses, and, except for
actions or proceedings affecting television broadcast stations generally, no
application, complaint, action or proceeding is pending or, to the knowledge of
Sellers and the Heritage Subsidiaries, threatened that may result in the (a) the
revocation, modification, non-renewal or suspension of any of the FCC Licenses,
or (b) the issuance of a cease-and-desist order. Except as set forth in Schedule
3.9, no Seller or Heritage Subsidiary has knowledge of any facts, conditions or
events relating to any Seller, any Heritage Subsidiary or the Stations that
would reasonably be expected to cause the FCC to revoke any FCC License or not
to grant any pending applications for renewal of the FCC Licenses or to deny the
assignment of the FCC Licenses to a qualified Buyer as provided for in this
Agreement.
3.10. REAL PROPERTY.
3.10.1. The Heritage Subsidiaries have (and Sellers will have prior to
the Transfer Date) good and marketable fee simple title to all fee estates
included in the Real Property and good title to all other owned Real Property,
in each case free and clear of all Encumbrances, except for Permitted
Encumbrances.
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3.10.2. The Heritage Subsidiaries have (and Sellers will have prior to
the Transfer Date) a valid leasehold interest in all Leased Property listed as
leased by the Heritage Subsidiaries or Sellers in Schedule 2.1.2. Schedule 2.1.2
lists all leases and subleases pursuant to which any of the Leased Property is
leased by the Heritage Subsidiaries and Sellers in connection with the business
and operations of the Stations. The Heritage Subsidiaries are (and Sellers will
be prior to the Transfer Date) the owner and holder of all the Leased Property
purported to be granted by such leases and subleases. Each such lease and
sublease is valid as to the lessee and sublessee thereunder and, to the
knowledge of Sellers and the Heritage Subsidiaries, valid as to any other party
thereto, and is in full force and effect and, to the knowledge of Sellers and
the Heritage Subsidiaries, constitutes a legal and binding obligation of, and is
legally enforceable against the lessee or sublessee thereunder and each other
party thereto and grants the leasehold interest it purports to grant, including
any rights to nondisturbance and peaceful and quiet enjoyment that may be
contained therein. The lessees and sublessees are, and to the knowledge of
Sellers and the Heritage Subsidiaries all other parties are, in compliance in
all material respects with the provisions of such leases and subleases.
3.10.3. The Real Property and the Leased Property listed in Schedule
2.1.2 constitute all of the real property owned, leased or used by Sellers or
the Heritage Subsidiaries in the business and operations of the Stations which
is material to the business and operations of the Stations.
3.10.4. No portion of the Real Property or any building, structure,
fixture or improvement thereon is the subject of, or affected by, any
condemnation, eminent domain or inverse condemnation proceeding currently
instituted or pending or, to the knowledge of Sellers and the Heritage
Subsidiaries, threatened. To the knowledge of Sellers and the Heritage
Subsidiaries and to the extent that such documents are in the possession of
Sellers or a Heritage Subsidiary, Sellers have delivered to Buyer true, correct
and complete copies of the following documents with respect to the Real Property
and Leased Property: (a) deeds, by which the current owner has received a fee
interest in any of the Real Property; (b) leases for all of the Leased Property;
(c) title insurance policies or commitments; (d) surveys; and (e) inspection
reports or other instruments or reports, including, without limitation, any
phase I or phase II environmental reports or other similar environmental
reports, surveys or assessments (including any and all amendments and other
modifications of such instruments).
3.11. INTELLECTUAL PROPERTY.
The Heritage Subsidiaries possess (and Sellers will possess prior to
the Transfer Date) adequate rights, licenses and authority to use all
Intellectual Property necessary to conduct the business of the Stations as
presently conducted.
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The Heritage Subsidiaries have (and Sellers will have prior to the Transfer
Date) good title to all Intellectual Property that the Heritage Subsidiaries or
Sellers own in connection with the business and operations of the Stations, free
and clear of any Encumbrances, except for Permitted Encumbrances. No Heritage
Subsidiary is (and no Seller will be as of the Transfer Date) obligated to pay
any royalty or other fees to anyone with respect to the Intellectual Property.
Neither Seller nor any Heritage Subsidiary has received any written notice to
the effect that any service rendered by any Seller or any Heritage Subsidiary
relating to the business of the Stations may infringe, or that any Seller or any
Heritage Subsidiary is otherwise infringing, on any Intellectual Property right
or other legally protectable right of another. No director, officer or employee
of any Seller or any Heritage Subsidiary has any interest in any Intellectual
Property.
3.12. STATION CONTRACTS.
Complete and correct copies of the Station Contracts set forth in
Schedules 2.1.5, 2.1.6, 2.1.8 and 2.1.9 (which schedules, to Sellers' knowledge
are and which have been represented to Sellers by the Heritage Subsidiaries
making such representations to be, true and correct in all material respects)
have been made available to Buyer and (a) each such material Station Contract
and, to the knowledge of Sellers and the Heritage Subsidiaries, each such
immaterial Station Contract, is in full force and effect and constitutes a
legal, valid and binding obligation of the owner of the Station that is a party
thereto, and, to the knowledge of Sellers and the Heritage Subsidiaries, of each
other party thereto; (b) no owner of a Station is in breach or default in any
material respect of the terms of any Station Contract; (c) none of the material
rights of the owner of a Station under any such Station Contract will be subject
to termination, nor will a default occur, as a result of the consummation of the
transactions contemplated hereby, except to the extent that failure to obtain
the prior consent to assignment thereof of any party thereto shall or could be
interpreted to constitute a termination or modification of or a default under
any such Station Contract; and (d) to the knowledge of Sellers and the Heritage
Subsidiaries, no other party to any such Station Contract is in breach or
default in any material respect of the terms thereunder.
3.13. TAXES.
The Heritage Subsidiaries have (or, in the case of returns becoming due
after the date hereof and on or before the Transfer Date, the Heritage
Subsidiaries or Sellers will have prior to the Transfer Date) duly filed all
material Seller Tax Returns required to be filed by them on or before the
Transfer Date with respect to all material applicable Taxes. In the case of any
Seller Tax Returns which receive an extension for their date of filing, such
Seller Tax Returns will be considered due on, and not considered required to be
filed before, the extended due
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date. To the knowledge of Sellers and the Heritage Subsidiaries, all Seller Tax
Returns are (or, in the case of returns becoming due after the date hereof and
on or before the Transfer Date, will be) true and complete in all material
respects. The Heritage Subsidiaries or Sellers have: (a) paid all Taxes due to
any Governmental Authority as indicated on the Seller Tax Returns; or (b)
established (or, in the case of amounts becoming due after the date hereof,
prior to the Transfer Date will have established) adequate reserves (in
conformity with generally accepted accounting principles consistently applied)
for the payment of such Taxes.
3.14. EMPLOYEE BENEFIT PLANS.
3.14.1. Schedule 3.14 lists all Plans and Benefit Arrangements
(exclusive of severance arrangements and retention agreements) maintained by or
contributed to for the benefit of the employees of the Stations (collectively,
the "Benefit Plans"). Each Benefit Plan has been maintained in material
compliance with its terms and with ERISA, the Code and other applicable Laws.
3.14.2. Schedule 3.14 sets forth a list of all Qualified Plans
maintained by or contributed to for the benefit of the employees of the
Stations. All such Qualified Plans and any related trust agreements or annuity
agreements (or any other funding document) have been maintained in material
compliance with ERISA and the Code (including, without limitation, the
requirements for tax qualification described in Section 401 thereof), other than
any Multiemployer Plan. To the knowledge of Sellers and the Heritage
Subsidiaries, any trusts established under such Plans are exempt from federal
income taxes under Section 501(a) of the Code.
3.14.3. Schedule 3.14 lists all funded Welfare Plans that provide
benefits to current or former employees of the Stations or their beneficiaries.
To the knowledge of Sellers, the funding under each such Welfare Plan does not
exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c)
of the Code. To the knowledge of Sellers and the Heritage Subsidiaries, no
Seller Party is subject to taxation on the income of any such Welfare Plan's
welfare benefit fund (as such term is defined in Section 419(e) of the Code)
under Section 419A(g) of the Code.
3.14.4. There are no post-retirement medical, life insurance or other
benefits promised, provided or otherwise due now or in the future to current,
former or retired employees of the Stations.
3.14.5. To the knowledge of Sellers and the Heritage Subsidiaries,
except as set forth in Schedule 3.14, the Seller Parties have (a) filed or
caused to be filed all returns and reports on the Plans that they are required
to file and (b) paid
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or made adequate provision for all fees, interest, penalties, assessments or
deficiencies that have become due pursuant to those returns or reports or
pursuant to any assessment or adjustment that has been made relating to those
returns or reports. All other fees, interest, penalties and assessments that are
payable by or for the Seller Parties have been timely reported, fully paid and
discharged. There are no unpaid fees, penalties, interest or assessments due
from any Seller Party or from any other person that are or could become an
Encumbrance on any of the Assets or could otherwise adversely affect the
businesses of the Stations or the Assets. To the knowledge of Sellers and the
Heritage Subsidiaries, the Seller Parties have collected or withheld all amounts
that are required to be collected or withheld by them to discharge their
obligations, and all of those amounts have been paid to the appropriate
Governmental Authority or set aside in appropriate accounts for future payment
when due. Sellers have furnished to Buyer true and complete copies of all
documents setting forth the terms and funding of each Plan.
3.14.6. Except as set forth in Schedule 3.14, neither any Seller Party
nor any ERISA Affiliate has ever sponsored or maintained, had any obligation to
sponsor or maintain, or had any liability (whether actual or contingent, with
respect to any of its assets or otherwise) with respect to any Plan subject to
Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including
any Multiemployer Plan). Neither any Seller Party nor any ERISA Affiliate (since
January 1, 1989) has terminated or withdrawn from or sought a funding waiver
with respect to any plan subject to Title IV of ERISA, and no facts exist that
could reasonably be expected to cause such actions in the future; no accumulated
funding deficiency (as defined in Code Section 412), whether or not waived,
exists with respect to any such plan; no reportable event (as defined in ERISA
Section 4043) has occurred with respect to any such plan (other than events for
which reporting is waived); all costs of any such plans have been provided for
on the basis of consistent methods in accordance with sound actuarial
assumptions and practices, and the assets of each such plan, as of its last
valuation date, exceeded its "Benefit Liabilities" (as defined in ERISA Section
4001(a)(16)); and, since the last valuation date for each such plan, no such
plan has been amended or changed to increase the amounts of benefits thereunder
and, to the knowledge of Sellers and the Heritage Subsidiaries, there has been
no event that would reduce the excess of assets over benefit liabilities; and
except as set forth in Schedule 3.14, neither any Seller Party nor any ERISA
Affiliate has ever made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any Multiemployer
Plan.
3.14.7. No claims or lawsuits are pending or, to the knowledge of
Sellers and the Heritage Subsidiaries, threatened by, against, or relating to
any Benefit Plan. To the knowledge of Sellers and the Heritage Subsidiaries, the
Benefit Plans are not presently under audit or examination (nor has notice been
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received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental agency or entity and no matters are pending
with respect to any Qualified Plan under the IRS's Voluntary Compliance
Resolution program, its Closing Agreement Program, or other similar programs.
3.14.8. With respect to each Plan, there has occurred no non-exempt
"prohibited transaction" (within the meaning of Section 4975 of the Code) or
transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty
described in Section 404 of ERISA that would, if successful, result in any
liability for any of the Seller Parties.
3.14.9. No Seller Party has any liability (whether actual, contingent,
with respect to any of its Assets or otherwise) with respect to any employee
benefit plan that is not a Benefit Plan (exclusive of severance arrangements and
retention agreements) or with respect to any employee benefit plan sponsored or
maintained (or which has been or should have been sponsored or maintained) by
any ERISA Affiliate.
3.14.10. All group health plans of the Seller Parties and the ERISA
Affiliates covering any current or former employees of the Stations have been
operated in material compliance with the requirements of Sections 4980B (and its
predecessor) and 5000 of the Code, and the Seller Parties have provided, or will
have provided before the Transfer Date, to individuals entitled thereto all
required notices and coverage pursuant to Section 4980B with respect to any
"qualifying event" (as defined therein) occurring before or on the Transfer
Date.
3.15. LABOR RELATIONS.
Sellers have made available to Buyer a true and complete list of all
employees of the Heritage Subsidiaries and Sellers engaged in the business or
operations of the Stations as of the date set forth on the list, together with
such employee's position, salary and date of hire. Schedule 3.15 lists all
written employment contracts with any such employees and all written agreements,
plans, arrangements, commitments and understandings pursuant to which any of the
Seller Parties have severance obligations or retention obligations with respect
to such employees. No labor union or other collective bargaining unit represents
or, to the knowledge of Sellers and the Heritage Subsidiaries, claims to
represent, any of the employees of the Stations. There are no strikes, work
stoppages, grievance proceedings, union organization efforts, or other
controversies pending between any Seller or any Heritage Subsidiary and any
union or collective bargaining unit representing (or, to the knowledge of
Sellers and the Heritage Subsidiaries, claiming to represent) any employees of
the Stations. The Heritage Subsidiaries are (and Sellers will be as of the
Transfer Date) in compliance with all Laws
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relating to the employment of employees of the Stations or the workplace of the
Stations, including, without limitation, provisions relating to wages, hours,
collective bargaining, safety and health, work authorization, equal employment
opportunity, immigration and the withholding of income taxes, unemployment
compensation, worker's compensation, employee privacy and right to know and
social security contributions, except for any noncompliance which would not have
a Material Adverse Effect. There are no collective bargaining agreements
relating to the Stations or the business and operations thereof.
3.16. ENVIRONMENTAL MATTERS.
3.16.1. Except as set forth in Schedule 3.16, to the knowledge of
Sellers and the Heritage Subsidiaries (which knowledge is based on the items set
forth on Schedule 3.16), the Heritage Subsidiaries are (and Sellers will be as
of the Transfer Date) in material compliance with, and the Real Property and all
improvements thereon are in material compliance with, all Environmental Laws.
3.16.2. Except as set forth in Schedule 3.16, there are no pending or,
to the knowledge of Sellers and the Heritage Subsidiaries, threatened actions,
suits, claims, or other legal proceedings based on (and neither any Seller nor
any of the Heritage Subsidiaries has received any written notice of any
complaint, order, directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental Authority
arising out of or attributable to): (a) the current or past presence at any part
of the Real Property of Hazardous Materials; (b) the current or past release or
threatened release into the environment from the Real Property (including,
without limitation, into any storm drain, sewer, septic system or publicly owned
treatment works) of any Hazardous Materials; (c) the off-site disposal of
Hazardous Materials originating on or from the Real Property or the Assets or
businesses of the Stations; (d) any facility operations or procedures of the
Stations which do not conform to requirements of the Environmental Laws; or (e)
any violation of Environmental Laws at any part of the Real Property arising
from activities of the Stations involving Hazardous Materials. To the knowledge
of Sellers and the Heritage Subsidiaries, the Heritage Subsidiaries have been
(and Sellers will have been prior to the Transfer Date) duly issued all material
permits, licenses, certificates and approvals required under any Environmental
Law.
3.17. INSURANCE.
Schedule 3.17 contains a true and complete list and brief summary of
all policies of title, property, fire, casualty, liability, life, workmen's
compensation, libel and slander, and other forms of insurance of any kind
relating to the Assets or the business and operations of the Stations. All such
policies: (a) are in full force
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and effect; (b) are sufficient for compliance in all material respects with all
requirements of Law and of all material agreements to which any Station owner is
a party; and (c) to the knowledge of Sellers and the Heritage Subsidiaries, are
valid, outstanding, and enforceable policies and the policy holder is not in
default in any material respect thereunder.
3.18. REPORTS.
All material returns, reports and statements that the Stations are
currently required to file with the FCC or any governmental agency have been
timely filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction thereof have been complied with by Sellers and
the Heritage Subsidiaries in all material respects. All of such reports, returns
and statements are complete and correct in all material respects as filed. To
the knowledge of Sellers and the Heritage Subsidiaries, all documents required
by the FCC to be deposited by the owners of the Stations in their public files
(as defined in the rules and regulations of the FCC) during the period of
operation of the Stations by the Heritage Subsidiaries and Sellers have been
deposited therein.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Sellers as follows:
4.1. ORGANIZATION AND STANDING.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and by the Transfer Date will
be duly qualified to do business as a foreign corporation in the State of New
York and the State of Vermont. Buyer has the full corporate power and corporate
authority to enter into and perform the terms of this Agreement and the other
Buyer Documents and to carry out the transactions contemplated hereby and
thereby.
4.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the
other Buyer Documents, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
actions of Buyer (none of which actions has been modified or rescinded and all
of which actions are in full force and effect). This Agreement and the Deposit
Escrow Agreement constitute, and upon execution and delivery each such other
Buyer Document will constitute, a valid and binding agreement and
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obligation of Buyer, enforceable against Buyer in accordance with its respective
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
4.3. CONSENTS AND APPROVALS; NO CONFLICTS.
4.3.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Buyer, will not require
any consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority, except as follows: (a)
filings required under Hart-Scott-Rodino, (b) approvals of the assignment of the
FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real
estate transfer taxes and (d) filings with the Securities and Exchange
Commission.
4.3.2. Assuming all consents, approvals, authorizations and other
actions described in Section 4.3.1 have been obtained and all filings and
notifications described in Section 4.3.1 have been made, the execution, delivery
and performance of this Agreement and the other Buyer Documents by Buyer do not
and will not (a) conflict with or violate any material Law applicable to Buyer,
(b) conflict with or result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) of any
material contract or material agreement to which Buyer is a party or by which
Buyer is bound, or (c) conflict with or violate the organizational documents of
Buyer.
4.4. AVAILABILITY OF FUNDS.
Buyer will have available on the Non-License Transfer Date and the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated hereby.
4.5. QUALIFICATION OF BUYER.
4.5.1. Except as disclosed in Schedule 4.5.1, Buyer is, and pending
Closing will remain legally, financially and otherwise qualified under the
Communications Act and all rules, regulations and policies of the FCC to acquire
and operate the Stations. There are no facts or proceedings which would
reasonably be expected to disqualify Buyer under the Communications Act or
otherwise from acquiring or operating any of the Stations or would cause the FCC
not to approve the assignment of the FCC Licenses to Buyer. Except as disclosed
in Schedule 4.5.1, Buyer has no knowledge of any fact or circumstance relating
to
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Buyer or any of Buyer's Affiliates that would reasonably be expected to (a)
cause the filing of any objection to the assignment of the FCC Licenses to
Buyer, or (b) lead to a delay in the processing by the FCC of the applications
for such assignment. Except for existing waivers pertaining to the Stations, no
waiver of any FCC rule or policy is necessary to be obtained for the grant of
the applications for the assignment of the FCC Licenses to Buyer, nor will
processing pursuant to any exception or rule of general applicability be
requested or required in connection with the consummation of the transactions
herein.
4.5.2. As of the date hereof and through the later to occur of the HSR
Filing and the filing of the FCC Applications, except as set forth on Schedule
4.5.1, neither Buyer nor any Affiliate of Buyer (a) owns, controls or operates
any television or radio station located in the Burlington DMA; (b) has any
direct or indirect interest, including, without limitation, any equity, debt,
security or any other financial interest, whether or not "attributable" (as
defined in the rules and regulations of the FCC), or management interest, in (i)
any television or radio station located in the Burlington DMA, or (ii) any
applicant seeking to construct or acquire, by assignment of license or transfer
of control, any such television or radio station (an "Applicant"); or (c) is a
party to any TBA with a television or radio station located in the Burlington
DMA, or with any Applicant. Buyer acknowledges and agrees that the
representations set forth in this Section 4.5.2 shall take into account and
include (a) the consummation of any proposed or pending acquisition (as of the
date hereof and through the later to occur of the HSR Filing and the filing of
the FCC Applications) of television or radio stations (including the acquisition
of the Stations) by Buyer or any Affiliate of Buyer or any Applicant, and (b)
any TBA or proposed or pending TBA (as of the date hereof and through the later
to occur of the HSR Filing and the filing of the FCC Applications) to which
Buyer or any Affiliate of Buyer is or may become a party.
4.6. WARN ACT.
Buyer is not planning or contemplating, and has not made or taken, any
decisions or actions concerning the employees of the Stations after the Transfer
Date that would require the service of notice under the Worker Adjustment and
Retraining Act of 1988, as amended.
4.7. NO OUTSIDE RELIANCE.
Buyer has not relied and is not relying on any statement,
representation or warranty not made in this Agreement, any Schedule hereto or
any certificate to be delivered to Buyer at the Non-License Transfer or the
Closing pursuant to this Agreement. Buyer is not relying on any projections or
other predictions contained or referred to in materials (other than the
Schedules) that
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have been or may hereafter be provided to Buyer or any of its Affiliates, agents
or representatives, and Sellers make no representations or warranties with
respect to any such projections or other predictions.
4.8. INTERPRETATION OF CERTAIN PROVISIONS.
Buyer has not relied and is not relying on the specification of any
dollar amount in any representation or warranty made in this Agreement or any
Schedule hereto to indicate that such amounts, or higher or lower amounts, are
or are not material, and agrees not to assert in any dispute or controversy
between the parties hereto that specification of such amounts indicates or is
evidence as to whether or not any obligation, item or matter is or is not
material for purposes of this Agreement and the transactions contemplated
hereby.
ARTICLE 5.
PRE-CLOSING FILINGS
5.1. APPLICATIONS FOR FCC CONSENT.
Within five (5) business days following the execution of this
Agreement, Sellers and Buyer (or any permitted assignee of Buyer under Section
15.6.1) shall jointly file applications for the Stations with the FCC requesting
consent to the assignment of the FCC Licenses for the Stations from Sellers to
Buyer (the "FCC Applications"). Sellers and Buyer will diligently take, or fully
cooperate in the taking of, all necessary and proper steps, and provide any
additional information reasonably requested in order to obtain promptly the
requested consents and approvals of the FCC Applications by the FCC.
5.2. HART-SCOTT-RODINO.
Within five (5) business days following the execution of this
Agreement, Sellers and Buyer shall complete any filing that may be required
pursuant to Hart-Scott-Rodino (each an "HSR Filing"). Sellers and Buyer shall
diligently take, or fully cooperate in the taking of, all necessary and proper
steps, and provide any additional information reasonably requested in order to
comply with, the requirements of Hart-Scott-Rodino.
5.3. NON-REQUIRED ACTIONS.
Neither Buyer nor any Seller shall have any obligation to take any
steps pursuant to Section 5.1 or Section 5.2 which would be reasonably expected
to
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result in the incurrence of a material cost or other liability or which would
require the divestiture of any business or assets of any party hereto or any
Affiliate thereof.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF SELLERS
Each Seller covenants and agrees with Buyer as follows:
6.1. NEGATIVE COVENANTS.
Pending and prior to the Non-License Transfer and the Closing, such
Seller will not, and will use its commercially reasonable efforts to enforce
such rights under the Heritage Agreement to cause the Heritage Subsidiaries not
to, without the prior written consent of Buyer (which consent will not be
unreasonably withheld, delayed or conditioned, except in the case of matters
referred to in Sections 6.1.6(b), 6.1.7, 6.1.9 and 6.1.11, with respect to which
Buyer's consent may be withheld in its sole and absolute discretion), do or
agree to do any of the following insofar as such actions (or failure to act)
relate to the Stations:
6.1.1. DISPOSITIONS; MERGERS.
Sell, assign, lease or otherwise transfer or dispose of any
of the Assets other than at substantially fair market value and in the Ordinary
Course of Business; or merge or consolidate with or into any other entity or
enter into any contracts or agreements relating thereto.
6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES.
Change or modify any accounting principles or practices or
any method of applying such principles or practices.
6.1.3. TRADE-OUT AGREEMENTS.
Enter into or renew any Trade-out Agreement that would be
binding on Buyer after the Non-License Transfer Date or the Closing Date, except
in the Ordinary Course of Business and which requires the provision of broadcast
time having a value of less than (a) Twenty-Five Thousand Dollars ($25,000)
individually, and (b) together with existing Trade-out Agreements still in
effect as of the Non-License Transfer Date or the Closing Date, as the case may
be, Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate as of the
Non-License Transfer Date or the Closing Date, as the case may be.
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6.1.4. BROADCAST TIME SALES AGREEMENTS.
Enter into or renew any Time Sales Agreement except in the
Ordinary Course of Business and which are for cash at prevailing rates for a
term not exceeding twelve (12) months.
6.1.5. NETWORK AFFILIATION AGREEMENTS AND LMAS.
Except for the TBA Agreement, acquire or enter into or renew
any LMA or network affiliation agreement.
6.1.6. ADDITIONAL AGREEMENTS.
(a) Acquire or enter into any new Station Contracts not
referred to in Sections 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend,
alter, modify or otherwise change any existing Station Contract, except in the
Ordinary Course of Business (collectively, "Additional Agreements"); provided,
however, such Seller shall not, and shall use its commercially reasonably
efforts to cause each Seller Party not to, enter into (a) any Program Contract
for any Station which will be binding on Buyer after the Non-License Transfer
Date or the Closing Date, or (b) any other Station Contract requiring payments
by a Seller Party under each Station Contract in excess of Fifty Thousand
Dollars ($50,000). For purposes of clause (a) above, each Seller acknowledges
that it shall not be unreasonable for Buyer to withhold its consent to approve
of any Program Contract where Buyer, acting in good faith, has reason to
conclude that it can acquire such programming on better terms.
(b) From and after the Sellers' acquisition of the Stations
from the Heritage Subsidiaries, Sellers shall not, without the prior written
consent of Buyer, acquire or enter into any new Station Contract or renew,
extend, amend, alter, modify or otherwise change any existing Station Contract,
which in any case requires payments by a Seller Party under any such Station
Contract in excess of Twenty-Five Thousand Dollars ($25,000).
6.1.7. BREACHES.
Do or omit to do any act which will cause a material breach
of any Station Contract.
6.1.8. EMPLOYEE MATTERS.
Enter into or become subject to any employment, labor, union,
or professional service contract not terminable at will, or any bonus, pension,
insurance, profit sharing, incentive, deferred compensation, severance pay,
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retirement, hospitalization, employee benefit, or other similar plan; or
increase the compensation payable or to become payable to any employee, or pay
or arrange to pay any bonus payment to any employee, except in the Ordinary
Course of Business.
6.1.9. ACTIONS AFFECTING FCC LICENSES.
Take any action which may jeopardize the validity or
enforceability of or rights under the FCC Licenses.
6.1.10. PROGRAMMING.
Program or broadcast any Program Contract or syndicated
program, except in the Ordinary Course of Business.
6.1.11. ENCUMBRANCES.
Create, assume or permit to exist any Encumbrances upon any
of the Assets except for Permitted Encumbrances and Encumbrances that will be
discharged prior to or on the Transfer Date.
6.1.12. TRANSACTIONS WITH AFFILIATES.
Enter into any transaction with any Affiliate of a Seller
Party that will be binding upon Buyer, the Assets or any Station on or after the
Non-License Transfer Date or the Closing Date, except for transactions not
otherwise prohibited by this Section 6.1 and transactions between and among
Stations operating in the same DMA in the Ordinary Course of Business, in each
case on arm's length terms.
6.2. AFFIRMATIVE COVENANTS.
Pending and prior to the Non-License Transfer and the Closing, each
Seller will, and will use its commercially reasonable efforts to enforce such
rights under the Heritage Agreement to cause the Heritage Subsidiaries to take
the following actions insofar as such actions relate to the Stations:
6.2.1. PRESERVE EXISTENCE.
Preserve its corporate existence and business organization
intact, maintain its existing franchises and licenses, use commercially
reasonable efforts to preserve for Buyer the relationships of the Stations with
suppliers, customers, employees and others with whom the Stations have business
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relationships, and keep all of the Assets substantially in their present
condition, ordinary wear and tear excepted.
6.2.2. NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement
(including, without limitation, Section 6.1) and the TBA Agreement, (a) carry on
the businesses and activities of the Stations, including without limitation,
promotional activities, the sale of advertising time, entering into other
contracts and agreements, or purchasing and scheduling of programming, in the
Ordinary Course of Business; (b) pay or otherwise satisfy all obligations (cash
and barter) of the Stations in the Ordinary Course of Business; provided,
however, each Seller shall cause to be brought current as of the Transfer Date
all payments that are due and payable under Program Contracts as originally
contracted; (c) maintain books of account, records, and files with respect to
the business and operations of the Stations in substantially the same manner as
heretofore; and (d) maintain the Assets in customary repair, maintenance and
condition, except to the extent of normal wear and tear, and repair or replace,
consistently with the Ordinary Course of Business, any Asset that may be damaged
or destroyed; notwithstanding the foregoing, Buyer acknowledges that no Seller
shall be obligated to spend any funds on capital expenditures after the date
hereof, except for the repair or replacement of Assets that may be damaged or
destroyed.
6.2.3. MAINTAIN FCC LICENSES.
Maintain the validity of the FCC Licenses, and comply in all
material respects with all requirements of the FCC Licenses and the rules and
regulations of the FCC.
6.2.4. NETWORK AFFILIATION.
Use commercially reasonable efforts to maintain in full force
and effect the present network affiliation agreements for the Stations (and any
and all modifications and renewals thereof).
6.2.5. STATION CONTRACTS.
Pay and perform obligations in the Ordinary Course of
Business under the Station Contracts and under any Additional Agreements that
shall be entered into pursuant to Section 6.1.6, in accordance with the
respective terms and conditions of such Station Contracts and in accordance with
the TBA Agreement.
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6.2.6. TAXES.
Pay or discharge all Taxes when due and payable.
6.2.7. ACCESS.
Subject to the cooperation of the Trustee and the Heritage
Subsidiaries, cause to be afforded to representatives of Buyer reasonable access
during normal business hours to offices, properties, assets, books and records,
contracts and reports of the Stations, as Buyer shall from time to time
reasonably request; provided, however, that (a) such investigation shall only be
upon reasonable notice and shall not unreasonably disrupt the personnel or
operations of any Seller Party or the Stations, and (b) under no circumstances
shall any Seller Party be required to provide access to Buyer or any
representative of Buyer (i) any information or materials subject to
confidentiality agreements with third parties required to be kept confidential
by applicable Laws, or (ii) any privileged attorney-client communications or
attorney work product. All requests for access to the offices, properties,
assets, books and records, contracts and reports of the Stations shall be made
to such representatives as Sellers shall designate in writing, who shall be
solely responsible for coordinating all such requests and all access permitted
hereunder. Buyer acknowledges and agrees that neither Buyer nor its
representatives shall contact any of the employees, customers, suppliers,
partners, or other associates or Affiliates of any Seller Party or the Stations,
in connection with the transactions contemplated hereby, whether in person or by
telephone, mail or other means of communication, without the specific prior
written authorization of such representatives of Sellers. Subject to and in
accordance with the terms of this Section 6.2.7, each Seller shall, and shall
use its commercially reasonable efforts to enforce such rights under the
Heritage Agreement to cause each other Seller Party to, cooperate in all
reasonable respects with Buyer's request to conduct an audit of any financial
information of the Stations as Buyer may reasonably determine is necessary to
satisfy any public company reporting requirements pursuant to the Securities Act
of 1933 or the Securities Exchange Act of 1934 including, without limitation,
(a) using commercially reasonable efforts to obtain the consent of auditors to
permit Buyer, any Affiliate of Buyer and their respective auditors to have
access to such auditors' work papers, and (b) consenting to such access by
Buyer. Under no circumstance shall the preparation of any financial statements
pursuant to such audit: (a) require any Seller Party to change or modify any
accounting policy, (b) cause any unreasonable disruption in the business or
operations of any Station, or (c) cause any delay that is more than de minimis
in any internal reporting requirements of any Seller Party. All costs and
expenses incurred in connection with the preparation of (and assimilation of
relevant information for) any such financial statements shall be paid by Buyer.
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6.2.8. INSURANCE.
Maintain in full force and effect all of its existing
casualty, liability, and other insurance in amounts not less than those in
effect on the date hereof.
6.2.9. FINANCIAL STATEMENTS.
Prior to Sellers' acquisition of the Stations from the
Heritage Subsidiaries, provide Buyer with, to the extent received by Seller in
connection with the Heritage Agreement (a) unaudited monthly statements of
assets and liabilities relating to the business and operations of the Stations,
and monthly statements of revenues and expenses reflecting the results of
business and operations of the Stations for January 1998 and for each month
thereafter, within thirty (30) days after the end of each such month, and (b)
weekly sales pacing reports for the Stations and copies of any financial
statements. After Sellers' acquisition of the Stations from the Heritage
Subsidiaries and prior to the Transfer Date, provide Buyer with (a) unaudited
monthly statements of assets and liabilities relating to the business and
operations of the Stations, and monthly statements of revenues and expenses
reflecting the results of business and operations of the Stations for the month
following the month such financial statements were last provided and for each
month thereafter, within thirty (30) days after the end of each such month, and
(b) weekly sales pacing reports for the Stations and copies of any financial
statements.
6.2.10. CONSENTS.
(a) Take all reasonable action required to obtain all
consents, approvals and agreements of any third parties necessary to authorize,
approve or permit the consummation of the transactions contemplated by this
Agreement, including, without limitation, any consent of the parties to the
Station Contracts designated as necessary in Schedule 3.4 in order to consummate
the transactions contemplated hereby (collectively, the "Restricted Contracts").
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, to the extent that the consent or approval of any third party is
required under any Restricted Contract, such Seller shall only be required to
use reasonable efforts (not involving the payment by such Seller of any money to
any party to any such Restricted Contract, except to the extent required by
Section 6.2.10(b)) to obtain such consents and approvals, and in the event that
such Seller fails to obtain any such consent or approval, Buyer shall have no
right to terminate this Agreement.
(b) Notwithstanding anything to the contrary in clause (a)
above, each Seller shall, and shall use its commercially reasonable efforts to
enforce such rights under the Heritage Agreement to cause a Heritage Subsidiary
to retain
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until such time as any required consents shall have been obtained by such
Seller, all rights to and under any Station Contract which requires the consent
of any other party thereto for assignment to Buyer if such consent has not been
obtained on the Closing Date (the "Deferred Contract"). Until the assignment of
the Deferred Contract, (i) each Seller shall continue to use all commercially
reasonable efforts and Buyer shall cooperate with Sellers to obtain the consent
and/or to remove any other impediments to such assignment, and (ii) Sellers and
Buyer agree to cooperate in any lawful arrangement to provide (to the extent
permitted without breach of such Deferred Contract) that Buyer shall receive the
benefits of such interest after the Closing Date to the same extent as if it
were the lessee thereunder; provided, however, if Buyer shall fail to receive
such benefits after the Closing Date for any Leased Property that is a main
transmitter tower site or a studio site for any Station (the "Designated
Properties"), Sellers agree to make such payments as are necessary for Buyer to
receive such benefits as long as the aggregate amount of all such payments does
not exceed Two Hundred Thousand Dollars ($200,000) for all such Designated
Properties under this Agreement. If, subsequent to the Closing, any Seller shall
obtain required consents to assign any Deferred Contract, the Deferred Contract
for which consent to assign has been obtained shall at that time be deemed to be
conveyed, granted, bargained, sold, transferred, setover, assigned, released,
delivered and confirmed to Buyer, without need of further action by any Seller
or of future documentation.
6.2.11. CORPORATE ACTION.
Take all corporate action (including, without limitation, all
shareholder action), under the Law of any state having jurisdiction over such
Seller necessary to effectuate the transactions contemplated by this Agreement
and the other Seller Documents.
6.2.12. ENVIRONMENTAL AUDIT.
Subject to the cooperation of the Trustee, permit 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 Leased Property 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 firm of Buyer's choice subject to the reasonable
approval of Sellers and in a manner as will not unreasonably interfere with the
normal business and operations of any of the Stations.
6.2.13. HERITAGE AGREEMENT.
Consummate the acquisition of the Assets in accordance with
all of the provisions of the Heritage Agreement and use commercially
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reasonable efforts to pursue in a timely manner any claims relating to the
Stations that Sellers may have under the Heritage Agreement.
6.3. CONFIDENTIALITY.
Each Seller shall, at all times, maintain strict confidentiality with
respect to all documents and information furnished to such Seller by or on
behalf of Buyer. Nothing shall be deemed to be confidential information that:
(a) is known to a Seller at the time of its disclosure to such Seller; (b)
becomes publicly known or available to a Seller other than through disclosure by
such Seller; (c) is received by a Seller from a third party not actually known
by such Seller to be bound by a confidentiality agreement with or obligation to
Buyer; or (d) is independently developed by a Seller. Notwithstanding the
foregoing provisions of this Section 6.3, each Seller may disclose such
confidential information (a) to the extent required or deemed advisable to
comply with applicable Laws; (b) to its officers, directors, employees,
representatives, financial advisors, attorneys, accountants, and agents with
respect to the transactions contemplated hereby (so long as such parties agree
to maintain the confidentiality of such information); (c) to the Heritage
Subsidiaries and the Trustee, as necessary, with respect to the transactions
contemplated hereby (so long as such parties agree to maintain the
confidentiality of such information); and (d) to any Governmental Authority in
connection with the transactions contemplated hereby. In the event this
Agreement is terminated, each Seller will return to Buyer all documents and
other material prepared or furnished by Buyer relating to the transactions
contemplated hereunder, whether obtained before or after the execution of this
Agreement.
6.4. HERITAGE ACQUISITION.
Upon receipt of a written notice by Sellers from Buyer that the Buyer
is prepared to proceed with the Non-License Transfer hereunder simultaneously
with (or immediately following) the acquisition of the Stations from the
Heritage Subsidiaries, Sellers agree to acquire the Stations from the Heritage
Subsidiaries as promptly as possible to the extent permitted under the Heritage
Agreement. Notwithstanding the foregoing, nothing in the preceding sentence
shall constitute a waiver by Buyer of any conditions precedent to Buyer's
obligation to proceed with the Non-License Transfer.
ARTICLE 7.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Sellers as follows:
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7.1. CONFIDENTIALITY.
Buyer shall, at all times prior to the Non-License Transfer and the
Closing, maintain strict confidentiality with respect to all documents and
information furnished to Buyer by or on behalf of a Seller. Nothing shall be
deemed to be confidential information that: (a) is known to Buyer at the time of
its disclosure to Buyer; (b) becomes publicly known or available other than
through disclosure by Buyer; (c) is received by Buyer from a third party not
actually known by Buyer to be bound by a confidentiality agreement with or
obligation to a Seller; or (d) is independently developed by Buyer.
Notwithstanding the foregoing provisions of this Section 7.1, Buyer may disclose
such confidential information (a) to the extent required or deemed advisable to
comply with applicable Laws; (b) to its officers, directors, partners,
employees, representatives, financial advisors, attorneys, accountants, agents,
underwriters, lenders, investors and any other potential sources of financing
with respect to the transactions contemplated hereby (so long as such parties
agree to maintain the confidentiality of such information); and (c) to any
Governmental Authority in connection with the transactions contemplated hereby.
In the event this Agreement is terminated, Buyer will return to Sellers all
documents and other material prepared or furnished by Sellers relating to the
transactions contemplated by this Agreement, whether obtained before or after
the execution of this Agreement.
7.2. CORPORATE ACTION.
Prior to the Non-License Transfer and the Closing, Buyer shall take all
corporate action (including, without limitation, all shareholder action), under
the Laws of any state having jurisdiction over Buyer necessary to effectuate the
transactions contemplated by this Agreement and the other Buyer Documents.
7.3. ACCESS.
From and after the Transfer Date for a period of three (3) years, Buyer
shall cause to be afforded to representatives of Sellers and the Heritage
Subsidiaries reasonable access during normal business hours to the offices,
books and records, contracts and reports of the Stations which relate to the
operations of the Stations during the period during which the Stations were
owned by the Sellers or the Heritage Subsidiaries, as Sellers or the Heritage
Subsidiaries shall from time to time reasonably request; provided, however, that
(a) such investigation shall only be upon reasonable notice and shall not
unreasonably disrupt the personnel or operations of Buyer or the Stations, and
(b) under no circumstances shall Buyer be required to provide access to any
Seller, any Heritage Subsidiary or any representatives of any Seller or any
Heritage Subsidiary (i) any information or materials subject to confidentiality
agreements with third parties required to be
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kept confidential by applicable Laws, or (ii) any privileged attorney-client
communications or attorney work product. All requests for access to the offices,
books and records, contracts and reports of the Stations shall be made to such
representatives as Buyer shall designate in writing, who shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. Buyer agrees not to dispose of any such books and records, contracts
and reports of the Stations which relate to the operations of the Stations
during the period during which the Stations were owned by Sellers or the
Heritage Subsidiaries without consulting with Sellers prior to disposal thereof
and taking any reasonable action requested by Sellers with respect to retention
and transfer to Sellers thereof.
7.4. COLLECTION OF RECEIVABLES.
At the earlier of the Non-License Transfer or the Closing, Sellers
shall assign the Accounts Receivable to Buyer for collection purposes only, and,
within ten (10) business days after the Transfer Date, Seller shall furnish to
Buyer a list of the Accounts Receivable by accounts and the amounts then owing.
Buyer agrees, for a period of one hundred fifty (150) days following the
Transfer Date, without any requirement to litigate to collect the Accounts
Receivable, to use its reasonable efforts (with at least the care and diligence
Buyer uses to collect its own accounts receivable) to collect for Sellers the
Accounts Receivable and to remit to Sellers (or their designees) on the fifth
day following the last day of each month occurring during such one hundred fifty
(150) day period (or, if any such day is a Saturday, Sunday or holiday, on the
next day on which banking transactions are resumed), collections received by
Buyer with respect to the Accounts Receivable. Buyer shall not make any referral
or compromise of any Accounts Receivable to a collection agency or attorney for
collection and shall not compromise for less than full value any Account
Receivable without the prior written consent of Sellers. Any Account Receivable
not collected by Buyer within one hundred fifty (150) days following the Closing
Date shall revert to Sellers (or their designees). Buyer shall reassign, without
recourse to Buyer, each Account Receivable and deliver to Sellers, all records
relating thereto on the same day as it remits to Sellers (or their designees)
the collections received. All payments in respect of the Accounts Receivable
received during the one hundred fifty (150) day period shall be first applied to
the oldest balance then due on the Accounts Receivable unless the account debtor
indicates in writing that payment is to be applied otherwise due to a dispute
over an Account Receivable. Buyer agrees, upon the reasonable request of
Sellers, to furnish to Sellers periodic reports on the status of its Accounts
Receivable. Buyer shall have no right to set-off any amounts collected for
Accounts Receivable for any amounts owed to Buyer by Sellers; provided, however,
that Buyer shall have the right to seek indemnification in accordance with the
terms and conditions of this Agreement.
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ARTICLE 8.
MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLERS AND BUYER
8.1. POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, Buyer shall not directly
or indirectly control, supervise or direct, or attempt to control, supervise or
direct, the business and operations of the Stations, and such operation,
including complete control and supervision of all programming, shall be the sole
responsibility of the owners of the Stations, except as contemplated by the LMA
Agreement after the Non-License Transfer. On and after the Closing Date, Sellers
shall have no control over, or right to intervene, supervise, direct or
participate in, the business and operations of the Stations.
8.2. RISK OF LOSS.
The risk of loss or damage by fire or other casualty or cause to the
Assets until the Transfer Date shall be upon Sellers. Except as otherwise
provided in Section 9.3, in the event of loss or damage prior to the Transfer
Date with respect to which Sellers have adequate replacement cost insurance and
which has not been restored, replaced, or repaired as of the Transfer Date,
Buyer shall proceed with the Non-License Transfer or the Closing, as applicable,
and receive at the Non-License Transfer or the Closing, as applicable, the
insurance proceeds or an assignment of the right to receive such insurance
proceeds, as applicable, to which Sellers otherwise would be entitled, whereupon
Sellers shall have no further liability to Buyer for such loss or damage.
8.3. PUBLIC ANNOUNCEMENTS.
Sellers and Buyer shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated herein and shall not issue any such
press release or make any such public statement without the prior written
consent of the other parties hereto, which shall not be unreasonably withheld;
provided, however, that a party may, without consulting with the other parties,
issue such press release or make such public statement as may be required by Law
or any listing agreement with a national securities exchange to which STC or
Sinclair is a party if it has used all reasonable efforts to consult with the
other party and to obtain such party's consent but has been unable to do so in a
timely manner.
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8.4. EMPLOYEE MATTERS.
8.4.1. Upon the earlier of the Non-License Transfer or the Closing,
Buyer shall offer employment to each of the employees of the Stations (including
those on leave of absence, whether short-term, long-term, family, maternity,
disability, paid, unpaid or other), at a comparable salary, position and place
of employment as held by each such employee immediately prior to the Transfer
Date (such employees who are given such offers of employment and accept such
offers are referred to herein as the "Transferred Employees"); provided,
however, that the two (2) employees of the Stations designated in the TBA
Agreement shall continue as employees of Sellers and shall not become
Transferred Employees hereunder until the Closing. Nothing in this Section 8.4.1
is intended to guarantee employment for any Transferred Employee for any length
of time after the Transfer Date.
8.4.2. Except as provided otherwise in this Section 8.4, Sellers shall
pay, discharge and be responsible for (a) all salary and wages arising out of or
relating to the employment of the employees of the Stations prior to the
Transfer Date and (b) any employee benefits arising under the Benefit Plans of
any Seller Party, any Heritage Subsidiary and their Affiliates during the period
prior to the Transfer Date. From and after the Transfer Date, Buyer shall pay,
discharge and be responsible for all salary, wages and benefits arising out of
or relating to the employment of the Transferred Employees by Buyer on and after
the Transfer Date. Buyer shall be responsible for all severance Liabilities, and
all COBRA Liabilities for any Transferred Employees of the Stations terminated
by Buyer on or after the Transfer Date, including, without limitation all
Liabilities under the retention and severance agreements set forth on Schedule
8.4.8 (subject to the reimbursement obligations of Sellers set forth in Section
8.4.8).
8.4.3. Buyer shall cause all Transferred Employees as of the Transfer
Date to be eligible to participate in its "employee welfare benefit plans" and
"employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA,
respectively) of Buyer in which similarly situated employees of Buyer are
generally eligible to participate; provided, however, that all Transferred
Employees and their spouses and dependents shall be eligible for coverage
immediately after the Transfer Date (and shall not be excluded from coverage on
account of any pre-existing condition) to the extent provided under such plans
with respect to Transferred Employees.
8.4.4. For purposes of any length of service requirements, waiting
periods, vesting periods or differential benefits based on length of service in
any such plan for which a Transferred Employee may be eligible after the
Transfer Date, Buyer shall ensure that, to the extent permitted by law, service
by such Transferred Employee with any Seller, any Heritage Subsidiary or any
Affiliate of
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Sellers or the Heritage Subsidiaries shall be deemed to have been service with
Buyer. In addition, Buyer shall ensure that each Transferred Employee receives
credit under any welfare benefit plan of Buyer for any deductibles or
co-payments paid by such Transferred Employee and his or her dependents for the
current plan year under a plan maintained by any Seller, any Heritage Subsidiary
or any Affiliate of Sellers or the Heritage Subsidiaries. Buyer shall grant
credit to each Transferred Employee for all sick leave in accordance with the
policies of Buyer applicable generally to its employees after giving effect to
service for any Seller or any Heritage Subsidiary as service for Buyer. To the
extent taken into account in determining the Final Proration Amount, Buyer shall
assume and discharge Liabilities of Sellers for the payment of all unused
vacation leave accrued by Transferred Employees as of the Transfer Date. To the
extent any claim with respect to such accrued vacation leave is lodged against
Sellers, with respect to any Transferred Employee, Buyer shall indemnify, defend
and hold harmless Sellers from and against any and all losses, directly or
indirectly, as a result of, or based upon or arising from the same.
8.4.5. As soon as practicable following the Transfer Date, Buyer shall
establish and maintain a defined contribution plan or plans (which may be a
preexisting plan or plans (the "Buyer's Plan") intended to be qualified under
Section 401(a) and 401(k) of the Code for the benefit of the Transferred
Employees. Effective as of the Transfer Date, Sellers shall, and shall use their
commercially reasonable efforts to enforce such rights under the Heritage
Agreement to cause the Heritage Subsidiaries to, cause appropriate amendments to
be made to all retirement savings plans to which any Transferred Employees
participate (the "Sellers' Plan") to provide that the Transferred Employees
shall be fully vested in their accounts under the Sellers' Plan. As soon as
practicable after the Transfer Date, Buyer shall take all necessary action to
qualify the Buyer's Plan under the applicable provisions of the Code (including
but not limited to Section 401), if it is not yet so qualified, and Buyer and
Sellers shall make any and all filings and submissions to the appropriate
governmental agencies required to be made by them in connection with the
transfer of assets described hereafter. As soon as practicable following the
earlier of the receipt of a favorable determination letter from the Internal
Revenue Service regarding the qualified status of both the Sellers' Plan and the
Buyer's Plan (each as amended to the date of transfer) or sooner, if Sellers and
Buyer so agree, Sellers shall, and shall use their commercially reasonable
efforts to enforce such rights under the Heritage Agreement to, cause the
Heritage Subsidiaries to cause to be transferred to the Buyer's Plan, in cash
and in kind, all of the individual account balances of Transferred Employees
under the Sellers' Plan, including any outstanding plan participant loan
receivables allocated to such accounts.
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8.4.6. Buyer acknowledges and agrees that Buyer's obligations pursuant
to this Section 8.4 are in addition to, and not in limitation of, Buyer's
obligation to assume the employment contracts set forth on Schedule 2.1.8.
8.4.7. Except as otherwise provided in this Section 8.4 or in any
employment, severance or retention agreements of any Transferred Employees, all
Transferred Employees shall be at-will employees, and Buyer may terminate their
employment or change their terms of employment at will. No employee (or
beneficiary of any employee) of the Stations may sue to enforce the terms of
this Agreement, including specifically this Section 8.4, and no employee or
beneficiary shall be treated as a third party beneficiary of this Agreement.
Except to the extent provided for herein, Buyer may cover the Transferred
Employees under existing or new benefit plans, programs, and arrangements, and
may amend or terminate any such plans, programs, or arrangements at any time.
8.4.8. To the extent that Sellers receive any severance payments from
the Heritage Subsidiaries in connection with the termination of employment by
Sellers or Buyer of a general manager for the Stations in accordance with the
terms of the Heritage Agreement, Sellers shall pay any such amounts received
from the Heritage Subsidiaries to Buyer within five (5) days of receipt.
8.5. DISCLOSURE SCHEDULES.
Prior to Sellers' acquisition of the Stations from the Heritage
Subsidiaries, Sellers shall have the right from time to time to update or
correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4 and 3.17 attached hereto
solely to reflect actions by Sellers or the Heritage Subsidiaries after the date
hereof which are not prohibited by Section 6.1 of the Heritage Agreement or this
Agreement. From and after Sellers' acquisition of the Stations from the Heritage
Subsidiaries and prior to the Transfer Date, Sellers shall have the obligation
to update or correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4 and 3.17
attached hereto solely to reflect actions by Sellers which are not prohibited by
Section 6.1 hereof. The inclusion of any fact or item on a Schedule referenced
by a particular section in this Agreement shall, should the existence of the
fact or item or its contents, be relevant to any other section, be deemed to be
disclosed with respect to such other section whether or not an explicit
cross-reference appears in the Schedules.
8.6. BULK SALES LAWS.
Buyer hereby waives compliance by Sellers, in connection with the
transactions contemplated hereby, with the provisions of any applicable bulk
transfer laws.
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8.7. TAX MATTERS.
Each party hereto represents, warrants, covenants and agrees that for
tax purposes the sale of Assets (except for the License Assets) is not effective
until the Transfer Date, and the sale of the License Assets is not effective
until the Closing Date. Seller and Buyer agree that all Tax returns and reports
shall be filed consistent with the sale of Assets taking place as aforesaid.
8.8. PRESERVATION OF BOOKS AND RECORDS.
For a period of three (3) years after the Closing Date, Sellers agree
not to dispose of, and agree to provide Buyer reasonable access to, any material
books or records in possession of Sellers immediately after the Transfer Date
that relate to the business or operations of the Stations prior to the Transfer
Date.
8.9. TBA AGREEMENT.
At the Non-License Transfer pursuant to Section 11.2, Buyer and Sellers
shall enter into a time brokerage agreement for the Stations substantially in
the form of Exhibit E hereto (the "TBA Agreement").
ARTICLE 9.
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Assets and to consummate the
Non-License Transfer or proceed with the Closing, as applicable, are subject to
the satisfaction (or waiver in writing by Buyer) at or prior to the Non-License
Transfer or the Closing, as applicable, of each of the following conditions:
9.1. CLOSING UNDER THE HERITAGE AGREEMENT.
Sellers shall have acquired the Assets pursuant to the terms of the
Heritage Agreement.
9.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Sellers made in this Agreement
shall be true and correct on and as of the Non-License Transfer Date or the
Closing Date, as applicable, with the same effect as though such representations
and warranties had been made on and as of the Non-License Transfer Date or the
Closing Date, as applicable (except as modified by the Schedules updated after
the date hereof in accordance with Section 8.5 and except
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for representations and warranties that speak as of a specific date or time
other than the Non-License Transfer Date or the Closing Date, as applicable
(which need only be true and correct in all material respects as of such date or
time)), and the covenants and agreements of Sellers required to be performed on
or before the Non-License Transfer Date or the Closing Date, as applicable, in
accordance with the terms of this Agreement shall have been performed in all
respects, except to the extent that the failure of such representations and
warranties to be true and correct and the failure to perform such covenants
shall not have, when considered together, had a material adverse effect on any
material FCC Licenses or on the broadcast transmissions of any Station (a
"Transmission Defect"); provided, however, if a Transmission Defect exists as of
the Non-License Transfer Date or the Closing Date, as applicable, then either or
both of Sellers and Buyer shall be entitled, by written notice to the other, to
postpone the Non-License Transfer Date or the Closing Date, as applicable, for a
period of up to sixty (60) days to resume such Station's broadcast transmission.
9.3. NO TRANSMISSION DEFECTS.
There shall not exist any loss or damage at any of the Stations which
has resulted in the regular broadcast transmission of such Station (including
its effective radiated power) to be diminished in any material respect;
provided, that if any such loss or damage does exist, then either or both of
Sellers and Buyer shall be entitled, by written notice to the other, to postpone
the Non-License Transfer Date or the Closing Date, as applicable, for a period
of up to sixty (60) days to resume such Station's broadcast transmission.
9.4. DELIVERY OF DOCUMENTS.
Sellers shall have delivered to Buyer all contracts, agreements,
instruments and documents required to be delivered by Sellers to Buyer pursuant
to Section 11.4.
9.5. FCC ORDER.
The FCC Order shall have been issued with respect to each Station;
provided, however, that there shall be no requirement that the FCC Order shall
have been issued as of the Non-License Transfer Date.
9.6. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
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9.7. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court
or Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits the transactions contemplated by this Agreement.
ARTICLE 10.
CONDITIONS PRECEDENT TO
OBLIGATION OF SELLERS
The obligations of Sellers to sell, transfer, convey and deliver the
Assets and to consummate the Non-License Transfer or to proceed with the
Closing, as applicable, are subject to the satisfaction (or waiver in writing by
Sellers) at or prior to the Non-License Transfer or the Closing, as applicable,
of each of the following conditions:
10.1. CLOSING UNDER THE HERITAGE AGREEMENT.
Sellers shall have acquired the Assets pursuant to the terms of the
Heritage Agreement.
10.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Buyer made in this Agreement
shall be true and correct in all material respects on and as of the Non-License
Transfer Date or the Closing Date, as applicable, with the same effect as though
such representations and warranties had been made on and as of the Non-License
Transfer Date or the Closing Date, as applicable, (except for representations
and warranties that speak as of a specific date or time other than the
Non-License Transfer Date or the Closing Date, as applicable, (which need only
be true and correct in all material respects as of such date or time)), and the
covenants and agreements of Buyer required to be performed on or before the
Non-License Transfer Date or the Closing Date, as applicable, in accordance with
the terms of this Agreement shall have been performed in all material respects.
10.3. DELIVERY BY BUYER.
Buyer shall have delivered to Sellers the Purchase Price in accordance
with Section 2.5 and all contracts, agreements, instruments and documents
required to be delivered by Buyer to Seller pursuant to Section 11.5.
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10.4. FCC ORDER.
The FCC Order shall have been issued with respect to each Station;
provided, however, that there shall be no requirement that the FCC Order shall
have been issued as of the Non-License Transfer Date.
10.5. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
10.6. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court
or Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits the transactions contemplated by this Agreement.
ARTICLE 11.
CLOSING; NON-LICENSE TRANSFER
11.1. CLOSING.
11.1.1. To the extent not previously transferred pursuant to the
Non-License Transfer, the closing for all of the Assets hereunder (the
"Closing") shall be held on a date specified by Buyer that is within ten (10)
days after the later of (a) the date on which all applicable waiting periods
under Hart-Scott-Rodino shall have expired or terminated, or (b) the date on
which all of the FCC Orders for all Stations shall have been issued (the date on
which the Closing shall occur pursuant to this Section 11.1 is referred to
herein as the "Closing Date").
11.1.2. If the Closing shall not have occurred on or prior to such date
which is two (2) years after the date of this Agreement due to the failure to
receive an FCC Order for reasons relating solely to Buyer's qualifications,
Buyer shall designate a successor licensee and the parties will cooperate to
secure the necessary governmental approvals to cause the designated successor to
become the licensee. If the Closing shall not have occurred on or prior to such
date which is four (4) years after the date of this Agreement due to the failure
to receive an FCC Order for reasons relating solely to any Seller, Sellers shall
jointly and severally indemnify, defend and hold Buyer harmless from and against
any and all actual Losses incurred by Buyer as a result of the FCC's failure to
issue such FCC Order by such date for such reasons. All proceeds received from a
transfer of the License Assets to any such successor licensee shall be for
Buyer; provided, however, to the
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extent Buyer has not incurred any Losses for which the Sellers have indemnified
Buyer pursuant to the preceding sentence, Sellers shall receive the amount of
TWO MILLION DOLLARS ($2,000,000) which would otherwise have been payable to
Sellers at Closing pursuant to Section 2.5.2.
11.1.3. If the Closing shall not have occurred on or prior to such date
which is four (4) years after the date of this Agreement, Sellers and Buyer
acknowledge and agree to cooperate and use commercially reasonable efforts to
consummate the sale to a third party of both the License Assets and the
Non-License Assets in an orderly and mutually satisfactory manner (the "Third
Party Sale"). At the closing of the Third Party Sale pursuant to this Section
11.1.3, (a) up to Two Million Dollars ($2,000,000) of the proceeds therefrom
shall be paid directly to Sellers by wire transfer of immediately available
funds to an account identified by Sellers in writing, and (b) any proceeds
therefrom in excess of the Two Million Dollars ($2,000,000), if any, shall be
paid directly to Buyer by wire transfer of immediately available funds to an
account identified by Buyer writing.
11.2. NON-LICENSE TRANSFER.
11.2.1. Notwithstanding anything to the contrary herein, provided that
the conditions set forth in Article 9 (except for Section 9.5) and Article 10
(except for Section 10.4) shall have been satisfied and the Closing shall not
have occurred, there shall be a closing (the "Non-License Transfer") for the
purchase and sale of all of the Assets, other than the License Assets, upon the
earlier to occur of (a) such date which is seventy-five (75) days after the date
of this Agreement (the "Outside Date"), or (b) any date prior to the Outside
Date specified by Buyer in writing at least five (5) days prior to such date
(the date on which the Non-License Transfer shall occur pursuant to this Section
11.2.1 is referred to herein as the "Non-License Transfer Date"). The parties
acknowledge and agree that if the conditions set forth in Article 9 (except for
Section 9.5) and Article 10 (except for Section 10.4) are not satisfied as of
the Outside Date, the Outside Date shall be such date which is ten (10) days
after satisfaction of all such conditions (subject to rights of Sellers and
Buyer to terminate this Agreement prior to such date in accordance with Article
13).
11.2.2. At the Non-License Transfer, Sellers shall sell, assign,
transfer, convey and deliver to Buyer free and clear of any Encumbrances other
than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for and
accept from Sellers, all right, title and interest of Sellers in, to and under
the Assets, other than the License Assets.
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11.3. TIME AND PLACE OF NON-LICENSE TRANSFER AND CLOSING.
The Closing and the Non-License Transfer shall be held at 10:00 A.M.
local time on the Closing Date and the Non-License Transfer Date, respectively,
at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100,
McLean, Virginia, or at such other time and place as the parties may agree.
11.4. DELIVERIES BY SELLERS.
At the Non-License Transfer and the Closing, as applicable, Sellers
shall deliver to Buyer the following:
11.4.1. AGREEMENTS AND INSTRUMENTS
The following bills of sale, assignments and other
instruments of transfer duly executed by Sellers:
(a) a Bill of Sale;
(b) an Assignment of FCC Licenses; provided
that the Assignment of Licenses shall not
be delivered at a Non-License Transfer;
(c) an Assignment of Contracts and Leases;
(d) an Assumption Agreement;
(e) certificates of title with respect to the
motor vehicles listed on Schedule 2.1.9
or if any such motor vehicles are leased
by a Seller, an assignment of such lease;
(f) special or limited warranty deeds for all
Real Property in the form appropriate to
the jurisdictions in which such Real
Property is located; and
(g) the TBA Agreement.
11.4.2. CONSENTS.
Copies of all consents Sellers have been able to obtain to
effect the assignment to Buyer of the Station Contracts listed on Schedule 3.4.
11.4.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the board of directors and the
stockholders of each Seller, certified as being correct and complete and then in
full force and effect, authorizing the execution, delivery and performance of
this Agreement, and of the other Seller Documents, and the consummation of the
transactions contemplated hereby and thereby.
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11.4.4. OFFICERS' CERTIFICATES.
(a) A certificate of each Seller certifying the matters set
forth in Section 9.2; and
(b) A certificate of each Seller as to the incumbency of the
representatives of such Seller executing this Agreement or any of the other
Seller Documents on behalf of such Seller, and true and correct copies of the
organizational documents of each Seller.
11.4.5. GOOD STANDING CERTIFICATES.
To the extent available from the applicable jurisdictions,
certificates as to the formation and/or good standing of each Seller issued by
the appropriate governmental authorities in the states of organization and each
jurisdiction in which such Seller is qualified to do business, each such
certificate (if available) to be dated a date not more than a reasonable number
of days prior to the Transfer Date.
11.5. DELIVERIES BY BUYER.
At the Non-License Transfer and the Closing, Buyer shall deliver to
Sellers the following:
11.5.1. PURCHASE PRICE PAYMENT.
The Purchase Price in the amount and manner set forth in
Section 2.5.
11.5.2. AGREEMENTS AND INSTRUMENTS.
The Assumption Agreement and other instruments of transfer
duly executed by Buyer.
11.5.3. CERTIFIED RESOLUTIONS.
Copies of the resolutions of the board of directors and
stockholder of Buyer, certified as being correct and complete and then in full
force and effect, authorizing the execution, delivery and performance of this
Agreement and of the other Buyer Documents, and the consummation of the
transactions contemplated hereby and thereby.
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11.5.4. OFFICERS' CERTIFICATE.
(a) A certificate of Buyer signed by an officer of Buyer
certifying the matters set forth in Section 10.2; and
(b) A certificate signed by the Secretary of Buyer as to the
incumbency of the officers of Buyer executing this Agreement or any of the other
Buyer Documents on behalf of Buyer, and true and correct copies of the
organizational documents of Buyer.
ARTICLE 12.
SURVIVAL; INDEMNIFICATION
12.1. SURVIVAL OF REPRESENTATIONS.
12.1.1. Unless otherwise set forth herein (including, without
limitation, Section 12.1.2), all representations and warranties, covenants and
agreements of Sellers and Buyer contained in or made pursuant to this Agreement
or in any certificate furnished pursuant hereto shall survive the Non-License
Transfer Date or the Closing Date, as applicable, and shall remain in full force
and effect to the following extent: (a) representations and warranties with
respect to the Non-License Assets shall survive for a period of twelve (12)
months after the Non-License Transfer Date, (b) representations and warranties
with respect to the License Assets shall survive for a period of twelve (12)
months after the Closing Date, (c) the covenants and agreements with respect to
the Non-License Assets which by their terms survive the Non-License Transfer
Date shall continue in full force and effect until fully discharged (but not
beyond the expiration of twelve (12) months after the Non-License Transfer
Date), (d) the covenants and agreements with respect to the License Assets which
by their terms survive the Closing Date shall continue in full force and effect
until fully discharged (but not beyond the expiration of twelve (12) months
after the Closing Date), and (e) any representation, warranty, covenant or
agreement that is the subject of a claim which is asserted in a reasonably
detailed writing prior to the expiration of the survival period set forth in
this Section 12.1.1, shall survive with respect to such claim or dispute until
the final resolution thereof.
12.1.2. No claim for indemnification may be made pursuant to this
Article 12 after the survival period set forth in this Section 12.1.
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12.2. INDEMNIFICATION BY SELLERS.
Subject to the conditions and provisions of Section 12.4 and Section
12.5, from and after the Transfer Date, Sellers jointly and severally agree to
indemnify, defend and hold harmless Buyer from and against and in any respect
of, on a net after-tax basis, any and all Losses, asserted against, resulting
to, imposed upon or incurred by Buyer, directly or indirectly, by reason of or
resulting from: (a) any failure by Sellers to pay, perform or discharge any
Liabilities not assumed by Buyer pursuant hereto; (b) the business or operations
of the Stations during the period prior to the Transfer Date (except to the
extent Buyer has assumed the Liability for any such Losses pursuant hereto); (c)
any misrepresentation or breach of the representations and warranties of any
Seller contained in or made pursuant to this Agreement or any other Seller
Document; (d) any breach by Sellers of any covenants of Sellers contained in or
made pursuant to this Agreement or any other Seller Document; or (e) the failure
of any Seller to comply with the provisions of any applicable bulk transfer law.
12.3. INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of Section 12.4 and Section
12.5, from and after the Transfer Date, Buyer hereby agrees to indemnify, defend
and hold harmless Sellers from, against and with respect of, on a net after-tax
basis, any and all Losses, asserted against, resulting to, imposed upon or
incurred by Sellers, directly or indirectly, by reason of or resulting from: (a)
any failure by Buyer to pay, perform or discharge any Liabilities assumed by
Buyer pursuant hereto; (b) the business or operations of the Stations during the
period from and after the Transfer Date; (c) any misrepresentation or breach of
the representations and warranties of Buyer contained in or made pursuant to
this Agreement or any other Buyer Document; or (d) any breach by Buyer of any
covenants of Buyer contained in or made pursuant to this Agreement or any other
Buyer Document.
12.4. LIMITATIONS ON INDEMNIFICATION.
12.4.1. Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Losses include a party's incidental, consequential
or punitive damages, regardless of the theory of recovery. Each party hereto
agrees to use reasonable efforts to mitigate any losses which form the basis for
any claim for indemnification hereunder.
12.4.2. Notwithstanding any other provision of this Agreement to the
contrary, Sellers shall not be liable to Buyer in respect of any indemnification
hereunder except to the extent that the aggregate amount of Losses of Buyer
under
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this Agreement exceeds Five Hundred Thousand Dollars ($500,000) (the "Basket
Amount"), and then only to the extent of the excess over the amount of Two
Hundred Fifty Thousand Dollars ($250,000); provided, however, that the aggregate
amount of Losses of Buyer under this Agreement shall not exceed Four Million
Dollars ($4,000,000) (the "Indemnity Cap"); further provided, however, the
Basket Amount shall not be applicable to any amounts owed in connection with the
determination of the Proration Amount pursuant to Section 2.6, to the payment or
reimbursement obligations of Sellers under Sections 8.2 and 8.4.8, or to the
indemnities set forth in Section 12.2(a) or Section 12.2(b); further provided,
however, the Indemnity Cap shall not be applicable (i) if the transfer of the
License Assets to Buyer has not occurred on or prior to such date which is four
(4) years from the date of this Agreement as a result of a default under, or
breach of, any of the terms of this Agreement by Sellers, (ii) if the Closing
has not occurred on or prior to such date which is four (4) years from the date
of this Agreement under the circumstances described in the second sentence of
Section 11.1.2, or (iii) in the event of fraud.
12.4.3. Notwithstanding any other provision of this Agreement to the
contrary, Buyer acknowledges and agrees that the maximum aggregate liability of
Sellers pursuant to this Agreement to Buyer and any third parties for any and
all Losses shall not exceed the Indemnity Cap, regardless of whether Buyer seeks
indemnification pursuant to this Article 12, regardless of the form of action,
whether in contract or tort, including negligence, and regardless of whether or
not Sellers are notified of the possibility of damages to Buyer or any other
third party; provided, however, the Indemnity Cap shall not be applicable if the
transfer of the License Assets to Buyer has not occurred on or prior to such
date which is four (4) years from the date of this Agreement as a result of a
default under, or breach of, any of the terms of this Agreement by Sellers, (ii)
if the Closing has not occurred on or prior to such date which is four (4) years
from the date of this Agreement under the circumstances described in the second
sentence of Section 11.1.2, or (iii) in the event of fraud.
12.4.4. Each party (a "recipient party") shall notify the other party
in writing (the "representing party") reasonably promptly of any perceived
breach by the representing party of which the recipient party has knowledge of
any representations, warranties, covenants and agreements, and of any Losses
(including a brief description of the same) of the recipient party caused
thereby. In the event of any breach that is cured prior to the Transfer Date in
accordance with the terms of this Agreement, the representing party shall have
no obligation under Section 12.2 or Section 12.3 or otherwise to indemnify the
recipient party with respect to such Losses.
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12.5. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Sellers and of Buyer hereunder with
respect to their respective indemnities pursuant to this Article 12, resulting
from any Losses, shall be subject to the following terms and conditions:
12.5.1. The party seeking indemnification (the "Indemnified Party")
must give the other party or parties, as the case may be (the "Indemnifying
Party"), notice of any such Losses promptly after the Indemnified Party receives
notice thereof; provided that the failure to give such notice shall not affect
the rights of the Indemnified Party hereunder except to the extent that the
Indemnifying Party shall have suffered actual damage by reason of such failure.
12.5.2. The Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of such Losses
at the Indemnifying Party's risk and expense.
12.5.3. In the event that the Indemnifying Party shall elect not to
undertake such defense, or, within a reasonable time after notice from the
Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final determination thereof). In such event, the
Indemnifying Party shall pay to the Indemnified Party, in addition to the other
sums required to be paid hereunder, the costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred.
12.5.4. Anything in this Section 12.5 to the contrary notwithstanding,
(a) if there is a reasonable possibility that Losses may materially and
adversely affect the Indemnified Party other than as a result of money damages
or other money payments, the Indemnified Party shall have the right, at its own
cost and expense, to participate in the defense, compromise or settlement of the
Losses, (b) the Indemnifying Party shall not, without the Indemnified Party's
written consent, settle or compromise any Losses or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Losses in form and substance satisfactory to the
Indemnified Party, and (c) in the event that the Indemnifying Party undertakes
defense of any Losses, the Indemnified Party, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have the right to
consult with the Indemnifying
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Party and its counsel or other representatives concerning such Losses and the
Indemnifying Party and the Indemnified Party and their respective counsel or
other representatives shall cooperate with respect to such Losses and (d) in the
event that the Indemnifying Party undertakes defense of any Losses, the
Indemnifying Party shall have an obligation to keep the Indemnified Party
informed of the status of the defense of such Losses and furnish the Indemnified
Party with all documents, instruments and information that the Indemnified Party
shall reasonably request in connection therewith.
12.6. CURE OF BREACH.
Notwithstanding any other provision of this Agreement to the contrary,
a breach by Sellers of any representations and warranties or a failure to
perform any covenant or agreement hereunder may be cured by Sellers prior to the
Transfer Date (a) by reducing the Purchase Price in an amount equal to the
Losses to Buyer caused by such breach, (b) by making payment to a third party or
taking other action to discharge the Losses, (c) by placing an amount equal to
the Losses in an escrow account under an escrow arrangement reasonably
satisfactory to Sellers and Buyer or (d) a combination of the foregoing. If the
foregoing actions fully cure the breach, Sellers shall have no obligation under
Section 12.2 or otherwise to indemnify Buyer with respect to the Losses caused
by such breach; if such actions partially cure the breach, Sellers shall
continue to have an obligation under Section 12.2 to indemnify Buyer with
respect to the remaining portion of the Losses caused by such breach.
ARTICLE 13.
TERMINATION
13.1. TERMINATION BY THE PARTIES.
This Agreement may be terminated at any time prior to the Closing by:
13.1.1. the mutual consent of Sellers and Buyer;
13.1.2. Sellers in accordance with, and subject to, the terms and
conditions of Section 14.1; and
13.1.3. Buyer if any loss or damage at a Station described in Section
9.3 shall not have been cured within the sixty (60) day period described in
Section 9.3.
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13.1.4. Buyer if the closing of the Heritage Agreement with respect to
the Stations shall not have occurred on or prior to July 16, 1998.
13.2. AUTOMATIC TERMINATION.
This Agreement shall automatically terminate without further action by
the parties upon the termination of the Heritage Agreement in accordance with
its terms.
13.3. EFFECT OF TERMINATION.
13.3.1. In the event this Agreement is terminated as provided in
Sections 13.1.1, 13.1.3, 13.1.4 and 13.2, Buyer shall receive the immediate
return of the Letter of Credit, this Agreement shall be deemed null, void and of
no further force or effect, and the parties hereto shall be released from all
future obligations hereunder; provided, however, that the obligations of Buyer
and Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality),
and Section 15.3 (which relates to payment of certain expenses), shall survive
such termination and the parties hereto shall have any and all remedies to
enforce such obligations provided at law or in equity or otherwise (including,
without limitation, specific performance).
13.3.2. In the event this Agreement is terminated as provided in
Section 13.1.2, this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; provided, however, that the obligations of Buyer and
Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality),
Article 14 (which relates to remedies and the Letter of Credit) and Section 15.3
(which relates to payment of certain expenses), shall survive such termination
and the parties hereto shall have any and all remedies to enforce such
obligations provided at law or in equity or otherwise (including, without
limitation, specific performance).
ARTICLE 14.
REMEDIES
14.1. DEFAULT BY BUYER.
If Buyer shall default in the performance of its obligations under this
Agreement in any material respect and such default is not cured within thirty
(30) days after notice thereof (it being understood that Buyer shall have no
right to such thirty (30) day cure period with respect to a payment default
under Section 2.5), and provided that Sellers shall not then be in material
default in the performance of
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their obligations hereunder, Sellers shall be entitled, by written notice to
Buyer, to terminate this Agreement, and as the sole and exclusive remedy of
Sellers under this Agreement, to receive the Deposit by drawing on the Letter of
Credit in accordance with the terms of the Deposit Escrow Agreement and the
Letter of Credit (without set-off, deduction or counterclaim) as liquidated
damages, and upon such payment Buyer shall be discharged from all further
liability under this Agreement.
14.2. LIQUIDATED DAMAGES.
Sellers and Buyer have provided for the amount of the Deposit to be
liquidated damages as a remedy for Sellers after having considered carefully the
anticipated and actual harms and losses that would be incurred if Buyer defaults
and thus fails to perform its obligations to consummate the transactions
contemplated hereunder, the difficulty of ascertaining at this time the actual
amount of damages, special and general, that Sellers will suffer in such event,
and the inconvenience or nonfeasibility of otherwise obtaining an adequate
remedy in such event.
14.3. SPECIFIC PERFORMANCE.
Sellers acknowledge that the Assets to be sold and delivered to Buyer
pursuant to this Agreement are unique and that Buyer has no adequate remedy at
law if Sellers shall fail to perform any of their obligations hereunder, and
Sellers therefore confirm and agree that Buyer's right to specific performance
is essential to protect the rights and interests of Buyer. Accordingly, in
addition to any other remedies which Buyer may have hereunder or at law or in
equity or otherwise, Sellers hereby agree that Buyer shall have the right to
have all obligations, undertakings, agreements and other provisions of this
Agreement specifically performed by Sellers and that Buyer shall have the right
to obtain an order or decree of such specific performance in any of the courts
of the United States or of any state or other political subdivision thereof.
ARTICLE 15.
GENERAL PROVISIONS
15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION.
Buyer agrees that it will, at any time, prior to, at or after the
Transfer Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments and obtain such consents, as may be reasonably
requested by Sellers in
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connection with the consummation of the purchase and sale contemplated by this
Agreement. Sellers agree that they will, at any time, prior to, at or after the
Transfer Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments and obtain such consents, as may be reasonably
requested by Buyer in connection with the consummation of the purchase and sale
contemplated by this Agreement.
15.2. BROKERS.
Each Seller represents to Buyer that such Seller has not engaged, or
incurred any unpaid liability (for any brokerage fees, finders' fees,
commissions or otherwise) to, any broker, finder or agent in connection with the
transactions contemplated by this Agreement; except for Salomon Smith Barney
(whose fee is the sole responsibility of Buyer), Buyer represents to Sellers
that Buyer has not engaged, or incurred any unpaid liability (for any brokerage
fees, finders' fees, commissions or otherwise) to, any broker, finder or agent
in connection with the transactions contemplated by this Agreement; and Seller
agrees to indemnify Buyer, and Buyer agrees to indemnify Sellers, against any
claims asserted against the other party for any such fees or commissions by any
person purporting to act or to have acted for or on behalf of the indemnifying
party. Notwithstanding any other provision of this Agreement, this
representation and warranty shall survive the Transfer Date without limitation
and shall not be subject to the Basket Amount contained in Section 12.4.
15.3. EXPENSES AND TAXES.
Each party hereto shall pay its own expenses incurred in connection
with this Agreement and in the preparation for and consummation of the
transactions provided for herein. Notwithstanding the foregoing, Buyer, on the
one hand, and Sellers, on the other hand, shall each pay one-half of (a) all
sales (including, without limitation, bulk sales), use, documentary, stamp,
gross receipts, registration, transfer, conveyance, excise, recording, license
and other similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon
or arising out of the sale by Sellers and the purchase by Buyer of the Assets
whether now in effect or hereinafter adopted and regardless of which party such
Transfer Tax is imposed upon (except for any Taxes incurred by Sellers from any
gain realized on the sale of the Assets hereunder, which Taxes shall be the sole
responsibility of Sellers), (b) any FCC filing fees incurred in connection with
the assignment of the FCC Licenses to Buyer, (c) any fees and expenses incurred
in connection with any HSR Filings, and (d) the fees and expenses of Geraghty &
Miller for the environmental site assessments performed on the Real Property as
disclosed on Schedule 3.16.
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15.4. NOTICES.
All notices, demands, requests, or other communications which may be or
are required to be given or made by any party to any other party pursuant to
this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier, or transmitted by telegram, telex,
or facsimile transmission addressed as follows:
If to Buyer:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Fax: (214) 740-7355
If to any Seller:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
Fax: (410) 467-5043
with copies (which shall not constitute notice) to:
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Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
and to:
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
Fax: (410) 662-4707
or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be given or
made in the manner described above shall be deemed sufficiently given or made
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex) the answerback being deemed conclusive but not exclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
15.5. WAIVER.
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be valid
against any party hereto unless made in writing and signed by the party against
whom enforcement of such waiver is sought and then only to the extent expressly
specified therein.
15.6. BENEFIT AND ASSIGNMENT.
15.6.1. No Seller shall assign this Agreement, in whole or in part,
whether by operation of law or otherwise, without the prior written consent of
Buyer and any purported assignment contrary to the terms hereof shall be null,
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void and of no force and effect. The Buyer shall not assign this Agreement, in
whole or in part, whether by operation of law or otherwise, without the prior
written consent of Sellers and any purported assignment contrary to the terms
hereof shall be null, void and of no force and effect; provided, however, Buyer
shall be entitled, without the consent of Sellers, to assign Buyer's rights and
interests hereunder (in whole or in part as to any Station) (a) prior to the
Transfer Date, to any Person that directly or indirectly is in control of, or is
controlled by, or is under common control with Buyer; further provided, however,
that Buyer gives Seller written notice thereof and such assignee shall be
responsible for all representations, covenants and agreements of Buyer hereunder
as if such assignee was a party hereto, and that any such assignment shall not
relieve Buyer of any of its Liabilities hereunder; and (b) from and after the
Transfer Date, to any Person.
15.6.2. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns as
permitted hereunder. No Person, other than the parties hereto and their
respective successors and assigns as permitted hereunder, is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the parties hereto, and the covenants and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto or their respective successors and assigns as permitted
hereunder.
15.7. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto and the
other instruments and documents referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements, commitments
or understandings with respect to such matters. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by each of the parties hereto.
15.8. SEVERABILITY.
If any part of any provision of this Agreement or any other contract,
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said contract, agreement, document or writing.
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<PAGE>
15.9. HEADINGS.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
15.10. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of New York, excluding the
choice of law rules thereof.
15.11. SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of which
need contain the signatures of all parties, each of which shall be deemed to be
an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement, or has caused this Asset Purchase Agreement to be duly
executed and delivered in its name on its behalf, all as of the day and year
first above written.
STC BROADCASTING OF VERMONT, INC.
By:______________________________________
Name: David A. Fitz
Title: Chief Financial Officer
TUSCALOOSA BROADCASTING, INC.
By:______________________________________
Name: David B. Amy
Title: Treasurer and Secretary
WPTZ LICENSEE, INC.
By:______________________________________
Name: David B. Amy
Title: Treasurer and Secretary
WNNE LICENSEE, INC.
By:______________________________________
Name: David B. Amy
Title: Treasurer and Secretary
<PAGE>
ANNEX I
DEFINITIONS
"ACCOUNTING FIRM" shall have the meaning set forth in Section 2.6.2.
"ACCOUNTS RECEIVABLE" means all cash accounts receivable with respect
to the Stations as of the end of the broadcast day immediately preceding the
Transfer Date.
"ADDITIONAL AGREEMENTS" shall have the meaning set forth in Section
6.1.6(a).
"AFFILIATE" shall mean, with respect to any Person, any other Person
that, (a) directly or indirectly is in control of, is controlled by, or is under
common control with, the first Person, (b) is an officer, director, trustee,
partner (general or limited), employee or holder of five percent (5%) or more of
any class of any voting or non-voting securities or other equity in the first
Person, (c) is an officer, director, trustee, partner (general or limited),
employee or holder of five percent (5%) or more of any class of the voting or
non-voting securities or other equity in any Person which directly or indirectly
is in control of, is controlled by, or is under common control with, the first
Person, and (d) any Family of any individual included in (a), (b) or (c). For
purposes of this definition, "control" (including with correlative meanings
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of either (X) five percent (5%) or more of the voting power of
the securities having ordinary voting power for the election of directors of the
first Person, or (Y) the power to direct or cause the direction of the
management or policies of the first Person (whether through ownership of
securities, partnership interests or any other ownership or debt interests, by
contract or otherwise).
"AGREEMENT" shall have the meaning set forth in the Preamble.
"APPLICANT" shall have the meaning set forth in Section 4.5.2.
"ASSETS" shall have the meaning set forth in Section 2.1.
"ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of
Contracts and Leases, dated as of the Transfer Date and executed by Sellers,
substantially in the form attached hereto as Exhibit C.
"ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC
Licenses, dated as of the Closing Date and executed by Sellers, substantially in
the form attached hereto as Exhibit B.
"ASSUMED LIABILITIES" mean the Liabilities assumed by Buyer pursuant to
Section 2.8.
<PAGE>
"ASSUMPTION AGREEMENT" means that certain Assumption Agreement, dated
the Transfer Date and executed by Buyer and Sellers, substantially in the form
attached hereto as Exhibit D.
"BALANCE SHEET" shall have the meaning set forth in Section 3.5.1.
"BASE PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"BASKET AMOUNT" shall have the meaning set forth in Section 12.4.2.
"BENEFIT ARRANGEMENT" means any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Plan, including, without
limitation, employment agreements, executive compensation arrangements,
incentive programs or arrangements, sick leave, vacation pay, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, perquisite, company cars, any
plans subject to Code Section 125, and any plans providing benefits or payments
in the event of a change of control, change in ownership, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
"BENEFIT PLANS" shall have the meaning set forth in Section 3.14.1.
"BILL OF SALE" means that certain Bill of Sale and Assignment of
Assets, dated as of the Transfer Date and executed by Sellers, substantially in
the form attached hereto as Exhibit A.
"BUYER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit
Escrow Agreement, the Assumption Agreement and the TBA Agreement.
"BUYER'S PLAN" shall have the meaning set forth in Section 8.4.5.
"CLOSING" shall have the meaning set forth in Section 11.1.1.
"CLOSING DATE" shall have the meaning set forth in Section 11.1.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
ANNEX I-2
<PAGE>
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CURRENT BALANCE SHEET DATE" shall have the meaning set forth in
Section 3.5.2.
"DEFERRED CONTRACT" shall have the meaning set forth in Section
6.2.10(b).
"DEPOSIT" shall have the meaning set forth in Section 2.3.
"DEPOSIT ESCROW AGENT" means George Mason Bank.
"DEPOSIT ESCROW AGREEMENT" means that certain Escrow Agreement dated as
of the date hereof by and among Buyer, Sellers and the Deposit Escrow Agent.
"DESIGNATED PROPERTIES" shall have the meaning set forth in Section
6.2.10(b).
"DMA" means the designated market area for a particular television or
radio station as determined by the A.C. Nielsen Co.
"ENCUMBRANCES" mean any mortgages, pledges, liens, security interests,
defects in title, easements, rights-of-way, encumbrances, restrictions and any
other matters affecting title.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss. 9601 et seq.;
the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 et seq.; the Clean
Water Act ("CWA"), 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water Act, 42
U.S.C. ss. 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 et seq.;
or any other applicable federal, state, or local laws relating to Hazardous
Materials generation, production, use, storage, treatment, transportation or
disposal, or the protection of the environment from Hazardous Materials
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
ANNEX I-3
<PAGE>
"ERISA AFFILIATE" means any person that, together with any Seller
Party, would be or was prior to March 17, 1997 treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2.
"FAMILY" of an individual includes (a) the individual, (b) the
individual's spouse and former spouses and any other natural person who resides
with such individual, (c) any other natural person who is related to the
individual or any person described in the preceding clause (b) within the second
degree.
"FCC" means the Federal Communications Commission.
"FCC APPLICATIONS" shall have the meaning set forth in Section 5.1.
"FCC LICENSES" shall have the meaning set forth in Section 2.1.1.
"FCC ORDER" means an order or orders of the FCC, or of the Chief, Mass
Media Bureau of the FCC, acting under delegated authority, consenting to the
assignment to Buyer of the FCC Licenses for the Stations.
"FINAL PRORATION AMOUNT" shall have the meaning set forth in Section
2.6.2.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of the United States
government, any foreign government, any state government or any local or other
governmental body in a state, territory or possession of the United States or
the District of Columbia.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants,
or contaminants, including without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws.
"HERITAGE SUBSIDIARIES" shall have the meaning set forth in the
Recitals.
ANNEX I-4
<PAGE>
"HERITAGE AGREEMENT" shall have the meaning set forth in the Recitals.
"HMSI" shall have the meaning set forth in the Recitals.
"HSR FILING" shall have the meaning set forth in Section 5.2.
"INDEMNITY CAP" shall have the meaning set forth in Section 12.4.2.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective
meanings set forth in Section 12.5.1.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
2.1.4.
"LAWS" means any federal, state or local law, foreign law, statute,
code, ordinance, regulation, order, writ, injunction, judgment or decree
applicable to the specified Person and to the businesses and assets thereof.
"LEASED PROPERTY" shall have the meaning set forth in Section 2.1.2(b).
"LETTER OF CREDIT" shall have the meaning set forth in Section 2.3.
"LIABILITIES" shall mean, as to any Person, all debts, adverse claims,
liabilities and obligations, direct, indirect, absolute or contingent of such
Person, whether accrued, vested or otherwise, whether in contract, tort, strict
liability or otherwise and whether or not actually reflected, or required by
generally accepted accounting principles to be reflected, in such Person's
balance sheets or other books and records.
"LICENSE ASSETS" shall mean the FCC Licenses and the other Assets
described on Schedule I hereto.
"LMA" means any time brokerage agreement, local marketing arrangement,
joint sales agreement, joint operating agreement, limited management agreement
or other similar agreement or contract.
"LOSSES" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations, assessments,
losses, damages, liabilities, obligations (including those arising out of any
action, such as any settlement or compromise thereof or judgment or award
therein) and any costs and expenses, including, without limitation, reasonable
attorneys' fees and disbursements.
ANNEX I-5
<PAGE>
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets or financial condition of the Stations taken as a whole, except
for any such material adverse effect resulting from (a) general economic
conditions applicable to the television broadcast industry, (b) general
conditions in the markets in which the Stations operate, (c) circumstances that
are not likely to recur and either have been substantially remedied or can be
substantially remedied without substantial cost or delay, or (d) the refusal by
Buyer to consent to any new Program Contract.
"MULTIEMPLOYER PLAN" means any Plan described in Section 3(37) of
ERISA.
"NETWORK AGREEMENT" shall have the meaning set forth in Section 2.1.8.
"NON-LICENSE ASSETS" shall mean the Assets, other than the License
Assets.
"NON-LICENSE TRANSFER" shall have the meaning set forth in Section
11.2.1.
"NON-LICENSE TRANSFER DATE" shall have the meaning set forth in Section
11.2.1.
"OPERATING CONTRACTS" shall have the meaning set forth in Section
2.1.9.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the Stations consistent with past practices of the Heritage Subsidiaries both
with respect to type and amount; any actions taken pursuant to the requirements
of law or contracts existing on the date hereof shall be deemed to be action in
the Ordinary Course of Business.
"OUTSIDE DATE" shall have the meaning set forth in Section 11.2.1.
"PERMITTED ENCUMBRANCES" means (a) Encumbrances of a landlord, or other
statutory lien not yet due and payable, or a landlord's liens arising in the
Ordinary Course of Business, (b) Encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of the Station
Contracts set forth on the Schedules which have been made available to Buyer,
(c) Encumbrances arising pursuant to the terms of leases on Real Property or
Leased Property as set forth on Schedule 2.1.1 and Schedule 2.1.9 which are
subject to any lease or sublease to a third party, (d) Encumbrances for Taxes
not yet due and payable or which are being contested in good faith and by
appropriate
ANNEX I-6
<PAGE>
proceedings if adequate reserves with respect thereto are maintained on Seller's
books in accordance with generally accepted accounting principles, (e)
Encumbrances that do not materially detract from the value of any of the Assets
or materially interfere with the use thereof as currently used, or (f) those
Encumbrances on Schedule 3.8.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, other form
of business or legal entity or Governmental Authority.
"PLAN" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by any Seller
Party or any ERISA Affiliate for the benefit of any current or former employees
of the Stations; (b) to which any Seller Party contributed or was obligated to
contribute or to fund or provide benefits or had any liability (whether actual
or contingent) with respect to any of its assets or otherwise for the benefit of
any current or former employees of the Stations; or (c) which provides or
promises benefits to any person who performs or who has performed services for
the Stations and because of those services is or has been (i) a participant
therein or (ii) entitled to benefits thereunder.
"PROGRAM CONTRACTS" shall have the meaning set forth in Section 2.1.5.
"PRORATION AMOUNT" shall have the meaning set forth in Section 2.6.1.
"PRORATION ITEMS" shall mean any power and utility charges, business
and license fees (including retroactive adjustments thereof), sales and service
charges, commissions, special assessments, and rental payments and personal and
real estate Taxes and assessments with respect to the Real Property, taxes
(except for Taxes arising from the transfer of the Assets hereunder), deposits,
Trade-out Agreements, accrued vacation, unused sick leave and other similar
prepaid and deferred items and any other operating expenses incurred in the
Ordinary Course of Business (except with respect to Program Contracts, only
those payments due and payable during the month in which the Transfer Date
occurs shall be prorated). The parties acknowledge and agree that there shall be
excluded from Proration Items the following: (a) severance pay relating to any
employee of any Seller who shall have been terminated prior to the Transfer
Date, and (b) any Liabilities not being assumed by Buyer in accordance with
Section 2.8.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
ANNEX I-7
<PAGE>
"QUALIFIED PLAN" means a Plan that satisfies, or is intended by any
Seller Party to satisfy, the requirements for tax qualification described in
Section 401 of the Code including, without limitation, any Plan that was
terminated on or after July 1, 1989, as to which any Seller Party may have any
actual or contingent liability.
"REAL PROPERTY" shall have the meaning set forth in Section 2.1.2(a).
"RESTRICTED CONTRACTS" shall have the meaning set forth in Section
6.2.10(a).
"SCHEDULES" shall mean the disclosure schedules delivered by Seller to
Buyer in connection herewith.
"SELLER DOCUMENTS" shall mean, collectively, this Agreement, the
Deposit Escrow Agreement, the Assignment of Contracts and Leases, the Bill of
Sale, the Assignment of FCC Licenses, the Assumption Agreement and the TBA
Agreement.
"SELLER PARTIES" shall mean, collectively, Sellers, HMC and the
Heritage Subsidiaries.
"SELLER TAX RETURNS" means all federal, state, local, foreign and other
applicable Tax returns, declarations of estimated Tax reports required to be
filed by any Seller or any of the Heritage Subsidiaries in connection with the
business and operations of the Stations (without regard to extensions of time
permitted by law or otherwise).
"SELLERS' PLAN" shall have the meaning set forth in Section 8.4.5.
"STATION" and "STATIONS" shall have the meaning set forth in the
Recitals.
"STATION CONTRACTS" shall have the meaning set forth in Section 2.1.9.
"STC" shall have the meaning set forth in the Recitals.
"TAXES" means all federal, state and local taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration fees, withholdings, or other similar
charges of every kind, character or description imposed by any Governmental
Authorities.
ANNEX I-8
<PAGE>
"TBA AGREEMENT" shall have the meaning set forth in Section 8.9.
"THIRD PARTY SALE" shall have the meaning set forth in Section 11.1.3.
"TIME SALES AGREEMENTS" shall have the meaning set forth in Section
2.1.7.
"TRADE-OUT AGREEMENTS" shall have the meaning set forth in Section
2.1.6.
"TRANSFER DATE" shall mean the earlier of the Non-License Transfer Date
or the Closing Date.
"TRANSFER TAXES" shall have the meaning set forth in Section 15.3.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
8.4.1.
"TRANSMISSION DEFECT" shall have the meaning set forth in Section 9.2.
"TRUSTEE" shall have the meaning set forth in the Recitals.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
"WFFF" shall have the meaning set forth in the Recitals.
"WNNE" shall have the meaning set forth in the Recitals.
"WPTZ" shall have the meaning set forth in the Recitals.
ANNEX I-9
<PAGE>
EXHIBIT E
TIME BROKERAGE AGREEMENT
This TIME BROKERAGE AGREEMENT (this "Agreement") is entered into as of
the ___ day of ________, 1998, by and among TUSCALOOSA BROADCASTING, INC., a
Maryland corporation ("Tuscaloosa"), WPTZ LICENSEE, INC., a Maryland corporation
("WPTZ Licensee") and WNNE LICENSEE, INC., a Maryland corporation ("WNNE
Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee, collectively, "Owner"),
and STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("Programmer").
RECITALS:
WHEREAS, Owner is the licensee, pursuant to authorizations issued by
the Federal Communications Commission ("FCC"), of television broadcast station
WPTZ-TV, Channel 5, North Pole, New York ("WPTZ") and television broadcast
station WNNE-TV, Channel 31, Hartford, Vermont ("WNNE"), licensed to WPTZ
Licensee and WNNE Licensee, respectively;
WHEREAS, Owner is the programmer of television broadcast station
WFFF-TV, Channel 44, Burlington, Vermont ("WFFF") (WPTZ, WNNE and WFFF,
individually, a "Station" and collectively, the "Stations");
WHEREAS, Programmer and Owner entered into an Asset Purchase Agreement
dated February 3, 1998 (the "Asset Purchase Agreement") pursuant to which Owner
has agreed to sell and Programmer has agreed to acquire substantially all of the
assets (the "Assets"), including (without limitation) the FCC licenses held by
Owner in connection with its ownership and operation of the Stations;
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WHEREAS, Programmer is experienced in broadcast ownership and
operation;
WHEREAS, during the terms of this Agreement, Owner wishes to retain
Programmer to provide programming and related services for the Stations, all in
conformity with Station policies and procedures, FCC rules and policies for time
brokerage arrangements, and the provisions hereof,
WHEREAS, Programmer agrees to use the Stations to broadcast such
programming of its selection that is in conformity with all rules, regulations
and policies of the FCC, subject to Owner's full authority to manage and control
the operation of the Stations;
WHEREAS, Programmer and Owner agree to cooperate to make this Agreement
work to the benefit of the public and both parties and as contemplated by the
terms set forth herein; and
WHEREAS, all capitalized terms used herein but not otherwise defined
have the meaning ascribed to such terms in the Asset Purchase Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the above recitals, and mutual
promises and covenants contained herein, the parties intending to be legally
bound, agree as follows:
SECTION 1 USE OF STATION AIR TIME.
1.1 Scope. During the term of this Agreement, Owner shall make
available to Programmer broadcast time on the Stations as set forth in this
Agreement. Programmer shall deliver such programming, at its expense, to the
Stations' transmitters or other authorized remote control points designated by
Owner. Programmer shall provide such programming of Programmer's selection
complete with commercial matter, news, public service announcements and other
suitable programming to the Stations for at least one hundred and sixty-six
(166) hours
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per week. Except as otherwise provided in this Agreement, Owner agrees to
broadcast such programming in its entirety, including commercials at the times
specified, on the facilities of the Stations without interruption, deletion, or
addition of any kind. Owner may use such time as Owner may require up to two (2)
hours per week, for the broadcast of its own regularly-scheduled news, public
affairs, and other nonentertainment programming on the Stations, to be scheduled
at mutually agreeable times. Owner may elect to set aside additional air time
(up to two (2) hours per week) (the "Additional Time") to be scheduled at a
mutually agreeable time, for the broadcast of specific non-entertainment
programming on issues of importance to the local community. Owner shall provide
Programmer with as much notice as possible, but in no event less than three (3)
weeks' notice, of its intention to set aside such Additional Time. All program
time not reserved by or designated for Owner shall be available for use by
Programmer. Owner agrees that Programmer may sell, or engage a third party to
sell, commercial time during the programming provided by Programmer to the
Stations for Programmer's account.
1.2 Term. This Agreement shall commence on the date of the Non-License
Transfer as contemplated in the Asset Purchase Agreement (the "Effective Date"),
and end on the Closing Date (the "Term"), unless terminated earlier pursuant to
any of the provisions of Section 5 hereof.
SECTION 2 STATION OPERATIONS.
2.1 Owner Control Over Station Operations.
(a) Owner shall retain full authority, power and control over
the management and operations of the Stations during the Term, including
specifically, control over the personnel, programming and finances of the
Stations.
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(b) Subject to Owner's full authority, power and control over
the management and operations of the Stations, Programmer agrees to provide
programming and related services to the Stations. Such related services shall
include: (i) the sale of advertising time on the Stations; (ii) coordination of
traffic and billing functions; (iii) maintenance, repair and replacement of the
Stations' transmitting or studio equipment and the other Assets, and (iv) other
administrative or operational functions as Owner and Programmer may agree to,
consistent with FCC rules and regulations relating to time brokerage agreements.
Programmer shall provide and perform Programmer's obligations hereunder,
including all related services, diligently and in a manner consistent with
broadcast industry practices.
(c) Owner shall employ at WPTZ's main studio location, at
Owner's expense, a Station Manager and a staff level employee, who will direct
the day-to-day operations of the Stations, and who will report to and be
accountable to Owner. Such employees shall be paid reasonable compensation
commensurate with their job responsibilities, as mutually agreed to by Owner and
Programmer.
(d) When on the Owner's premises, all employees of Programmer
used to provide Programmer's programming or other services to the Stations shall
be subject to the overall supervision of Owner's management personnel.
2.2 Station Expenses. During the Term, Programmer shall be responsible
for and shall reimburse Owner within fifteen (15) days following receipt of a
request for reimbursement by Owner for any direct out-of-pocket costs incurred
by Owner as necessary to preserve and maintain the FCC Licenses and other Assets
of the Stations then owned by Owner (including the expenses of Owner as a result
of Section 2.1(c) above).
2.3 Consideration. As consideration for the air time made available
hereunder and the
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other agreements of the parties made hereunder, Programmer agrees to pay Owner
the payments set forth in Attachment 2.3 hereto. Notwithstanding any provision
of this Agreement to the contrary, in the event of a preemption by Owner of
Programmer's programming under Sections 1.1 (with respect to the Additional Time
only), 3.2, 4.1 or 4.2 of this Agreement, the Monthly Payment as defined in
Attachment 2.3 shall be reduced by an amount equal to (a) the amount of the
Monthly Payment multiplied by (b) a fraction the numerator of which is the
number of minutes of Programmer's programming preempted by Owner during such
month and the denominator of which is one hundred sixty-six (166).
SECTION 3 STATION PUBLIC INTEREST OBLIGATIONS.
3.1 Owner Authority. Owner shall be responsible for the Stations'
compliance with all applicable provisions of the Communications Act of 1934, as
amended (the "Act"), the rules, regulations and policies of the FCC and all
other applicable laws. Programmer shall cooperate with Owner, at Programmer's
expense, in taking such actions as Owner may reasonably request to assist Owner
in maintaining the Stations' compliance with the Act, rules, regulations and
policies of the FCC and all other applicable laws. Notwithstanding any other
provision of this Agreement, Programmer recognizes that Owner has certain
obligations to operate the Stations in the public interest, and to broadcast
programming to meet the needs and interests of the Stations' communities of
license and service area. From time to time Owner shall air, or if Owner
requests, Programmer shall air, programming on issues of importance to the local
community. Nothing in this Agreement shall abrogate or limit the unrestricted
authority of Owner to discharge Owner's obligations to the public and to comply
with the Act and the rules, regulations and policies of the FCC, and Owner shall
have no liability or obligation to Programmer, for
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taking any action that Owner deems necessary or appropriate to discharge such
obligations or comply with such laws, rules, regulations or policies.
3.2 Additional Owner Obligations. Although both Owner and Programmer
shall cooperate in the broadcast of emergency information over the Stations,
Owner shall retain the right, without any liability or obligation to Programmer,
to interrupt Programmer's programming in case of an emergency or for programming
which, in the good faith judgment of Owner, is of greater local or national
public importance. In all such cases, Owner shall use Owner's commercially
reasonable efforts to provide Programmer notice of Owner's intention to
interrupt Programmer's programming. Owner shall coordinate with Programmer each
Station's hourly station identification and any other announcements required to
be aired by FCC rules or regulations. Owner shall (a) continue to maintain and
staff a main studio in compliance with the rules of the FCC, (b) maintain each
Station's local public inspection file within each Station's community of
license, and (c) prepare and place in such inspection file in a timely manner
all material required by Section 73.3526 of the FCC's Rules, including without
limitation each Station's quarterly issues and program lists and FCC Form 398.
Programmer shall, upon request by Owner, promptly provide Owner with such
information concerning Programmer's programs and advertising as is necessary to
assist Owner in the preparation of such information or to enable Owner to verify
independently the Stations' compliance with any other laws, rules, regulations
or policies applicable to the Stations' operation. Owner shall also maintain the
station logs, receive and respond to telephone inquiries, and control and
oversee any remote control point for the Stations.
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SECTION 4 STATION PROGRAMMING & OPERATIONAL POLICIES.
4.1 Broadcast Station Programming Policy Statement. Owner has adopted a
Broadcast Station Programming Policy Statement (the "Policy Statement"), a copy
of which appears as Attachment 4.1 hereto and which may be amended from time to
time in order to comply with the rules and regulations of the FCC by Owner upon
written notice to Programmer. Programmer agrees and covenants to comply in all
material respects with the Policy Statement, with all rules and regulations of
the FCC, and with all changes subsequently made by Owner or the FCC. Programmer
shall furnish or cause to be furnished the artistic personnel and material for
the programs as provided by this Agreement and all programs shall be prepared
and presented in conformity with the rules, regulations and policies of the FCC
and with the Policy Statement. All advertising spots and promotional material or
announcements shall comply with all applicable federal, state and local
regulations and policies and the Policy Statement, and shall be produced in
accordance with quality standards established by Programmer. If Owner determines
that a program, commercial announcement or promotional material supplied by
Programmer is for any reason, in Owner's reasonable discretion, unsatisfactory
or unsuitable or contrary to the public interest, or does not comply with the
Policy Statement Owner may, upon written notice to Programmer (to the extent
time permits such notice), and without any liability or obligation to Programmer
suspend or cancel such program, commercial announcement or promotional material
and substitute its own programming or, if Owner requests, Programmer shall
provide promptly suitable programming, commercial announcement or other
announcement or promotional material.
4.2 Owner Control of Station Programming. Notwithstanding any contrary
provision contained in this Agreement, and consistent with Owner's obligations
pursuant to the Act and the
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rules and regulations of the FCC, Owner shall have the right, without any
liability or obligation to Programmer to delete any material contained in any
programming or commercial matter furnished by Programmer for broadcast over the
Stations that Owner determines is unsuitable for broadcast or the broadcast of
which Owner believes would be contrary to the public interest. Owner shall have
the right, without any liability or obligation to Programmer to broadcast
Owner's own programming in place of such deleted material.
4.3 [INTENTIONALLY OMITTED].
4.4 Political Advertising. Owner shall oversee and shall take ultimate
responsibility for the Stations' compliance with the political broadcasting
rules of the FCC and Sections 312 and 315 of the Act, including but not limited
to, the provision of equal opportunities, compliance with lowest unit charge
requirements, and the provision of reasonable access to federal political
candidates. Programmer shall cooperate with Owner, at Programmer's expense, to
assist Owner in complying with the political broadcasting rules of the FCC.
Programmer shall supply such information promptly to Owner as may be necessary
to comply with the lowest unit charge and other applicable political broadcast
requirements of federal law. To the extent that Owner deems necessary or
appropriate, Programmer shall release advertising availabilities to Owner to
permit Owner to comply with the political broadcasting rules of the FCC and
Sections 312 and 315 of the Act. Programmer shall be entitled to all revenues
received by Owner for such advertising.
4.5 Advertising of Credit Terms. To the extent prohibited by the rules
of the Federal Trade Commission, no advertising of credit terms shall be made
over broadcast material supplied hereunder by Programmer beyond mention of the
fact that credit terms are available.
4.6 Payola/Plugola. In order to enable Owner to fulfill Owner's
obligations under Section 317 of the Act, Programmer, in compliance with Section
507 of the Act, will, in advance
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of any scheduled broadcast by the Stations, disclose to Owner any information of
which Programmer has knowledge or which has been disclosed to Programmer as to
any money, service, or other valuable consideration that any person has paid or
accepted, or has agreed to pay or to accept, for the inclusion of any matter as
a part of the programming or commercial matter to be supplied to Owner pursuant
to this Agreement. Programmer will cooperate with Owner, at Programmer's
expense, as necessary to ensure compliance with this provision. Commercial
matter with obvious sponsorship identifications shall not require disclosure in
addition to that contained in the commercial copy.
4.7 Programmer Compliance with Copyright Act. Programmer represents and
warrants that Programmer will have full authority to broadcast the programming
on the Stations; that Programmer shall not broadcast any material in violation
of the Copyright Act; and the performing rights to all music contained in
broadcast material supplied hereunder by Programmer are licensed by BMI, ASCAP,
or SESAC, are in the public domain, are controlled by Programmer, or are cleared
at the source by Programmer.
SECTION 5 TERMINATION.
5.1 Termination by Programmer.
Unless terminated pursuant to the provisions of Section 1.2,
this Agreement may be terminated by Programmer by written notice to Owner, if
Programmer is not then in material default or breach hereof, upon the occurrence
of either of the following:
(a) five (5) days following the date of termination of the
Asset Purchase Agreement; or
(b) Owner is in material breach of Owner's representations or
Owner's material obligations hereunder or under the Asset Purchase Agreement and
has failed to cure
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such breach within thirty (30) days of notice from Programmer.
5.2 Termination by Owner. Unless terminated pursuant to the provisions
of Section 1.2, this Agreement may be terminated by Owner by written notice to
Programmer, if Owner is not then in material default or breach hereof, upon the
occurrence of any of the following:
(a) five (5) days following the date of termination of the
Asset Purchase Agreement; or
(b) Programmer is in material breach of Programmer's
representations or Programmer's material obligations hereunder or under the
Asset Purchase Agreement and has failed to cure such breach within thirty (30)
days of notice from Owner.
5.3 Termination. If not otherwise earlier terminated, this Agreement
will terminate, upon the first to occur of any of the following:
(a) this Agreement is declared invalid or illegal in whole or
substantial part by an order or decree of an administrative agency or court of
competent jurisdiction and such order or decree has become final and no longer
subject to further administrative or judicial review, unless as a result of
actions taken by Programmer in violation of the terms hereof;
(b) there has been a material change in FCC rules or policies
that would cause this Agreement to be in violation thereof and such change is in
effect and not the subject of an appeal or further administrative review,
provided that in such event the parties shall first negotiate in good faith and
attempt to agree on an amendment to this Agreement that will provide the parties
with a valid, binding and enforceable agreement that conforms to the new FCC
rules, policies or precedent; or
(c) the mutual, written consent of both parties.
5.4 Severability. The parties hereto intend that the transactions
contemplated
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hereunder comply in all respects with the Act and all applicable rules,
regulations, and policies of the FCC. If any provision of this Agreement shall
be declared void, illegal, or invalid by any governmental authority with
jurisdiction thereof, the remainder of this Agreement shall remain in full force
and effect without such offending provision so long as such remainder
substantially reflects the original agreement of the parties hereunder.
Furthermore, in such event, the parties shall use their commercially reasonable
efforts to reach agreement promptly on lawful substitute provisions in place of
said offending provision so as to effectuate more closely their intent as
expressed hereunder. If any governmental authority grants to any other entity or
individual rights which are not contained in this Agreement, then the parties
shall use their commercially reasonable efforts to amend this Agreement to
provide the parties hereto such lawful provisions which comport with any rules,
regulations and policies adopted after the date of this Agreement.
5.5 Force Majeure. Any failure or impairment of the Assets or any delay
or interruption in the broadcast of programs, or failure at any time to furnish
facilities, in whole or in part, for broadcast, due to Acts of God, restrictions
by any governmental authority, civil riot, floods or any other similar cause not
reasonably within the control of Owner, shall not constitute a breach of this
Agreement and Owner will not be liable to Programmer for any liability or
obligation with respect thereto.
5.6 Insurance; Risk of Loss.
(a) From the date hereof through the end of the Term, Owner
shall maintain with reputable insurance companies reasonably acceptable to
Programmer, commercially reasonable amounts of insurance as is conventionally
carried by broadcasters operating television stations in the area comparable to
those of the Stations, including replacement cost insurance and general
liability insurance, with respect to the Assets and shall cause Programmer to be
named as
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an additional insured on Owner's policies. The risk of any loss, damage,
impairment, confiscation, or condemnation of any equipment or other personal
property owned and used by Owner in the business and operations of the Stations
("Risk of Loss") shall be borne by Owner at all times throughout the Term, to
the extent of, but solely to the extent of, Owner's receipt of insurance
proceeds in respect thereof and in no event shall Owner have any liability or
obligation to Programmer in respect of any such loss, damage, impairment,
confiscation or condemnation. The Risk of Loss beyond that specifically borne by
the Owner in accordance with the immediately preceding sentence shall be borne
by Programmer. Owner shall use such proceeds of insurance to repair or replace
any such equipment or such other personal property of Owner to the extent of
such proceeds. At Owner's request and subject to Owner's supervision and
direction, Programmer shall effect in a timely fashion any repairs to or
replacement of any of Owner's damaged equipment or property.
(b) From the date hereof through the end of the Term,
Programmer shall maintain with reputable insurance companies reasonably
acceptable to Owner, insurance in such amounts and with respect to such risks,
as reasonably requested by Owner, including broadcast liability insurance,
naming Owner as an additional insured, and general comprehensive insurance, also
naming Owner as an additional insured, each with a commercially reasonable
amount of coverage as is conventionally carried by broadcasters operating
television stations in the area comparable to those of the Stations. The risk of
any loss, damage, impairment, confiscation, or condemnation of any equipment or
other personal property owned or leased and used by Programmer in the
performance of its obligations hereunder shall be borne by Programmer at all
times throughout the Term.
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SECTION 6 INDEMNIFICATION.
6.1 Indemnification by Programmer. Programmer shall indemnify and hold
harmless Owner from and against any and all claims, losses, costs, liabilities,
damages, expenses, including any FCC fines or forfeitures (including reasonable
legal fees and other expenses incidental thereto), of every kind, nature and
description (collectively "Damages") arising or resulting from or relating to
(a) Programmer's breach of any representation, covenant, agreement or other
obligation of Programmer contained in this Agreement, (b) any action taken by
Programmer or Programmer's employees and agents with respect to the Stations, or
any failure by Programmer or Programmer's employees and agents to take any
action with respect to the Stations, including, without limitation, Damages
relating to violations of the Act, or any rule, regulation or policy of the FCC,
slander, defamation or other claims relating to programming provided by
Programmer or Programmer's broadcast and sale of advertising time on the
Stations, or (c) the business or operations of the Stations by Programmer
(except where Damages are caused by Owner's negligence, recklessness, willful
misconduct, or a breach of Owner's representations or obligations under this
Agreement or the Asset Purchase Agreement) from and after the date of this
Agreement.
6.2 Indemnification by Owner. Owner shall indemnify and hold harmless
Programmer from and against any and all Damages arising or resulting from or
relating to (a) Owner's breach of any representation, covenant, agreement or
other obligation of Owner contained in this Agreement, (b) any action taken by
Owner or Owner's employees and agents with respect to the Stations, or any
failure by Owner or Owner's employees and agents to take any action with respect
to the Stations, including, without limitation, Damages relating to violations
of the Act, or any rule, regulation or policy of the FCC, slander, defamation or
other
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claims relating to programming provided by Owner or Owner's broadcast and sale
of advertising time on the Stations, or (c) the business or operations of the
Stations by Owner (except where Damages are caused by Programmer's negligence,
recklessness, willful misconduct, or a breach of Programmer's representations or
obligations under this Agreement or the Asset Purchase Agreement) from and after
the date of this Agreement.
6.3 Indemnification Procedure. Neither Owner nor Programmer shall be
entitled to indemnification pursuant to this Section 6.3 unless (a) such claim
for indemnification is asserted in writing delivered to the other party,
together with a statement as to the factual basis for the claim and the amount
of the claim and (b) such claim, in the aggregate with all other claims made by
such party under this Agreement and the Asset Purchase Agreement, exceeds Five
Hundred Thousand Dollars ($500,000), and then only to the extent of the excess
over the amount of Two Hundred Fifty Thousand Dollars ($250,000); provided,
however, that the aggregate dollar amount of claims under this Agreement and the
Asset Purchase Agreement shall not exceed Four Million Dollars ($4,000,000). The
party making the claim (the "Claimant") shall make available to the other party
(the "Indemnitor") the information relied upon by the Claimant to substantiate
the claim. The Indemnitor under this Section 6.3 shall have the right to conduct
and control through counsel of such Indemnitor's own choosing the defense of any
third party claim, action or suit (and the Claimant shall cooperate fully with
the Indemnitor), but the Claimant 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 Indemnitor shall fail to defend any such claim, action or suit,
then the Claimant may defend through counsel of its own choosing such claim,
action or suit, and (so long as it gives the Indemnitor at least fifteen (15)
days' notice of the terms of the proposed settlement thereof and permits the
Indemnitor to then undertake the defense thereof) settle such
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claim, action or suit, and to recover from the Indemnitor the amount of such
settlement or of any judgment and the costs and expenses of such defense. The
Indemnitor shall not compromise or settle any third party claim, action or suit
without the prior written consent of the Claimant, which consent will not be
unreasonably withheld or delayed.
6.4 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to 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.
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 nonarbitrable 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 6.4, any party thereto may commence arbitration hereunder by
delivering notice to the other party or parties thereto; provided, in advance of
the commencement of any arbitration each of the parties agrees to participate in
a non-binding mediation effort (not to exceed thirty (30) days) in an attempt to
resolve such
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controversy, claim or dispute. The arbitration panel shall consist of three (3)
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, Owner, on the one hand, and
Programmer, 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 (a) are on the AAA's Large, Complex Case Panel, (b) have
practiced law for at least fifteen (15) years as an attorney specializing in
either general commercial litigation or general corporate and commercial
matters, and (c) are experienced in matters involving the broadcasting industry.
The arbitration hearing shall be held in Washington, D.C. and 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 (a) 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 (b) the
arbitrators shall limit the presentation of evidence by each side in such
arbitration to not more than ten (10) full days' (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,
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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 6.4 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 in conflict with any of the
time periods provided for hereunder, or with any other aspect of the matters set
forth in this Section 6.4, that such rules shall be modified in respects
necessary to accord with the provisions of this Section 6.4 (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 in the State of New York,
and shall render their decision in writing and include in such decision a
statement of the finding 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.
6.5 Damages: Specific Performance.
(a) In the event of a material breach by Owner of Owner's obligations
hereunder, Programmer shall be entitled to seek monetary damages against Owner.
The parties recognize, however, that given the unique nature of the Stations and
this Agreement, monetary damages alone will not be adequate to compensate
Programmer for any injury resulting from Owner's breach. Programmer shall
therefore be entitled, as an alternative to the right to seek and collect
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monetary damages, to obtain specific performance of the terms of this Agreement.
(b) In the event of a material breach by Programmer of its obligations
hereunder, Owner shall be entitled to seek monetary damages against Programmer.
SECTION 7 REPRESENTATIONS, WARRANTIES, AND COVENANTS.
7.1 Representations, Warranties, and Covenants of Owner. Owner
represents, warrants, and covenants that:
(a) Owner is legally qualified, empowered, and authorized to
enter into this Agreement, and that the execution, delivery and performance
hereof shall not constitute a breach or violation of any agreement, contract or
other obligation to which Owner is subject or by which Owner is bound.
(b) Owner is now, and for so long as this Agreement shall be
in effect, will be the holder of the FCC Licenses necessary for the operation of
WPTZ and WNNE as then being operated.
(c) Owner does not know of any current or prospective
governmental investigation having a material adverse effect on the Stations,
their properties or business.
(d) As of this date, Owner does not know of any facts which
would cause the Commission to refuse to renew the FCC Licenses.
(e) Owner shall not take any action or omit to take any action
which would have a materially adverse impact upon Owner, the Assets, the
Stations or upon Owner's ability to perform this Agreement.
(f) This Agreement constitutes the legal, valid and binding
obligation of Owner, enforceable in accordance with its terms, except to the
extent that the enforcement
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thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, or similar law affecting creditors' rights and remedies generally,
and (ii) general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
7.2 Representations, Warranties and Covenants of Programmer. Programmer
represents, warrants, and covenants that:
(a) Programmer is legally qualified, empowered, and authorized
to enter into this Agreement, and that the execution, delivery and performance
hereof shall not constitute a breach or violation of any agreement, contract or
other obligation to which Programmer is subject or by which Programmer is bound.
(b) This Agreement constitutes the legal, valid and binding
obligation of Programmer, enforceable in accordance with its terms, except to
the extent that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganizations, moratorium or similar laws affecting creditors'
rights and remedies generally, and (ii) general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
SECTION 8: MISCELLANEOUS.
8.1 Assignment. This Agreement shall not be assigned by any party
hereto without the prior written consent of the other party, which consent shall
not be unreasonably withheld, except that Programmer may assign its rights and
interests hereunder to any reputable broadcasting entity provided, that (a)
Programmer gives Owner written notice of any such assignment; (b) such
assignment shall not relieve Programmer of any of its obligations or liabilities
hereunder; and (c) such assignment would not violate any applicable laws, rules,
regulations or policies of any applicable governmental authority. It is
understood and agreed that
19
<PAGE>
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 Programmer. This Agreement shall be binding on the
parties' respective heirs and permitted assigns.
8.2 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and, except for the Asset Purchase Agreement, and documents delivered pursuant
thereto, supersedes any and all prior agreements, broadcasting commitments, or
any other understandings between Programmer and Owner with respect to such
subject matter. No provision of this Agreement shall be changed or modified, nor
shall this Agreement be discharged in whole or in part, except by an agreement
in writing signed by the party against whom the change, modification, or
discharge is claimed or sought to be enforced, nor shall any waiver of any of
the conditions or provisions of this Agreement be effective and binding unless
such waiver shall be in writing and signed by the party against whom the waiver
is asserted, and no waiver of any provision of this Agreement shall be deemed to
be a waiver of any preceding or succeeding breach of the same or any other
provision.
8.3 Further Assurances. Owner and Programmer shall use commercially
reasonable efforts in the performance and fulfillment of the terms and
conditions of this Agreement in effectuating the intent of such parties as
expressed under this Agreement. From time to time, without further
consideration, Owner and Programmer shall execute and deliver such other
documents and take such other actions as either party hereto reasonably may
request to effectuate such intent.
8.4 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each such counterpart
were upon the same instrument.
20
<PAGE>
8.5 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 receipt is confirmed by
facsimile transmission, five (5) days after deposited in the mail, first class
postage prepaid, addressed as follows:
(a) If the notice is to Programmer:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Fax: (214) 740-7355
or to such other address as Programmer may from time to
time designate.
21
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(b) If to Owner:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
Fax: (410) 467-5043
with copies (which shall not constitute notice) to:
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
and to:
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
Fax: (410) 662-4707
or to such other address as Owner may from time to time
designate.
8.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to its choice
of law rules.
8.7 Taxes. Owner and Programmer shall each pay its own ad valorem
taxes, if any, which may be assessed on such party's personal property for the
periods that such items are owned by such party.
8.8 No Joint Venture or Partnership. Programmer shall act as an
independent contractor in rendering its services hereunder. Neither party shall
have any power or authority to act for or on behalf of the other or to bind the
other in any manner whatsoever, except as and to the extent expressly provided
for in this Agreement. The parties hereto agree that nothing herein shall
constitute a joint venture or partnership between them.
22
<PAGE>
8.9 Headings. The headings in this Agreement are for convenience only
and will not affect or control the meaning or construction of the provisions of
this Agreement.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Time
Brokerage Agreement as of the date first above written.
PROGRAMMER:
STC BROADCASTING OF VERMONT, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
OWNER:
TUSCALOOSA BROADCASTING, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WPTZ LICENSEE, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WNNE LICENSEE, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
24
<PAGE>
ATTACHMENT 2.3
MONTHLY FEE
During the first nine (9) months of this Agreement, Programmer shall
pay to Owner a monthly fee equal to Thirteen Thousand Three Hundred Dollars
($13,300) plus the salaries of the two employees retained by Owner. If the
Closing under the Asset Purchase Agreement has not occurred within nine (9)
months of the date of this Agreement, the monthly fee from and after such date
shall increase to Twenty Thousand Dollars ($20,000) plus the salaries of the two
employees retained by Owner; provided, however, the monthly fee shall not
increase if the reason that the Closing has not occurred by such nine (9) month
date is because of a breach or default by Owner under the Asset Purchase
Agreement.
25
<PAGE>
ATTACHMENT 4.1
BROADCAST STATION PROGRAMMING POLICY STATEMENT
I. No Plugola or Payola. Except for commercial messages aired
in compliance with 47 C.F.R. ss.73.1212, Programmer shall not
receive any consideration in money, goods, services, or otherwise,
directly or indirectly (including to relatives) from any persons
or company for the presentation of any programming over the
Stations without reporting the same to Owner's Station Manager.
The commercial mention of any business activity or "plug" for any
commercial, professional, or other related endeavor, except where
contained in an actual commercial message of a sponsor, is
prohibited.
II. No Lotteries. Announcements giving any information about
lotteries or games prohibited by applicable federal or state law
or regulation are prohibited.
III. Election Procedures. At least fifteen (15) days before
the start of any primary or election campaign, Programmer will
clear with Owner's Station Manager the rates Programmer will
charge for the time to be sold for use by qualified candidates for
the public office and/or their supporters to make certain that the
rates charged are in conformance with applicable law and the
Stations' policies.
IV. Required Announcements. Programmer shall broadcast (i) an
announcement in a form satisfactory to Owner at the beginning of
26
<PAGE>
each hour to identify the Stations and (ii) any other
announcements that may be required by law or regulation.
V. No Illegal Announcements. No announcements or promotion
prohibited by applicable federal, state law or regulation shall be
made over the Stations. Any game, contest, or promotion relating
to or to be presented over the Stations must be fully stated and
explained in advance to Owner, which reserves the right in its
sole discretion to reject any game, contest, or promotion.
VI. Owner Discretion Paramount. In accordance with the
Owner's responsibility under the Communications Act of 1934, as
amended, and the Rules and Regulations of the Federal
Communications Commission, Owner reserves the right to reject or
terminate any advertising proposed to be presented or being
presented over the Stations which is in conflict with established
policies of the Stations or which in Owner's or its Station
Manager's reasonable judgment would be contrary to the public
interest.
Owner may waive any of the foregoing regulations in specific instances,
if, in its opinion, the Stations will remain in compliance with all applicable
laws, rules, regulations and policies and broadcasting in the public interest is
served. In any case where questions of policy or interpretation arise,
Programmer should submit the same to Owner for decision before making any
commitments in connection therewith.
27
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
THE STOCKHOLDERS OF
LAKELAND GROUP TELEVISION, INC.
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS ...............................................................1
2. SALE OF SHARES ............................................................2
3. PURCHASE PRICE ............................................................2
3.1 Payment ..........................................................2
4. CLOSING ...................................................................3
5. REPRESENTATIONS AND WARRANTIES OF SELLERS .................................3
5.1. Representations as to Shares, Etc. .............................3
5.2. Representations and Warranties as to the Company ...............4
a. Organization and Good Standing ..........................4
b. Capitalization ..........................................4
c. No Conflicts ............................................5
d. Real Property ...........................................5
e. Personal Property .......................................6
f. Financial Statements ....................................6
g. FCC .....................................................8
h. Intellectual Property ...................................9
i. Employee Benefit Plans ..................................9
j. Labor ..................................................11
k. Insurance ..............................................12
l. Material Contracts ....................................12
m. Compliance with Laws ...................................13
n. Litigation .............................................13
o. No Brokers .............................................13
p. Consents ...............................................13
q. Environmental ..........................................13
r. Tax Matters ............................................14
s. Dividends ..............................................16
t. Accounts Receivable ....................................17
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<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER ..............................17
6.1. Organization and Good Standing ................................17
6.2. Execution and Effect of Agreement .............................17
6.3. No Conflicts ..................................................17
6.4. Consents ......................................................18
6.5. Litigation ....................................................18
6.6. No Brokers ....................................................18
6.7. Funds Available ...............................................18
6.8. Purchaser Qualifications ......................................18
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ........19
7.1. Limitation; Survival ..........................................19
7.2. Schedules and Exhibits ........................................19
7.3. Non-Employee Sellers ..........................................19
8. TAX MATTERS ..............................................................19
8.1. Section 338 Election ..........................................19
8.2 Apportionment ..................................................20
8.2 Apportionment ..................................................20
8.3 Cooperation in Tax Matters .....................................20
8.4 Certain Taxes ..................................................20
8.6. Certain Withheld Amounts ......................................20
9. ADDITIONAL COVENANTS AND UNDERTAKINGS ....................................22
9.1. Further Assurances and Assistance .............................22
9.2. Access to Information .........................................22
9.3. Conduct of Business Prior to Closing ..........................22
9.4. H-S-R Act .....................................................25
9.5. FCC Application ...............................................25
9.6. Books and Records .............................................26
9.7. Contractual Obligations .......................................26
9.8. Control of Stations ...........................................26
9.9. Assumption of Brokerage Amounts ...............................27
9.10. Interruption of Broadcast Transmission. ......................27
ii
<PAGE>
10. INDEMNIFICATION .........................................................28
10.1. Indemnification of Purchaser by Sellers ....................28
10.2. Indemnification of Sellers by Purchaser ....................29
10.3. Limitations and Other Provisions Regarding Indemnification
Obligations ................................................29
10.4. Notice of Claim /Defense of Action .........................30
10.5 Tax Contests ...............................................31
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE .............32
11.1. Conditions Precedent to the Obligation of Purchaser ........32
11.2. Conditions Precedent to the Obligation of Sellers ..........34
12. DELIVERIES AT THE CLOSING ...............................................35
12.1. Deliveries by Sellers ......................................35
12.2. Deliveries by Purchaser ....................................36
13. EXPENSES ................................................................36
14. TERMINATION .............................................................37
14.1 Termination ................................................37
14.2 Procedure and Effect of Termination ........................37
15. NOTICES .................................................................38
16. SELLERS' AGENT ..........................................................40
16.1. Sellers' Agent .............................................40
17. MISCELLANEOUS ...........................................................41
17.1. Headings ...................................................41
17.2. Schedules and Exhibits .....................................41
17.3. Execution in Counterparts ..................................41
17.4. Entire Agreement ...........................................41
17.5. Governing Law ..............................................41
17.6. Modification ...............................................41
17.7. Successors and Assigns .....................................42
17.8. Waiver .....................................................42
17.9. Severability ...............................................42
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<PAGE>
17.10. Announcements ..............................................42
17.11. Specific Performance .......................................43
17.12 Bulk Transfers .............................................43
17.13 Third Party Beneficiaries ..................................43
17.14 Interpretation .............................................43
ANNEX 1 -- Definitions
ANNEX 2 -- Sellers
EXHIBITS
A - Deposit Escrow Agreement
B - Indemnification Escrow Agreement
C - Form of Opinion
D - Form of Opinion
SCHEDULES
5.1 Encumbrances on Stock
5.2c Conflicts Regarding Sellers or the Company
5.2d Leases of Real Property
5.2e Exceptions to Title to Personal Property
5.2f Financial Statements
5.2g FCC Licenses
5.2h Intellectual Property
5.2i Company Plans and Benefit Arrangements
5.2k Insurance Policies
5.2l Material Contracts
5.2m Exceptions to Compliance with Laws
5.2n Litigation Involving the Company
5.2p Consents Required for Sellers or the Company
5.2q Environmental Notices or Claims
5.2r(i) Exceptions to Certain Tax Representations
5.2r(ii) Tax Matters (Statement as to Basis, etc.)
iv
<PAGE>
5.2t Exceptions Regarding Accounts Receivable
6.3 Conflicts Regarding Purchaser
6.4 Consents Required for Purchaser
6.5 Litigation Involving Purchaser
9.3c Pre-Closing Sales, etc. of Company Property
9.3j Pre-Closing Changes to Compensation, etc.
9.9 Engagement Letter with Dain Bosworth Incorporated
11.1(i) Form of Statement by the Company under FIRPTA
v
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this 14th
day of November, 1997, is entered into by and among Sinclair Communications,
Inc., a Maryland corporation ("Purchaser"), and each person who has executed
this Agreement (each a "Seller" and collectively, "Sellers").
WITNESSETH:
-----------
WHEREAS, Sellers own issued and outstanding shares of capital stock
(the "Stock") of Lakeland Group Television, Inc., a Minnesota corporation (the
"Company"); and
WHEREAS, the Company is the owner of the assets and operator of
KLGT-TV, Channel 23, in the Minneapolis-Saint Paul, Minnesota market (the
"Station"); and
WHEREAS, the Company holds the licenses granted by the Federal
Communications Commission (the "FCC") pursuant to which the Station is permitted
to operate (the "FCC Licenses"); and
WHEREAS, each Seller desires to sell to Purchaser, and Purchaser
desires to purchase from such Seller, all of the issued and outstanding shares
of Stock held by such Seller.
NOW, THEREFORE, for the purpose of consummating the above transaction
and in consideration of the promises and mutual covenants herein contained,
Sellers and Purchaser hereby agree as follows:
SECTION 1
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex 1 hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
<PAGE>
SECTION 2
SALE OF SHARES
--------------
At the Closing, each Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase from each Seller, that number and class
of shares of Stock as is set forth opposite the name of such Seller in Annex 2
hereto.
SECTION 3
PURCHASE PRICE
--------------
3.1 Payment. In consideration for the sale of the Stock, Purchaser
shall pay to Sellers the aggregate amount of $50,000,000.00 (the "Purchase
Price"), payable as follows:
(1) One Million Five Hundred Thousand Dollars ($1,500,000.00)
simultaneously with the execution and delivery of this Agreement, to be held in
escrow by Richfield Bank & Trust Co. as Escrow Agent pursuant to the Escrow
Agreement in the form of Exhibit A hereto (the "Deposit Escrow Agreement"). At
the Closing, Purchaser and Sellers shall cause such $1,500,000.00 to be released
to the Sellers' Agent (as hereinafter defined) and shall cause any interest or
other additional amounts in such escrow to be released to Purchaser;
(2) $1,000,000.00 at the Closing, to be held in Escrow (the
"Indemnification Escrow") by First Union National Bank as Escrow Agent pursuant
to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the
"Indemnification Escrow Agreement"); and
(3) the balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available United States funds to the
accounts specified by the Sellers' Agent no less than two (2) Business Days
prior to the Closing.
2
<PAGE>
SECTION 4
CLOSING
-------
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Thomas & Libowitz, P.A.,
Suite 1100, 100 Light Street, Baltimore, Maryland 21202, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on the
immediately preceding day), on the later to occur of (a) five Business Days
after all applicable waiting periods under the H-S-R Act shall have expired or
terminated, or (b) five Business Days after the Final Order, unless (i)
Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser
shall give Sellers reasonable notice of the Closing, or (ii) the parties shall
mutually agree upon a different date or location (the actual date of Closing
being the "Closing Date").
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
5.1. REPRESENTATIONS AS TO SHARES, ETC.
a. Each Seller (severally and not jointly) hereby represents and
warrants to Purchaser that: (i) such Seller holds of record and owns
beneficially all of the shares of the Stock set forth opposite such Seller's
name in Annex 2 hereto free and clear of any lien, security interest, pledge or
encumbrance other than those set forth on Schedule 5.1 hereof, all of which will
be released at or before the Closing; (ii) upon transfer of the Stock set forth
opposite such Seller's name in Annex 2 hereto to Purchaser at the Closing,
Purchaser will have legal and equitable title to such Stock, free and clear of
any lien, security interest, pledge or encumbrance (other than any created by or
on behalf of Purchaser); (iii) such Seller has full power and authority to enter
into this Agreement, and the consummation of the transactions contemplated
hereby has been duly authorized by all necessary action on the part of such
Seller, and if such Seller is an entity that such entity is duly and validly
organized, existing and in good standing in the jurisdiction of its formation;
(iv) this Agreement has been duly executed and delivered by such Seller and
constitutes a legal, valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and to the exercise of judicial discretion in
accordance with general principles of equity, whether applied by a court of law
or equity (collectively, the "Enforceability Limits"); (v) such Seller's shares
of Stock are not subject
4
<PAGE>
to any option(s), warrant(s), voting trusts, outstanding proxies, registration
rights agreement(s), or other agreements regarding voting rights (other than
those reflected in Schedule 5.1 and that contemplated by Section 16 hereof); and
(vi) neither the execution and delivery of this Agreement by such Seller nor the
consummation of the transactions contemplated hereby by such Seller will (a)
violate any of the provisions of any governing documents of such Seller if it is
an entity, (b) violate any provision of applicable law, rule or regulation,
which violation would prevent or interfere with such Seller's ability to perform
its obligations hereunder, or (c) conflict with or result in a breach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which such Seller is a party or to which
its property is subject, or constitute a default thereunder, where such
conflict, breach, right of termination, acceleration or default would prevent or
materially interfere with such Seller's ability to perform hereunder.
b. Neither Seller nor anyone acting on behalf of such Seller, has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the sale of the Stock and the
transactions contemplated by this Agreement other than the Company's engagement
of Dain Bosworth Incorporated.
5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY.
Sellers, jointly and severally, hereby represent and warrant to
Purchaser as to the Company as follows:
a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Minnesota and
has full corporate power and authority to carry on its business as it is now
being conducted and to own and use the assets owned and used by it. The Company
is not required to be qualified as a foreign corporation in any other
jurisdiction. The Company does not own any direct or indirect subsidiaries.
b. CAPITALIZATION. The authorized capital stock of the Company consists
of a single class of common stock having a par value of $.01 per share, of which
10,000,000 shares are authorized. The issued and outstanding shares thereof are
as described on Annex 2. All the outstanding shares of the Stock have been
validly issued and are fully paid and nonassessable and are held of record by
the respective Sellers as set forth on Annex 2 hereto. Except as described on
Annex 2, (i) no shares of capital stock of the Company are held in treasury,
(ii) there are no other issued or outstanding equity securities of the Company,
(iii) there are no outstanding stock appreciation rights, phantom stock rights,
4
<PAGE>
profit participation rights, or other similar rights with respect to shares;
(iv) there are no other issued or outstanding securities of the Company
convertible or exchangeable at any time into equity securities of the Company;
and (v) the Company is not subject to any commitment or obligation that would
require the issuance or sale of additional shares of capital stock of the
Company at any time under options, subscriptions, warrants, rights or any other
obligations. The Company does not have any equity interest in any corporation,
partnership, joint venture or other entity.
c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of incorporation or by-laws of the Company, (ii) violate any provision of
applicable law, rule and regulation, which violation would prevent or interfere
with Sellers' ability to perform hereunder or have a Material Adverse Effect, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which the Company is a party or to which its property is
subject, or constitute a default thereunder, where such conflict, breach, right
of termination, acceleration or default would prevent or materially interfere
with Sellers' ability to perform hereunder or have a Material Adverse Effect.
d. REAL PROPERTY. The Company owns no real estate. All leaseholds and
other interests in Real Property and all buildings, structures, towers and
improvements thereon used in the business and operations of the Station are
listed on Schedule 5.2d to this Agreement.
The Sellers have delivered to the Purchaser correct and complete copies of the
leases and subleases listed in Schedule 5.2d. With respect to each lease and
sublease listed in Schedule 5.2.d (except as disclosed in such Schedule 5.2d):
(i) the lease or sublease is legal, valid, binding,
enforceable (subject to the Enforceability Limits), and in full force and effect
in all material respects;
(ii)no party to the lease or sublease is in material breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder;
5
<PAGE>
(iii) no party to the lease or sublease has repudiated
any material provision thereof;
(iv) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold; and
(vi) all facilities leased or subleased thereunder have
received all material approvals of governmental authorities (including material
licenses and permits) required in connection with the operation thereof, and
have been operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects .
e. PERSONAL PROPERTY. Except as set forth on Schedule 5.2e hereto or on
the Financial Statements, the Company has good and marketable (to the extent
applicable under Minnesota law) title to all of its material items of tangible
personal property and assets used or useful by the Company located on its
premises or shown on the Financial Statement, and the Company owns such assets
free and clear of all liens, security interests and encumbrances. The tangible
personal property of the Company has been maintained in accordance with normal
industry practice and is in good condition and repair (subject to normal wear
and tear) and is adequate for its present use by the Company.
f. FINANCIAL STATEMENTS. Schedule 5.2f includes copies of the Financial
Statements. The Financial Statements have been prepared in accordance with GAAP,
consistently applied with prior periods (except that the balance sheet of July
31, 1997, is not a year-end statement and is subject to year-end adjustments and
the Financial Statements do not include the notes required by GAAP). The
Financial Statements present fairly the financial position of the Company as at
and for the periods indicated therein. Except as set forth on Schedule 5.2.f
hereto, since July 31, 1997, there has not been any material adverse change in
the business, financial condition, operations, or results of operations of the
Company taken as a whole. Without limiting the generality of the foregoing,
since that date:
6
<PAGE>
(i) the Company has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the ordinary
course of business;
(ii) the Company has not entered into any material
agreement, contract, lease, or license outside the ordinary course of business;
(iii) the Company has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which the Company is a party or by which the Company is bound;
(iv) the Company has not imposed any security interest upon
any of its assets, tangible or intangible;
(v) the Company has not made any material capital
expenditures outside the ordinary course of business;
(vi) the Company has not made any material capital
investment in, or any material loan to, any other Person outside the ordinary
course of business;
(vii) the Company has not created, incurred, assumed, or
guaranteed more than $25,000.00 in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) the Company has not granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property;
(ix) there has been no change made or authorized in the
articles or bylaws of the Company;
(x) the Company has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xi) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
7
<PAGE>
(xiii) the Company has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees
outside the ordinary course of business;
(xiv) the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xv) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(xvi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xvii) the Company has not made any other material change
in employment terms for any of its directors, officers, and employees outside
the ordinary course of business;
(xviii) the Company has not made or changed any material
Tax election or taken any other action with respect to Taxes not in the ordinary
course of business and consistent with past practices; and
(xix) the Company has not committed to do any of the
foregoing.
g. FCC. The Company and the Station are operated in material compliance
with the terms of the FCC Licenses, the Communications Act of 1934, as amended,
and applicable rules, regulations and policies of the FCC ("FCC Rules and
Regulations"). All FCC Licenses, a true and complete list of which is set forth
on Schedule 5.2g, and true and complete copies of each of which have been
delivered to Purchaser, are valid and in full force and effect. Except as set
forth on Schedule 5.2g, no application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses and, to the Company's
Knowledge, there is not now before the FCC any investigation or complaint
against the Company or relating to the Station, the unfavorable resolution of
which would impair the qualifications of the Company to hold any FCC Licenses.
Except as set forth on Schedule 5.2g, there is no proceeding pending before the
FCC, and the Company has received no notice of violation from the FCC with
respect to the Station. Except as set forth on Schedule 5.2g, the Company has
received no order or notice of violation issued by any governmental entity which
permits revocation, adverse modification or termination of
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any FCC License. Except as set forth on Schedule 5.2g, none of the FCC Licenses
or other licenses is subject to any restriction or condition which requires any
material change in the operation of the Station as currently operated. The FCC
Licenses listed in Schedule 5.2g are currently in effect and, except as
disclosed on the Schedules, are not subject to any liens, or other encumbrances.
No license renewal applications are pending with respect to any of the FCC
Licenses, but the Company must file an application for renewal of the FCC
Licenses on or before December 1, 1997. As of the date hereof, the Company has
received no notice or other information to the effect that the FCC would not
renew the FCC Licenses in the ordinary course for a full license term without
any adverse conditions, upon the timely filing of appropriate applications and
payment of the required filing fee. As of the date hereof, the Company has
received no notice or other information to the effect that the FCC would not
grant the FCC Application in the ordinary course without any adverse conditions.
All documents required by 47 C.F.R. Section 73.3526 to be kept in the Station's
public inspection files are in such file, other than documents, the absence of
which either individually or in the aggregate would not have a material adverse
effect on the renewal of the FCC Licenses or the Company's ability to consummate
the transactions contemplated by this Agreement, and such file will be
maintained in proper order and complete up to and through the Closing Date,
except for any such immaterial documents.
h. INTELLECTUAL PROPERTY. Set forth on Schedule 5.2h is a complete list
of all Intellectual Property owned by or licensed to the Company on the date
hereof and, except as otherwise set forth on Schedule 5.2h hereto, the Company
owns such Intellectual Property free and clear of any royalty, lien, encumbrance
or charge and does not interfere with the rights of others. Except as set forth
on Schedule 5.2h, the Company has not received any written notice or written
claim that any such Intellectual Property is not valid or enforceable, or of any
infringement upon or conflict with any patent, trademark, service mark,
copyright or trade name of any third party by the Company. Except as set forth
on Schedule 5.2h, the Company has not given any notice of infringement to any
third party with respect to any of the Intellectual Property and to the
Company's Knowledge no such infringement exists.
i. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit
Plans and Benefit Arrangements:
(i) Schedule 5.2i completely and accurately lists all
Company Plans and Company Benefit Arrangements and specifically identifies any
that are Qualified Plans. Neither the Company nor any ERISA Affiliate has
maintained or contributed to any Qualified Plans since October 18, 1991, other
than the IDS Financial Services Inc. Defined Contribution Prototype Plan (the
"401(k) Plan"). The 401(k) Plan is qualified in form and operation under Code
Section 401(a) and has a currently applicable determination letter
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<PAGE>
from the Internal Revenue Service, and its trust is exempt under Code Section
501, and nothing has occurred with respect to the 401(k) Plan or such trust that
could cause the loss of such qualification or exemption or the imposition of any
material liability, lien, penalty, or tax under ERISA or the Code, other than
the obligation to make contributions in accordance with the 401(k) Plan.
(ii) Each Company Plan and each Company Benefit Arrangement
has been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other domestic and foreign laws,
including federal, state, and foreign securities laws and all laws respecting
reporting and disclosure, in each case in all material respects. No Company Plan
holds employer securities.
(iii) The Company neither has nor has ever had any ERISA
Affiliates. The Company has never sponsored, maintained, or had any liability
(direct or indirect, actual or contingent) with respect to any Benefit Plan
subject to Title IV of ERISA, nor has the Company ever made or been obligated to
make or reimbursed or been obligated to reimburse another employer for,
contributions to any multi-employer plan (as defined in ERISA, Section 3(37)).
The Company has no liability (whether actual, contingent or otherwise) with
respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit
Plan or Arrangement.
(iv) No claims or lawsuits (other than routine benefit
claims) have been asserted, instituted or, to the knowledge of the Company,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, and the Company does not have knowledge of any fact that could form
the basis for any material liability of the Company in the event of any such
claim or lawsuit. The Company has not received any notice that the Company Plans
and Company Benefit Arrangements are presently under audit or examination (and
has not received notice of a potential audit or examination by any governmental
authority, or of any matters pending with respect to the 401(k) Plan under any
governmental compliance programs).
(v) No Company Plan or Company Benefit Arrangement
contains any provision or is subject to any law that would give rise to any
vesting of benefits, severance, termination, or other payments or liabilities as
a result of the transactions this Agreement contemplates, and, except as
disclosed herein or in the Schedule 5.2i, the Company has not declared or paid
any bonus or other incentive compensation or established any severance plan,
program, or arrangement in contemplation of the transactions contemplated by
this Agreement.
(vi) With respect to each Company Plan, there have been no
violations of
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<PAGE>
Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims
would result in any material liability for the Company or any Person required to
be indemnified by it.
(vii) The Company has made all required contributions to
the Company Plan as of the last day of each plan's most recent fiscal year, all
benefits accrued under any unfunded Company Plan or Company Benefit Arrangement
will have been paid, accrued, or otherwise adequately reserved in accordance
with generally accepted accounting principles as of July 31, 1997; and all
monies withheld from employee paychecks with respect to Company Plans have been
transferred to the appropriate plan within the timing required by governmental
regulations.
(viii) The Company has complied in all material respects
with the health continuation rules of Code Sections 4980B (and its predecessor)
and with Code Section 5000. No employee or former employee of the Company nor
dependent of any such employee or former employee is, by reason of such
employee's or former employee's employment, entitled to receive any benefits
subject to reporting under Statement of Financial Accounting Standards No. 106,
other than as required by Code Section 4980B or other applicable law.
(ix) There are no contracts, agreements, plans or
arrangements covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount (or
portion thereof) that, under Code Sections 280G, 404 or 162(m) would not be
deductible when paid.
j. LABOR. With respect to employees of the Company:
(i) The Company is and has been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice.
(ii) The employees of the Company are not and have never
been represented by any labor union in connection with employment by the
Company, and no collective bargaining agreement is binding and in force against,
or currently being negotiated by, the Company. To the Company's knowledge, no
labor representation organization effort currently exists nor has there been any
such activity within the past three years.
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<PAGE>
(iii) All Persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported the Company's
payments to them on IRS Forms 1099 when required to do so.
(iv) Since December 31, 1996, no employee of the Company,
or group of employees, the loss of whom would have significant adverse effect on
the business of the Company, has notified the Company of his or their intent to
(A) terminate his or their relationship with the Company, or (B) make any demand
for material payments or modifications of his or their arrangements with the
Company.
(v) The Company has received no notice of any charge or
compliance proceeding actually pending or threatened against the Company before
the Equal Employment Opportunity Commission or any state, local, or foreign
agency responsible for the prevention of unlawful employment practices.
k. INSURANCE. Schedule 5.2k hereto contains a list of all insurance
policies concerning the Business, other than employee-benefit related insurance
policies. All such policies are in full force and effect, there are no existing
breaches or defaults by the Company with respect to such policies, and no notice
of cancellation or termination has been received by the Company.
l. MATERIAL CONTRACTS. Schedule 5.2l hereto contains a list of all the
Material Contracts and true copies of such agreements have been furnished to
Purchaser or have been made available to Purchaser. All Material Contracts
listed on Schedule 5.2l are legal, valid and binding obligations of the Company
enforceable in accordance with their terms (subject to the Enforceability
Limits) and in full force and effect. There exists no default by the Company or
event which, with notice or lapse of time, or both, would constitute a default
by the Company (or, to its knowledge) any other party to any such Material
Contract or which would permit termination, modification or acceleration. Except
as disclosed in Schedule 5.21, the Company has not received notice (or other
knowledge) that any party to any Material Contract intends to cancel or
terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
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m. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2m, the
Company is in compliance in all material respects with all applicable Federal,
state and local laws, rules and regulations, and the Company has received no
notice of any action threatened or pending alleging noncompliance therewith.
n. LITIGATION. Except as set forth on Schedule 5.2n hereto, there is no
suit, claim, action, proceeding or arbitration which seeks to enjoin or obtain
damages in respect of the transactions contemplated hereby pending or, to the
Company's Knowledge, threatened against (i) any of Sellers, or (ii) the Company.
The Company has received no citation, order, judgment, writ, injunction, or
decree of any court, government, or governmental or administrative agency
against or affecting the Business or the Company, except as disclosed on
Schedule 5.2n, and except for such FCC orders and other governmental orders,
decrees and other actions which apply to the broadcasting industry generally.
o. NO BROKERS. The Company has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders fees in
connection with the sale of the Stock and the transactions contemplated by this
Agreement, other than the Company's engagement of Dain Bosworth Incorporated.
p. CONSENTS. Except (i) as set forth on Schedule 5.2p hereto, (ii) for
filings pursuant to the H-S-R Act, or (iii) for the application requesting the
approval and consent of the FCC to the transaction contemplated by this
Agreement (the "FCC Application"), no filing, consent, approval or authorization
of any governmental authority or of any third party on the part of any Seller or
the Company is required in connection with the execution and delivery of this
Agreement by Sellers or the consummation by Sellers of any of the transactions
contemplated hereby (including any consents required under any Company contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.2q hereto:
(i) The Company has not received any notice or claim
alleging that the operations of the Company at or from any Real Property do not
comply in all material respects with applicable Environmental Laws, or alleging
that the Company has engaged in or permitted any operations or activities upon
any of the Real Property for the purpose of or involving the treatment, storage,
use, generation, release, discharge, emission, or disposal of any Hazardous
Substances at the Real Property, except in substantial compliance with
applicable Environmental Laws.
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<PAGE>
(ii) The Company has not received any notice or claim
alleging that the Real Property is listed or, to the Company's Knowledge,
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. The Company has not received any notice from any
governmental entity or third party of any actual or threatened Environmental
Liabilities with respect to the Real Property or the conduct of the Business.
(iii) The Company has not received any notice or claim
alleging that there are conditions existing at the Real Property that require,
or which with the giving of notice or the passage of time or both would likely
require remedial or corrective action, removal or closure pursuant to the
Environmental Laws.
(iv) The Company has not received any notice or claim
alleging that the Company does not have all the material permits,
authorizations, licenses, consents and approvals necessary for the current
conduct of the Business and for the operations on, in or at the Real Property
which are required under applicable Environmental Laws, or is not in substantial
compliance with the terms and conditions of all such permits, authorizations,
licenses, consents and approvals
(v) The Company has not received any notice or claim
alleging that there are Hazardous Substances present on or in the Real Property
or at any geologically or hydrologically adjoining property, including any
Hazardous Substances contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether movable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of the Real Property or such adjoining property,
or incorporated into any structure therein or thereon. The Company has not
received any notice or claim alleging that the Company (or any other Person for
whose conduct it is or may be held responsible) has permitted or conducted, or
was aware of, any Hazardous Substances, or any illegal activity conducted with
respect to the Real Property or any other properties or assets (whether real,
personal, or mixed) the Company has or had an interest.
r. TAX MATTERS.
(i) Except as set forth on Schedule 5.2r(i) hereto:
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(A) All Tax Returns required to be filed by the
Company have been filed when due in a timely fashion and all such Tax Returns
are true, correct and complete in all material respects.
(B) The Company has paid in full on a timely basis
all Taxes owed by it that were payable on or prior to the date hereof, whether
or not shown on any Tax Return.
(C) The amount of the Company's liability for unpaid
Taxes did not, as of July 31, 1997, exceed the amount of the current liability
accruals for such Taxes (excluding reserves for deferred Taxes) reflected on the
Financial Statements.
(D) The Company has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over (and complied in all material respects with all information reporting
and backup withholding requirements, including maintenance of required records
with respect thereto) in connection with amounts paid to any employee,
independent contractor, creditor or other third party.
(E) The Company has received no notice of any Tax
Proceeding currently pending with respect to the Company and the Company has not
received notice from any Tax Authority that it intends to commence a Tax
Proceeding.
(F) No waiver or extension by the Company of any
statute of limitations is currently in effect with respect to the assessment,
collection or payment of Taxes of the Company or for which the Company is
liable.
(G) The Company has not requested any extension of
the time within which to file any Tax Return of the Company that is currently in
effect.
(H) There are no liens on the assets of the Company
relating or attributable to
Taxes (except liens for Taxes not yet due).
(I) The Company is not and has not been at any time
during the preceding five years a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(J) The Company has not entered into an agreement or
consent made under Section 341(f) of the Code affecting the Company.
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<PAGE>
(K) The Company has not agreed to, nor is it required
to, make any adjustments under Section 481(a) of the Code as a result of a
change in accounting methods.
(L) The Company is not and has not at any time been a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the Tax liability of any other entity or person under
contract.
(M) The Company is not and has not at any time been a
member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(N) The Company is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes.
(O) None of the Company's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(ii) Sellers have furnished or otherwise made available to
Purchaser correct and complete copies of (A) all income, franchise and other
material Tax Returns filed by the Company since January 1, 1994; and (B) all
examination reports, statements of deficiencies and closing agreements received
by the Company with respect to the Company relating to Taxes.
(iii) Schedule 5.2r(iii) contains complete and accurate
statements of (A) the Company's basis in its assets, (B) the amount of any net
operating loss, net capital loss and any other Tax carryovers of the Company
(including losses and other carryovers subject to any limitations), and (C)
material Tax elections made by or with respect to the Company. Except as stated
in Schedule 5.2r(iii), the Company has no net operating losses or other Tax
attributes presently subject to limitation under Code Sections 382, 383 or 384,
or the federal consolidated return regulations.
s. DIVIDENDS. Since December 31, 1996, no dividends have been declared,
paid, issued or otherwise approved by the Board of Directors of the Company in
respect of the Stock.
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t. ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Financial Statements or on the accounting records of the
Company as of the date hereof (collectively, the "Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Except as stated in
Schedule 5.2t, the Accounts Receivable are current and collectable, net of the
reserves shown on the Financial Statements (which reserves are adequate and
calculated consistent with past practice) or on the accounting records of the
Company. There is no contest, claim, or right of setoff, other than returns in
the ordinary course of business, under any contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. The Company's financial records include a complete and accurate list
of all Accounts Receivable.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Sellers that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted. Purchaser is qualified (or Purchaser or
its permitted assignee will be qualified as of the Closing Date) as a foreign
corporation in the State of Minnesota.
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS.
Except as described on Schedule 6.3 hereof, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a)
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violate any of the provisions of the articles of incorporation or by-laws of
Purchaser, (b) violate any provision of applicable law, rule or regulation,
which violation would prevent or interfere with Purchaser's ability to perform
hereunder, or (c) conflict with or result in a breach of, or give rise to a
right of termination of, or accelerate the performance required by the terms of
any judgment, court order or consent decree, or any agreement, indenture,
mortgage or instrument to which Purchaser is a party or to which its property is
subject, or constitute a default thereunder, except where such conflict, breach,
right of termination, acceleration or default would not have a material adverse
effect on the business or financial condition of Purchaser or prevent or
materially interfere with Purchaser's ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 hereto, (ii) for
filings pursuant to the H-S-R Act, or (iii) for the FCC Application, no filing,
consent, approval or authorization of any governmental authority or of any third
party on the part of Purchaser is required in connection with the execution and
delivery of this Agreement by Purchaser or the consummation of any of the
transactions contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 hereto, there is
no suit, claim, action, proceeding or arbitration pending or, to Purchaser's
Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages
in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Except for Kepper, Tupper & Company (whose fees and
expenses will be paid in full by Purchaser), neither Purchaser nor anyone acting
on its behalf has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the purchase
of the Stock and the transactions contemplated by this Agreement.
6.7. FUNDS AVAILABLE. Purchaser currently has (and on the Closing Date
will have) sufficient funds to pay the Purchase Price, in full and in accordance
with this Agreement, and Purchaser's obligations to purchase the Stock are not
subject to any condition or contingency involving financing, availability of
funds, or any similar matter.
6.8. PURCHASER QUALIFICATIONS. Purchaser is legally, financially and
otherwise qualified to be the licensee of, acquire, own and operate the Station
under the Communications Act, and the rules, regulations and policies of the
FCC. Purchaser knows of no fact that would, under existing law and the existing
rules, regulations, policies and procedures of the FCC (a) disqualify Purchaser
as a transferee of the FCC Licenses or as the owner and operator of the Station,
or (b) cause the FCC to fail to approve in a timely
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fashion the FCC Application for any reason attributable to Purchaser. No waiver
of any FCC rule or policy is necessary to be obtained for the grant of the FCC
Application for the transfer of control over the FCC Licenses to Purchaser, nor
will processing pursuant to any exception to a rule of general applicability be
requested or required in connection with the consummation of the transactions
contemplated hereby.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES
--------------------------------------------------------------
7.1. LIMITATION; SURVIVAL. The representations and warranties herein
and the obligations of the parties shall survive the Closing Date for a period
of one year, except to the extent any claims for indemnification in respect of a
breach of any such representation or warranty is made on or before such date, in
which case such representation or warranty shall survive until the resolution of
such claim.
7.2. SCHEDULES AND EXHIBITS. Disclosure of any fact or item in this
Agreement or in any Schedule, Annex or Exhibit hereto shall be deemed to have
been disclosed in all other Schedules or Exhibits requiring such disclosure and
for purposes of all other representations and warranties made herein.
7.3. NON-EMPLOYEE SELLERS. In the case of each Seller who is not an
officer, director or employee of the Company, the parties acknowledge that (a)
such Seller does not have direct access to the books, records, employees and
assets of the Company; (b) such Seller does not have personal knowledge of the
matters discussed in the representations and warranties set forth in Section
5.2; (c) such Seller has not made any independent investigation or inquiry
regarding such matters; and (d) such Seller is relying principally on the
representations and warranties made by those Sellers who are officers or
employees of the Company.
SECTION 8
TAX MATTERS
-----------
8.1. SECTION 338 ELECTION. In the event that Purchaser makes an
election under Section 338 of the Code (or any comparable provision of state,
local or foreign law) with
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respect to the purchase of the stock in the Company as provided herein,
Purchaser shall be responsible for and shall pay all Taxes resulting from such
election.
8.2 APPORTIONMENT. For purposes of apportioning any Tax to a portion of
any Taxable Period, the determination shall be made assuming that there was a
closing of the books as of the close of business on the last day of such
portion, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Taxable Period
in question.
8.3 Sellers and Purchaser shall (a) cooperate fully, as reasonably
requested, in connection with the preparation and filing of all Tax Returns
prepared and filed pursuant to Section 8.2; (b) make available to the other, as
reasonably requested, all information, records or documents with respect to Tax
matters pertinent to the Company for all Taxable Periods or portions thereof
ending on or before the Closing Date; and (c) preserve information, records or
documents relating to Tax matters pertinent to the Company that is in their
possession or under their control until the expiration of any applicable statute
of limitations.
8.4 Sellers shall timely pay all transfer, documentary, sales, use,
stamp, registration and other similar Taxes and fees arising from or relating to
the sale of Stock under this Agreement, and Sellers shall at their own expense
file all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other similar Taxes
and fees. If required by applicable law, Purchaser will join in the execution of
any such Tax Returns and other documentation.
8.5. CERTAIN WITHHELD AMOUNTS.
(a) Sellers and Purchaser acknowledge and agree that:
(i) Annex 2 refers to certain options to purchase shares of
Stock ("Options" and each an "Option");
(ii) immediately prior to Closing, some Options may remain
outstanding (each an "Unexercised Option");
(iii) Sellers shall cause each Unexercised Option to be
canceled without cost to the Company or Purchaser at or before the time of
Closing;
(iv) Sellers may cause part of the Purchase Price to be paid
to the
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holder of each Unexercised Option;
(v) Sellers may cause part of the Purchase Price to be paid to
the holder of certain shares of Stock listed on Annex 2 that were issued by the
Company as compensation for services previously rendered by such holder to the
Company (each a "Compensatory Share"); and
(vi) certain amounts so paid with respect to an Unexercised
Option or a Compensatory Share may be taxable income and subject to Tax
reporting, or withholding of Tax, or both.
(b) For each holder of any Unexercised Option or Compensatory
Share, Sellers shall
(i) determine the amount of such taxable income (if any) and
the amount of Tax (if any) required to be withheld;
(ii) withhold such amount (the "Withheld Amount") from the
amount otherwise payable to such holder;
(iii) provide to the Company a statement that (A) identifies
such holder, (B) specifies such Withheld Amount, and (C) states the amount of
taxable income to be reported for such holder on Form W-2 or Form 1099 (as the
case may be) and the Withheld Amount (if any);
(iv) at or before the time of Closing, provide to the
Purchaser an opinion of counsel or certified public accountants reasonably
satisfactory to Purchaser to the effect that the amount of taxable income and
Tax required to be withheld with respect to each holder of any Unexercised
Option or Compensatory Share, as set forth in Seller's statement, are correct;
and
(v) pay to the Company the Withheld Amount (if any).
(c) For each such holder, upon the Company's receipt of such
statement and such Withheld Amount (if any), Purchaser shall cause the Company
to
(i) report on Form W-2 or Form 1099 (as the case may be) each
amount specified on such statement, in accordance with such statement; and
(ii) pay the Withheld Amount to the Internal Revenue Service
and
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the Minnesota Department of Revenue, in each case in the respective amount
specified on such statement (or, in the case of any holder who is not a resident
of Minnesota, to such alternate state Tax authority (if any) as may be specified
in such statement).
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
-------------------------------------
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchaser and Sellers agree
that each will execute and deliver to the other any and all documents, in
addition to those expressly provided for herein, that may be necessary or
appropriate to implement the provisions of this Agreement, whether before, at or
after the Closing. The parties agree to cooperate with each other to any extent
reasonably required in order to accomplish fully the transactions herein
contemplated.
9.2. ACCESS TO INFORMATION. Sellers, from and after the date of this
Agreement and until the Closing Date, shall cause the Company to (a) give
Purchaser and Purchaser's employees and counsel full and complete access upon
reasonable notice during normal business hours, to all officers, employees,
offices, properties, agreements, records and affairs of the Company or otherwise
relating to the Business, (b) provide Purchaser with all financial statements of
the Company, which shall be prepared and delivered to Purchaser each month
between the date hereof and the Closing Date, and (c) provide copies of such
information concerning the Company and the Business as Purchaser may reasonably
request; provided, however, that the foregoing shall not permit Purchaser or any
agent thereof to (i) disrupt the Business, or (ii) contact any employee of the
Company without providing reasonable prior notice to Sellers and allowing a
representative of Sellers to be present. The Company and Sellers will use their
commercially reasonable efforts to obtain the consent of its auditors to permit
inclusion of the Financial Statements in applicable securities filings of
Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have
the immediate right, without causing unreasonable disruption to the Business, to
have the access provided for in the first sentence hereof to conduct an audit of
the Station's financial information, and, subject to the foregoing, the Company
and Sellers shall cooperate with Purchaser's reasonable requests in connection
with such audit, including, without limitation, giving all reasonable consents
thereto as long as any expenses thereof are borne by Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Sellers shall use their best
efforts to cause the
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Company to conduct such Business in the ordinary course. Except as contemplated
by this Agreement or as consented to by Purchaser (which consent shall not
unreasonably be withheld), from and after the date hereof, Sellers shall act,
and shall cause the Company to act, as follows:
(a) The Company will not adopt any material change in any method
of accounting or accounting practice, except as contemplated or required by
GAAP;
(b) The Company will not amend its charter or by-laws;
(c) Except (i) for the disposition of obsolete equipment in the
ordinary course of business, or (ii) as set forth on Schedule 9.3(c) hereto, the
Company will not sell, mortgage, pledge or otherwise dispose of any material
assets or properties owned, leased or used in the operation of the Business;
(d) The Company will not merge or consolidate with, or agree to
merge or consolidate with, or purchase or agree to purchase all or substantially
all of the assets of, or otherwise acquire, any other business entity;
(e) The Company will not authorize for issuance, issue or sell
any additional shares of its capital stock except as required by the exercise of
options outstanding on the date hereof as described in Annex 2 or any securities
or obligations convertible or exchangeable into shares of its capital stock or
issue or grant any option, warrant or other right to purchase any shares of its
capital stock;
(f) The Company will not incur, or agree to incur, any debt for
borrowed money other than draws under the Company's existing revolving credit
agreement;
(g) The Company will not change its historic practices concerning
the payment of accounts payable;
(h) The Company will not declare, issue, or otherwise approve the
payment of dividends of any kind in respect of the Stock or redeem, purchase or
acquire any of its capital stock;
(i) The Company shall maintain the existing insurance policies on
the assets of the Station or other policies providing substantially similar
coverages;
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(j) Except as stated in Schedule 9.3(j) and except as otherwise
agreed to by Purchaser, the Company will not permit any increases in the
compensation of any of the employees of the Station except as required by law or
existing contract or agreement or enter into or amend any Company Plan or
Company Benefit Arrangement;
(k) The Company shall not enter into or renew any contract or
commitment relating to the Station or the assets of the Station, or incur any
obligation that will be binding on Purchaser after Closing, except in the
ordinary course of business; provided that (i) except for time sales contracts
for cash at prevailing rates for a term not exceeding twelve (12) months,
Sellers shall not enter into time sales agreement that will be binding on
Purchaser after Closing; and (ii) the Company shall not enter into, modify,
amend, renew, or change any contract with respect to programming for the Station
for any period after the Closing Date (each a Programming Action) without the
prior approval of Purchaser which approval shall not be unreasonably withheld or
delayed. For purposes of clause (ii) above, Sellers acknowledge that it shall
not be unreasonable for Purchaser to withhold its consent to approve of any
Programming Action where Purchaser, acting in good faith, has advised the
Company in writing that Purchaser has reason to conclude that it can acquire
such programming on better terms. Purchaser acknowledges that any failure of the
Company or Sellers to take any Programming Action as a result of Purchaser's
withholding consent shall not be a breach of any provision of this Agreement by
Sellers and shall not be a failure to satisfy any condition to be satisfied by
the Company or Sellers hereunder;
(l) The Company shall not enter into any transactions with any
Affiliate of the Company or any Seller that will be binding upon Purchaser, or
the Station following the Closing Date;
(m) The Company shall use all commercially reasonable efforts to
maintain the assets of the Station or replacements thereof in good operating
condition and adequate repair;
(n) The Company shall, in connection with the operation of the
Station, make expenditures materially consistent with the estimates of expenses
set forth in the Company's operating budget and, including, without limitation,
the Company shall make such materially consistent expenditures in respect to
promotional, programming and engineering activities for the Station (and any
employee expenditures related to such activities) for any period covered by the
current operating budget of the Station;
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(o) The Company shall not make or change any material Tax
election, amend any Tax Return, or take or omit to take any other action not in
the ordinary course of business and consistent with past practice that would
have the effect of increasing any Taxes of Purchaser or any of its Affiliates,
or any Taxes of the Company.
(p) The Company shall file all Tax Returns when due; provided,
however, that the Company shall not file any material Tax Return without
providing Purchaser with reasonable opportunity to review and consent to the
filing of such Tax Return, which consent will not be unreasonably withheld;
provided further, however, that the Company shall not be in breach of this
Section 9.3(p) if Purchaser has not consented to such filing by the fifth (5th)
Business Day preceding the due date (including any extension periods) of such
filing.
9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten
Business Days following the date hereof, file duly completed and executed
Pre-Merger Notification and Report Forms as required under the H-S-R Act and
shall otherwise use their respective best efforts to comply promptly with any
requests made by the Federal Trade Commission or the Department of Justice
pursuant to the H-S-R Act or the regulations promulgated thereunder. All filing
fees and other similar payments in connection with the H-S-R Act shall be split
equally by Purchaser and the Company.
9.5. FCC APPLICATION.
(a) Purchaser and Sellers jointly shall, within five Business
Days following the date hereof, file (or cause to be filed) with the FCC the FCC
Application; provided that the parties shall cooperate with each other in the
preparation of the FCC Application and shall in good faith and with due
diligence take all reasonable steps necessary to expedite the processing of the
FCC Application and to secure such consents or approvals as expeditiously as
practicable. If the Closing shall not have occurred for any reason within the
initial effective periods of the granting of FCC approval of the FCC
Application, and no party shall have terminated this Agreement under Section 14,
the parties shall jointly request and use their respective best efforts to
obtain one or more extensions of the effective periods of such grants. No party
shall knowingly take, or fail to take, any action of which the intent or
reasonably anticipated consequence would be to cause the FCC not to grant
approval of the FCC Application.
(b) Sellers shall cause the Company to publish the notices
required by the FCC Rules and Regulations relative to the filing of the FCC
Application. Copies of all applications, documents and papers filed with the FCC
after the date hereof and prior to the Closing, or filed after the Closing with
respect to the transaction under this Agreement, by
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Purchaser or Sellers shall be mailed to the other simultaneously with the filing
of the same with the FCC or as soon as practicable thereafter. Each of Purchaser
and the Company shall bear its own costs and expenses (including the fees and
disbursements of its counsel) in connection with the preparation of the portion
of the application to be prepared by it and in connection with the processing of
that application. All filing and grant fees, if any, paid to the FCC, shall be
split equally by Purchaser and the Company. None of the information contained in
any filing made by Purchaser or Sellers with the FCC with respect to the
transaction contemplated by this Agreement shall contain any untrue statement of
a material fact.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
each Seller (a) to have reasonable access to the books and records of Purchaser
and those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
records for a period of three (3) years following the Closing.
9.7. CONTRACTUAL OBLIGATIONS. At all times after Closing, Purchaser
shall cause the Company to:
(a) honor all of the Company's contractual obligations disclosed
herein (including, without limitation, those under employment arrangements
disclosed herein or in any Schedule hereto), in each case in accordance with
their respective terms and conditions;
(b) continue, for at least ninety (90) days after the Closing
Date, the employment of each person who is employed by the Company immediately
prior to Closing, in each case under terms and conditions of employment
(including, without limitation, compensation and benefits as such are disclosed
herein or in any Schedule hereto) that are not less favorable to such person
than those existing immediately prior to Closing, provided, however, that
nothing in this clause (b) shall require the continued employment of the
Station's general manager or general sales manager, except to the extent of any
such contractual obligations disclosed herein or in any Schedule hereto.
9.8. CONTROL OF STATIONS. From the date hereof until the Closing Date,
subject to the express provisions of this Agreement, Purchaser shall not
directly or indirectly control, supervise or direct the operation of the
Station.
9.9. ASSUMPTION OF BROKERAGE AMOUNTS. At the Closing, Purchaser shall
pay the
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brokerage fees and expenses due from the Company to Dain Bosworth Incorporated
in accordance with the engagement letter dated November 12, 1996, executed by
the Company as set forth on Schedule 9.9 hereto.
9.10. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment, confiscation
or condemnation of any of the assets of the Station prior to the completion of
the Closing that materially interferes with the normal operation of the Station,
the Company shall notify Purchaser of same in writing immediately, specifying
with particularity the loss, damage or impairment, confiscation or condemnation
incurred, the cause thereof, if known or reasonably ascertainable, and the
insurance coverage. The Company shall apply the proceeds of any insurance
policy, judgment or award with respect thereto and take such other commercially
reasonable actions, as determined in its sole discretion, as are necessary to
repair, replace or restore such assets of the Station to their prior condition
as soon as possible after such loss, damages or impairment, confiscation or
condemnation.
(b) If before the Closing Date, due to damage or destruction of
the assets of the Station, the regular broadcast transmission of the Station in
the normal and usual manner is interrupted for a period of twelve (12)
continuous hours or more, the Company shall give prompt written notice thereof
to Purchaser. If on the Closing Date, due to damages or destruction of the
assets of the Station the regular broadcast transmission of the Station in the
normal and usual manner is interrupted such that the regular broadcast signal of
such Station (including its effective radiated power) is diminished in any
material respect, then (i) the Company shall immediately give written notice
thereof to Purchaser; and (ii) either, and both of, the Sellers' Agent or
Purchaser shall have the right, by giving prompt written notice to the other, to
postpone the Closing Date for a period of up to ninety (90) days.
(c) In the event the Station's normal and usual transmission has
not been resumed by the Closing Date as postponed pursuant to section (b) above,
either Purchaser or Sellers' Agent, may pursuant to Section 14.1(e), terminate
this Agreement by written notice to the other party. Notwithstanding the
foregoing, however, Purchaser may, at its option, proceed to close this
Agreement and complete the restoration and replacement of any damaged assets of
the Station after the Closing Date, in which event Sellers shall cause the
Company to deliver or assign to Purchaser all insurance or other proceeds
received in connection therewith to the extent such proceeds are received by or
payable to the Company and have not therefore been used in or committed to the
restoration or replacement of the assets but Sellers shall have no other
liability or obligation to
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Purchaser in connection therewith.
(d) If before the Closing Date, due to damage or destruction of
the assets the regular broadcast transmission of the Station in the normal and
usual manner is interrupted for a period of seven (7) continuous days or more,
Sellers shall give prompt written notice thereof (the "Interruption Notice") to
Purchaser. Upon receipt of the Interruption Notice, Purchaser shall have the
right, in its sole and absolute discretion, by giving prompt written notice
thereof to Sellers within two (2) Business Days of the date of the Interruption
Notice, to terminate this Agreement with the effect specified in Section 14.2(a)
hereof.
SECTION 10
INDEMNIFICATION
---------------
10.1. INDEMNIFICATION OF PURCHASER BY SELLERS.
(a) Subject to Section 10.3 hereof, each Seller, severally but
not jointly, shall indemnify and hold Purchaser harmless from and against any
and all Losses, however incurred, which arise out of or result from any breach
by such Seller of any representation or warranty of such Seller as to itself or
himself, in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof, Sellers shall jointly and
severally indemnify and hold Purchaser harmless from and against any and all
Losses, howsoever incurred, which arise out of or result from:
(i) any breach of any representation or warranty of Sellers
set forth in Section 5.2 of this Agreement other than any representation or
warranty of any Seller set forth in Section 5.1 of this Agreement; or
(ii) the material failure by Sellers to perform any covenant
of Sellers contained herein; or
(iii) breaches of other agreements contemplated hereby.
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10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3
hereof, Purchaser shall indemnify and hold Sellers harmless from and against any
and all Losses, howsoever incurred, which arise out of or result from:
(a) any breach by Purchaser of any representation or warranty of
Purchaser set forth in Section 6 of this Agreement;
(b) the material failure by Purchaser to perform any covenant of
Purchaser contained herein; or
(c) breaches of other agreements contemplated hereby.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
(a) Notwithstanding the provisions of Section 10.1 hereof,
Purchaser shall not be entitled to indemnification or to receive indemnification
payments with respect to any Losses except if and to the extent that the
aggregate amount of Losses incurred by Purchaser and its Affiliates to which it
or they would otherwise be entitled to indemnification under Section 10.1
hereof, exceeds $50,000.00.
(b) In determining the amount of any Losses for which
indemnification is provided under this Agreement, such Losses shall be (i) net
of any insurance recovery made by the indemnified party, (ii) reduced to take
into account any net Tax benefit realized by the indemnified party arising from
the deductibility of such Losses, and (iii) increased to take account of any net
Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Loss, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement
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shall be treated as an adjustment to the Purchase Price for Tax purposes, unless
a final determination with respect to the indemnified party or any of its
affiliates causes any such payment not to be treated as an adjustment to the
Purchase Price.
(c) No claim for indemnification for Losses shall be made or
available after the first anniversary of the Closing Date (except to the extent
of any claims made on or before such first anniversary).
(d) Indemnification pursuant to this Section 10 shall be the sole
and exclusive remedy of each party hereto with respect to any Losses,
notwithstanding that indemnification may not be available and shall be in lieu
of any and all other rights and remedies after the Closing Date (whether
asserted as claims for breach of contract, tort claims, actions in equity or
otherwise.
(e) The maximum aggregate liability of all Sellers (including,
without limitation, all liability for indemnification under this Article 10)
shall not exceed the amount held in the Indemnification Escrow, and Purchaser
shall not (and shall have no right to) proceed against any Seller, other than
the right to proceed against the Indemnification Escrow to the extent of Losses
incurred by Purchaser for which Purchaser is entitled to indemnification
hereunder.
(f) The terms and conditions of Section 10.3(a) through (e) shall
not be deemed to limit any rights or remedies Purchaser may have for any act or
acts of fraud by Sellers or any Seller.
10.4. NOTICE OF CLAIM /DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the indemnifying
part(ies) notice of any matter which an indemnified party has determined has
given or could give rise to a right of indemnification under this Agreement,
stating the nature and, if known, the amount of the Losses, and method of
computation thereof, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such right to
indemnification is claimed or arises; provided that the failure of any party to
give notice promptly as required in this Section 10.4 shall not relieve any
indemnifying party of its indemnification obligations except to the extent that
such failure materially prejudices the rights of such indemnifying party. The
indemnified party shall give continuing notice promptly thereafter of all
developments coming to the indemnified party's attention materially affecting
any matter relating to any indemnification claims.
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(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified
party shall give prompt notice thereof to the indemnifying part(ies) and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it shall wish, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume the
defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the indemnified party from all liability arising out
of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects to
assume the defense of any action or claim, the indemnifying part(ies) shall not
be liable for any compromise or settlement of any such action or claim effected
without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement, including, without limitation, making available all
witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect the indemnification
provided hereunder except to the extent that the failure to give such
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notice materially prejudices the indemnifying party.
(b) Sellers, acting through Sellers' Agent, shall have the
right, at their own expense, to control and make all decisions with respect to
any Tax Proceeding relating solely to Taxes of the Company for which Sellers are
liable to indemnify Purchaser; provided, that Purchaser and counsel of its own
choosing shall have the right, at Purchaser's own expense, to participate fully
in all aspects of the prosecution or defense of such Tax Proceeding; and
provided further that Sellers shall not settle any such Tax Proceeding without
the prior written consent of Purchaser if such settlement could adversely affect
the past, present or future Tax liability of Purchaser or any of its Affiliates,
or any Tax liability of the Company for which Seller is not obligated to
indemnify Purchaser.
(c) If Sellers do not exercise their right to assume control
of or participate in any Tax Proceeding as provided under this Section 10.5,
Purchaser may, without waiving any rights to indemnification hereunder, defend
or settle the same in such manner as it may deem appropriate in its sole and
absolute discretion.
(d) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4 conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Sellers shall have complied in all material respects with
their agreements and covenants contained herein to be performed at or prior to
the Closing, and the representations and warranties of Sellers contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate from Sellers' Agent, dated as of the
Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of
the conditions set forth in this Section 11.1(a) ("Sellers' Bring-Down
Certificate").
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(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Stock or the assets of the Station.
(c) All applicable waiting periods under the H-S-R Act shall have
expired or been terminated.
(d) All consents and/or agreements identified on Schedule 5.2p
shall have been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses and the approval of the Company's application for
renewal of the FCC Licenses shall have been obtained. All the material
conditions contained in the Final Order required to be satisfied on or prior to
the Closing Date shall have been duly satisfied and performed. Notwithstanding
the foregoing, if the consent of the FCC is conditional or qualified in any
manner that has a material adverse effect on Purchaser, Purchaser may,
nevertheless, in its sole discretion, require the consummation of the
transactions contemplated by this Agreement, but shall not be required to do so;
provided, however, that if the consent of the FCC includes a condition to the
effect that Closing cannot occur until after grant of the application for
renewal of the FCC Licenses, such condition will not be deemed to have a
material adverse effect on Purchaser.
(f) Sellers shall have delivered to Purchaser at the Closing each
document required by Section 12.1 hereof.
(g) The Company shall have delivered to Purchaser a written
statement by a duly authorized officer of Richfield Bank & Trust Co. that the
Existing Debt of the Company does not exceed $2,500,000.00 on the Closing Date.
(h) Since the date of this Agreement through the Closing Date,
there shall not have been any Material Adverse Effect to the business,
operations, properties, assets, or condition of the Company, and no event shall
have occurred or circumstance exist that would reasonably be expected to result
in such a Material Adverse Effect.
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(i) Purchaser shall have received from the Company a properly
executed statement in the form set forth in Schedule 11.1(i), together with
evidence that the Company has complied with the notice requirements of Section
1.897-2(h)2 of the Treasury regulations.
(j) Sellers shall have taken the actions and delivered the
payments, statements and opinions required by Section 8.5.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation
of Sellers to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Seller shall have received a certificate of Purchaser, dated as of the Closing
Date and signed by an officer of Purchaser, certifying as to the fulfillment of
the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down
Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Sellers
from consummating the transactions contemplated hereby.
(c) All applicable waiting periods under the H-S-R Act shall have
expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred. There shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, that
Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by
the FCC and close following an "Initial Grant".
(e) Purchaser shall have delivered to Sellers at the Closing the
Purchase Price and each document required by Section 12.2 hereof.
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SECTION 12
DELIVERIES AT THE CLOSING
-------------------------
12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or
cause to be delivered to Purchaser:
(a) Sellers' Bring-Down Certificate;
(b) the legal opinions of Faegre & Benson LLP, counsel to
Sellers, and Wiley Rein & Fielding, FCC counsel to the Company, substantially in
the form attached as Exhibit C hereto;
(c) stock certificates evidencing the Stock, together with stock
powers, dated as of the Closing Date and executed by the respective Sellers,
transferring the Stock to Purchaser;
(d) the original corporate minute books, stock registry and seal
of the Company (to the extent available);
(e) a certificate as to the existence and good standing of the
Company issued by the Secretary of State of the State of Minnesota dated shortly
before the Closing Date confirmed as of the Closing Date;
(f) receipt for Purchase Price;
(g) resignations of each of the officers and directors of the
Company, effective as of the Closing Date;
(h) the statement required by Section 11.1(i);
(i) a copy of any instrument evidencing any consents received,
including, but not limited to, estoppel certificates from the Company's landlord
with respect to the Real Property;
(j) the Indemnification Escrow Agreement, duly executed by
Sellers or Sellers' Agent;
(k) the statement required by Section 8.5(b)(iii);
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(l) the opinion of counsel or certified public accountants
required by Section 8.5(b)(iv); and
(m) such other documents as Purchaser shall reasonably request.
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Sellers' Agent or the Indemnification Escrow Agent,
as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit D hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement, duly executed by
Purchaser;
(e) certificates as to the existence and good standing of the
Purchaser issued by the Maryland Department of Assessments and Taxation of the
State of Maryland and the Secretary of State of Minnesota as to the Purchaser's
qualification as a foreign corporation dated shortly before the Closing Date and
confirmed as of the Closing Date; and
(f) such other documents Sellers' Agent shall reasonably
request.
SECTION 13
EXPENSES
--------
Except as provided in Sections 9.4, 9.5 and 9.9, each party will pay
its own fees, expenses, and disbursements and those of its counsel in connection
with the subject matter of this Agreement (including the negotiations with
respect hereto and the preparation of any documents) and all other costs and
expenses incurred by it in the performance and compliance with all conditions
and obligations to be performed by it pursuant to this Agreement or as
contemplated hereby. The parties acknowledge and agree that (a) the Company has
incurred expenses in connection with considering, evaluating, preparing and
negotiating this Agreement and related documents and transactions (including,
without limitation, fees and expenses of accountants, legal counsel and other
professional advisors), (b) the Company will continue to incur and pay such
reasonable expenses in connection
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<PAGE>
with completing this Agreement and transactions and documents contemplated
hereby, and (c) the Company's doing so does not violate any representation,
warranty or other obligation of the Company hereunder.
SECTION 14
TERMINATION
-----------
14.1 TERMINATION. This Agreement may be terminated:
(a) at any time by mutual written consent of Purchaser and
Sellers;
(b) by either Purchaser or Sellers, if the terminating party is
not in default or breach in any material respect of its or their obligations
under this Agreement, if the Closing hereunder has not taken place on or before
twelve (12) calendar months from the date hereof, except where Closing has been
postponed pursuant to the provisions of 9.10, in which case the applicable date
shall be upon the expiration of the ninety (90) period referred to in Section
9.10;
(c) by Sellers, if Sellers are not in default or breach in any
material respect of its obligations under this Agreement, if all of the
conditions in Section 11.2 have not been satisfied or waived by the date
scheduled for the Closing (as such date may be postponed pursuant to Section
9.10);
(d) by Purchaser, if Purchaser is not in default or breach in any
material respect of its obligations under this Agreement, if all of the
conditions in Section 11.1 have not been satisfied or waived by the date
scheduled for the Closing (as such date may be postponed pursuant to Section
9.10);
(e) by Purchaser or Sellers, pursuant to Section 9.10.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Sellers pursuant to Sections 9.10 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its
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<PAGE>
obligations under this Agreement. If this Agreement is terminated as provided
herein, all filings, applications and other submissions relating to the
transactions contemplated hereby as to which termination has occurred shall, to
the extent practicable, be withdrawn from the agency or other Person to which
such filing is made.
(b) If this Agreement is terminated pursuant to Sections 14.1(b),
14.1(d), or 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1)
shall be returned to Purchaser. In recognition of the unique character of the
property to be sold hereunder, and the damages which Purchaser will suffer in
the event of a termination of this Agreement caused by a breach by Sellers,
Purchaser shall have the right to pursue all remedies available hereunder at law
or in equity, including, without limitation, the right to seek specific
performance and/or monetary damages. Sellers hereby waive any defense that
Purchaser has an adequate remedy at law for such breach of this Agreement by
Sellers.
(c) If this Agreement is terminated pursuant to Section 14.1(c)
and Purchaser shall be in breach in any material respect of its representations,
warranties, covenants, agreements, or obligations set forth in this Agreement,
then and in that event, Sellers shall have the right to retain the amount
delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as
the sole and exclusive remedy of Sellers as a consequence of Purchaser's default
(which aggregate amount the parties agree is a reasonable estimate of the
damages that will be suffered by Sellers as a result of the default by Purchaser
and does not constitute a penalty), the parties hereby acknowledging the
inconvenience and nonfeasability of otherwise obtaining an adequate remedy.
(d) If this Agreement is terminated pursuant to Section 14.1(a),
the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to
Purchaser.
(e) In the event of a default by either party that results in a
lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party shall be entitled to reimbursement from the other party of its
reasonable legal fees and expenses, whether incurred in arbitration, at trial,
or on appeal.
SECTION 15
NOTICES
-------
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed and
followed promptly by delivery of the
38
<PAGE>
original), or (b) sent by Federal Express or other reputable overnight delivery
service (for next Business Day delivery), shipping prepaid, as follows:
If to Purchaser to:
Mr. David Smith
President
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, MD 21211-1420
Telephone: (410) 467-5005
Fax: (410) 467-5043
With a copy to:
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, MD 21211-1420
Attention: General Counsel
Telephone: (410) 662-6422
Fax: 410-662-4707
If to Sellers to:
Ms. Linda Rios Brook
Sellers' Agent
Lakeland Group Television, Inc.
1640 Como Avenue
Saint Paul, Minnesota 55108
Telephone: (612) 646-2300
Fax: (612) 646-4296
39
<PAGE>
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attn: William R. Busch, Jr.
Telephone: (612) 336-3178
Fax: (612) 336-3026
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENT
--------------
16.1. SELLERS' AGENT. Each of the Sellers hereby irrevocably appoints
Linda Rios Brook (herein called the "Sellers' Agent"), or any successor Sellers'
Agent appointed in accordance with this Section 16.1 as his, her or its agent
and attorney-in-fact to take any action required or permitted to be taken by
such Seller under the terms of this Agreement, including, without limiting the
generality of the foregoing, the payment of expenses relating to the
transactions contemplated by the Agreement, and the right to waive, modify or
amend any of the terms of this Agreement in any respect, whether or not
material, and agrees to be bound by any and all actions taken by the Sellers'
Agent on his or its behalf. In the event of the death or incapacity of Sellers'
Agent, such person shall be replaced by Miles J. Kennedy (automatically and
without any action by any Seller) who shall continue in that capacity. If at any
time, neither of the persons named above is serving as Sellers' Agent, then
Sellers' Agent shall be such person as may be named as such in a notice to
Purchaser, executed by Sellers holding (or, if such time is after Closing,
formerly holding) more than 50% of all shares of Stock listed on Annex 2. The
Sellers agree jointly and severally to indemnify the Sellers' Agent from and
against and in respect of any and all liabilities, damages, claims, costs, and
expenses, including, but not limited to attorneys' fees, arising out of or due
to any action as the Sellers' Agent and any and all actions, proceedings,
demands, assessments, or judgments, costs, and expenses incidental thereto,
except to the extent that the same result from bad faith or gross negligence on
the part of the Sellers' Agent. Purchaser shall be entitled to rely exclusively
upon any communications given by the Sellers' Agent on behalf of any Seller, and
shall not be liable for any action taken or not taken in reliance upon any
40
<PAGE>
such communications from the Sellers' Agent. Purchaser shall be entitled to
disregard any notices or communications given or made by Sellers unless given or
made through the Sellers' Agent.
SECTION 17
MISCELLANEOUS
-------------
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Schedules, Annexes and Exhibits
attached to this Agreement constitute an integral part of this Agreement as if
fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the Annexes, Schedules,
Exhibits, and other documents to be delivered hereunder and thereunder
constitute the entire understanding and agreement between the parties hereto
concerning the subject matter hereof. All negotiations and writings between the
parties hereto are merged into this Agreement, and there are no representations,
warranties, covenants, understandings, or agreements, oral or otherwise, in
relation thereto between the parties other than those incorporated herein or to
be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the State of Maryland
without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended except
in writing signed by each of the Purchaser and Sellers' Agent.
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<PAGE>
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its obligations hereunder. In the event of such permitted assignment or other
transfer, all of the rights, obligations, liabilities, and other terms and
provisions of this Agreement shall be binding upon, inure to the benefit of, and
be enforceable by and against, the respective successors and assigns of the
parties hereto, whether so expressed or not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
17.10. ANNOUNCEMENTS. From the date of this Agreement, all public
announcements relating to this Agreement or the transactions contemplated hereby
will be made only as agreed upon jointly by the parties hereto, except that
nothing herein shall prevent any Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if (and to the extent) required by applicable law as a result of
its, or its Affiliate's, being a public company, provided that prior notice of
such disclosure is given to the other party hereto.
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<PAGE>
17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will
have no adequate remedy at law if Sellers fail to perform their obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 BULK TRANSFERS. Purchaser hereby waives compliance for the
provisions of any applicable bulk transfer laws subject to Sellers'
indemnification as a result of such failure to comply.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits, Annexes
and Schedules hereto are the result of the efforts of all parties to this
Agreement and every covenant, term, and provision of this Agreement shall be
construed according to its fair meaning and shall not be construed against any
particular party as the drafter of such covenant, term, and/or provision.
[SIGNATURE PAGE TO FOLLOW -
PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
PURCHASER: SELLERS:
SINCLAIR COMMUNICATIONS,
INC.
By:
--------------------------------- ---------------------------------
Title:
---------------------------------
44
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ANNEX 1
DEFINITIONS
As used in the attached Stock Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
1. "Accounts Receivable" has the meaning given in Section 5.2t.
2. Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
3. "Agreement" has the meaning set forth in the preamble to the
attached Stock Purchase Agreement.
4. "Benefit Arrangement" shall mean any legally enforceable benefit
arrangement, obligation, custom, or practice to provide benefits (other than
regular cash compensation for services rendered) to present or former directors,
employees, or independent contractors, other than any obligation, arrangement,
custom or practice that is a Benefit Plan, including without limitation,
employment agreements, severance agreements, executive compensation
arrangements, including but not limited to stock options, restricted stock
rights and performance unit awards, incentive programs or arrangements, sick
leave, vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, workers' compensation, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical insurance, life
insurance, tuition reimbursement or scholarship programs, employee discounts,
employee loans, employee banking privileges, any plans subject to Section 125 of
the Code, and any plans providing benefits or payments in the event of a change
of control, change in ownership, or sale of a substantial portion (including all
or substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees or directors.
5. "Benefit Plan" shall have the meaning given in Section 3(3) of
ERISA.
6. "Business" means the business of owning and operating the Station.
7. "Business Day" means any day on which banks in New York City are
open for business.
8. "CERCLA" has the meaning set forth in Section 5.2q of the Agreement.
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<PAGE>
9. "Closing" has the meaning set forth in Section 4 of the Agreement.
10. "Closing Date" has the meaning set forth in Section 4 of the
Agreement.
11. "Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
12. "Company" has the meaning set forth in the recitals to the
Agreement.
13. "Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
any liability (whether actual, contingent, with respect to any of its assets or
otherwise) as of the Closing Date, in each case with respect to any present or
former directors or employees of the Company.
14. "Company's Knowledge" means the actual knowledge (without any
requirement of inquiry) of any Seller who is not an officer, employee or
director of the Company or the actual knowledge, after due inquiry, of any
Person who is an officer or director (including any benefit manager whether or
not an officer) of the Company on the date of the Agreement or any other
individuals responsible for the day-to-day operations of the Stations.
15. "Company Plan" shall mean, as of the Closing Date, any Benefit Plan
for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments, in each case with respect to any present or former
employees of the Company.
16. "Compensatory Share" has the meaning set forth in Section 8.5 of
the Agreement.
17. "Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock to Purchaser to maintain the validity and effectiveness (without any
material default or violation of the terms thereof) of any Material Contract and
any licenses (including, without limitation, the FCC Licenses) to be transferred
to Purchaser, or otherwise to consummate the transactions contemplated by this
Agreement.
18. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1
of the Agreement.
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19. "Enforceability Limits" has the meaning set forth in Section 5.1.
20. "Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
21. "Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection of
the Environment.
22. "Environmental Liability" means any loss, liability, damage, cost
or expense arising under any Environmental Law.
23. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
24. "ERISA Affiliate" shall mean any Person that together with the
Company would be or was at any time treated as a single employer under Section
414 of the Code or Section 4001 of ERISA and any general partnership of which
the Company is or has been a general partner.
25. "Existing Debt" means the principal amount of all indebtedness of
the Company for borrowed money or the deferred purchase price of any property,
plus the amount required to be recorded as a liability on the financial
statements of the Company in accordance with GAAP with respect to any capital
lease.
26. "FCC" has the meaning set forth in the recitals to the Agreement.
27. "FCC Application" has the meaning set forth in Section 5.2p of the
Agreement.
28. "FCC Licenses" has the meaning set forth in the Recitals of the
Agreement.
29. "FCC Rules and Regulations" has the meaning set forth in Section
5.2g of the Agreement.
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30. "Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
31. "Financial Statements" means the consolidated balance sheet of the
Company as of July 31, 1997 and the consolidated income statement and statement
of changes in financial condition for the calendar year 1996.
32. "GAAP" means generally accepted accounting principles, consistently
applied.
33. "Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" under any Environmental Laws.
34. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
35. "Initial Grant" means the date of the publication of the FCC
"Public Notice" announcing the grant of the "Assignment Applications" for the
FCC License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
36. "Intellectual Property" means the trademarks, trademark
registrations and applications therefor, service marks, service mark
registrations and applications therefor, copyright registrations and
applications therefor and trade names that are (i) owned by the Company and (ii)
material to the continued operation of the Business.
37. "IRS" means the Internal Revenue Service.
38. "Indemnification Escrow Agreement" has the meaning set forth in
Section 3.1 of the Agreement.
39. "Indemnification Escrow" has the meaning set forth in Section 3.1
of the Agreement.
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40. "Losses" means any loss, liability, damage, cost or expense
(including, without limitation, reasonable attorneys' fees and expenses)
determined in each case on an after-tax, after-insurance coverage basis in
accordance with Section 10.3(b) hereof.
41. "Material Adverse Effect" shall mean a material adverse effect on
the business, business prospects or financial condition of the Company taken as
a whole.
42. "Material Contract" means all agreements to which the Company is a
party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
43. "Permitted Exceptions" means matters that (i) do not render title
to the Real Property unmarketable or (ii) do not prohibit the continued
existence and/or continued use (as presently used) or maintenance of the
buildings, structures or improvements presently located on the Real Property.
Notwithstanding the foregoing, any matter shown on Schedule 5.2d shall be
considered a Permitted Exception.
44. "Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
45. "Purchase Price has the meaning set forth in Section 3.1 of the
Agreement.
46. "Purchaser" has the meaning set forth in the preamble to the
Agreement.
47. "Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11. 2 (a) of the Agreement.
48. "Purchaser's Knowledge" means the actual knowledge, after due
inquiry, of the officers of Purchaser.
49. "Qualified Plan" shall mean any Company Plan that meets or purports
to meet the requirements of Section 401(a) of the Code.
50. "Real Property" means any real property leased by the Company.
51. "Sellers" has the meaning set forth in the preamble to the
Agreement.
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52. "Sellers' Bring-Down Certificate" has the meaning set forth in
Section 11.1(a) of this Agreement.
53. "Station" has the meaning set forth in the recitals to the
Agreement.
54. "Stock" has the meaning set forth in the recitals to the Agreement.
55. "Tax" or "Taxes" means all taxes, including, but not limited to,
income (whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
56. "Tax Authority" means any federal, national, foreign, state,
municipal or other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body or other authority exercising
any taxing or tax regulatory authority.
57. "Tax Liability" means any liability for a Tax.
58. "Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
59. "Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding involving Taxes.
60. "Tax Returns" means all returns, reports, forms, estimates,
information returns and statements (including any related or supporting
information) filed or to be filed with any Tax Authority in connection with the
determination, assessment, collection or administration of any Taxes.
61. "Unexercised Option" has the meaning set forth in Section 8.5 of
the Agreement.
50
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
THE STOCKHOLDERS OF MAX RADIO INC. ,
MAX RADIO INC.
AND
MAX MEDIA PROPERTIES LLC
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS................................................................3
SALE OF SHARES/EXCLUDED ASSETS.................................................3
2.1. Sale of Shares.................................................3
2.2. Excluded Assets................................................3
PURCHASE PRICE.................................................................6
3.1. Payment........................................................6
3.2. Disbursing Agent...............................................6
4. CLOSING....................................................................7
5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7
5.1. Representations as to Shares, Etc..............................7
c.No Conflicts..............................................8
5.2. Representations and Warranties as to the Company...............8
a. Organization and Good Standing..........................8
b. Capitalization..........................................9
c. No Conflicts............................................9
d. Financial Statements....................................9
e. Employee Benefit Plans.................................11
f. Labor..................................................13
g. Insurance..............................................14
h. Material Contracts.....................................14
i. Compliance with Laws...................................15
j. Litigation.............................................15
k. No Brokers.............................................15
l. Consents...............................................15
m. Tax Matters............................................15
n. Dividends..............................................17
o. Accounts Receivable....................................18
p. Company Assets.........................................18
q. Representations as to the Company Interests............18
5.3. Representations and Warranties as to the MMP and the FCC
Licensee Entities........................................18
a. Organization and Good Standing.........................18
b. Capitalization of MMP..................................19
c. Organization and Capitalization of the FCC License
Entities...............................................19
d. No Conflicts...........................................20
e. Real Property..........................................20
f. Personal Property......................................21
i
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g. Financial Statements....................................22
h. FCC.....................................................23
i. Intellectual Property...................................24
j. Employee Benefit Plans..................................25
k. Labor...................................................27
l. Insurance...............................................28
m. Material Contracts......................................28
n. Compliance with Laws....................................28
o. Litigation..............................................28
p. Consents................................................28
q. Environmental...........................................29
r. Tax Matters.............................................30
s. Accounts Receivable.....................................32
t. Representations as to MMP Interests.....................32
5.4. Representations and Warranties as to MTR.......................33
a. Organization and Good Standing..........................33
b. Capitalization..........................................33
c. No Conflicts............................................33
d. Financial Statements....................................34
e. Employee Benefit Plans..................................35
f. Labor...................................................35
g. Insurance...............................................36
h. Material Contracts......................................36
i. Compliance with Laws....................................36
j. Litigation..............................................36
k. Consents................................................36
l. Tax Matters.............................................36
m. Dividends...............................................38
n. MTR Assets..............................................39
o. Representations as to MTR Interests.....................39
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................39
6.1. Organization and Good Standing................................39
6.2. Execution and Effect of Agreement.............................39
6.3. No Conflicts..................................................39
6.4. Consents......................................................40
6.5. Litigation....................................................40
6.6. No Brokers....................................................40
6.7. Purchaser Qualifications......................................40
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............41
7.1. Limitation; Survival..........................................41
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8. TAX MATTERS...............................................................41
8.1. Section 338 Election..........................................41
8.2. Tax Returns...................................................41
8.3. Apportionment.................................................42
8.4. Cooperation in Tax Matters....................................42
8.5. Certain Taxes.................................................43
8.6. FIRPTA........................................................43
8.7. Section 754 Election..........................................43
8.8. Closing Date Actions..........................................43
9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................43
9.1. Further Assurances and Assistance.............................43
9.2. Access to Information.........................................44
9.3. Conduct of Business Prior to Closing..........................44
9.4. H-S-R Act.....................................................47
9.5. FCC Application...............................................48
(c)FCC Applications to Transfer Certain FCC Licenses.....48
9.6. Books and Records.............................................49
9.7. Employees and Employee Benefits...............................49
9.8. Interruption of Broadcast Transmission........................49
9.9. Interpretation of Certain Provisions..........................50
9.10. Collection of Accounts Receivable.............................51
9.11. Other Acquisitions............................................52
9.12. Payment of Certain Liabilities Prior to Closing...............53
9.13. Reserved......................................................53
9.14. Value Appreciation Rights and Incentive Fees..................53
10. INDEMNIFICATION..........................................................53
10.1. Indemnification of Purchaser by Sellers.......................53
10.2. Indemnification of Sellers by Purchaser.......................54
10.3. Limitations and Other Provisions Regarding
Indemnification Obligations...................................55
10.4. Notice of Claim Defense of Action.............................57
10.5 Tax Contests..................................................58
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............59
11.1. Conditions Precedent to the Obligation of Purchaser...........59
11.2. Conditions Precedent to the Obligation of Sellers.............61
12. DELIVERIES AT THE CLOSING................................................62
12.1. Deliveries by Sellers.........................................62
12.2. Deliveries by Purchaser.......................................64
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13. EXPENSES.................................................................64
14. TERMINATION..............................................................64
14.1. Termination...................................................64
14.2. Procedure and Effect of Termination...........................65
15. NOTICES..................................................................66
16. SELLERS' AGENTS..........................................................68
16.1. Sellers' Agents...............................................68
17. MISCELLANEOUS............................................................68
17.1. Headings......................................................68
17.2. Schedules and Exhibits........................................69
17.3. Execution in Counterparts.....................................69
17.4. Entire Agreement..............................................69
17.5. Governing Law.................................................69
17.6. Modification..................................................69
17.7. Successors and Assigns........................................69
17.8. Waiver........................................................70
17.9. Severability..................................................70
17.10. Announcements.................................................70
17.11. Specific Performance..........................................70
17.12. Fees and Expenses.............................................70
17.13. Third Party Beneficiaries.....................................71
17.14. Interpretation................................................71
ANNEX 1 - DEFINITIONS
ANNEX 2 - SELLERS
EXHIBITS
Exhibit A - Deposit Escrow Agreement
Exhibit B - Indemnification Escrow Agreement
Exhibit C - MMP II Assignment and Assumption Agreement
Exhibit D - Time Brokerage Agreements
Exhibit E - Opinion of Counsel,
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Clark & Stant, P.A.
Exhibit F - Opinion of Sellers' FCC Counsel
Exhibit G - Opinion of Counsel,
Thomas & Libowitz, P.A.
SCHEDULES
5.1a(ii) Encumbrances of Stock
5.1a(vi) Options and Agreements
5.1b Share Brokers
5.1c No Conflicts
5.2b Capitalization
5.2c Conflicts
5.2d Financial Statements
5.2e Employee Benefit Plans
5.2f Labor
5.2g Insurance
5.2h Material Contracts
5.2i Compliance with Laws
5.2j Litigation
5.2k Brokers
5.2l Consents
5.2m(a) Tax Matters
5.2m(c) Tax Basis and Tax Elections
5.2q Company Interest
5.3b Capitalization
5.3d Conflicts
5.3e Real Property
5.3f Personal Property
5.3g Financial Statements
5.3h FCC Licenses
5.3i Intellectual Property
5.3j Employee Benefit Plans
5.3k Labor
5.3k(d) Employee Terminations or Demands
5.3l Insurance
5.3m Material Contracts
5.3n Compliance with Laws
5.3o Litigation
5.3p Consents
5.3q Environmental Matters
5.3r(a) Tax Matters
5.3r(c) Tax Basis and Tax Elections
5.3t Representations as to MMP Interests
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5.4b Capitalization
5.4d Financial Matters
5.4h Material Contracts
5.4l(a) Tax Matters
5.4l(c) Tax Basis and Tax Elections
5.4o Representations as to MTR Interests
6.3 Conflicts
6.4 Consents
6.5 Litigation
6.7 Purchaser Qualifications
9.3(c) Planned Asset Dispositions
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STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of December, 1997, is entered into by and among Sinclair
Communications, Inc., a Maryland corporation ("Purchaser"), Aardvarks Unlimited
Inc., a Virginia corporation ("Aardvarks"), Commonwealth Investors, L.P., a
Virginia limited partnership ("Commonwealth"), Quad-C Partners, L.P., a Delaware
limited partnership ("Quad-C Partners"), Quad-C Offshore Investors L.P., a
Delaware limited partnership ("Offshore"), and Quad-C Partners II, L.P., a
Virginia limited partnership ("Quad-C II"; together with Commonwealth, Quad-C
Partners and Offshore "Quad-C") (each a "Seller" and collectively, "Sellers"),
Max Radio Inc., a Virginia corporation (the "Company"), and Max Media Properties
LLC, a Virginia limited liability company ("MMP").
RECITALS:
---------
WHEREAS, Sellers own collectively all of the issued and outstanding
shares of capital stock, par value $1.00, (the "Stock") of the Company; and
WHEREAS, the Company is the owner of 31% of the issued and outstanding
shares of capital stock, par value $1.00, of MTR Holding Corp., a Virginia
corporation ("MTR"), 3,069,000 Class A Membership Units (out of a total
11,631,431 Membership Units) of MMP and a 2% limited partnership interest in
Radio License L.P., a Virginia limited partnership ("RLLP"), the holder of the
FCC Licenses of the Radio Stations (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to
acquire all of the issued and outstanding shares of Max Investors, Inc., a
Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C
Membership Units (out of a total 11,631,431 Membership Units) of MMP; and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to
acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500
Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP,
69% of the equity of MTR and a 2% limited partnership interests in the
Television Licensees (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "Management Agreement")
to acquire from Max Management LLC, a Virginia limited liability company
("Management"), 188,034 Class C Membership Units (out of a total 11,631,431
Membership Units) of MMP; and
<PAGE>
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a
total 11,631,431 Membership Units) of MMP; and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of television stations WSYT-TV in the Syracuse, New York market,
WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio
market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri
and KETK-TV in the Tyler, Texas market (each a "Television Station" and
collectively, the "Television Stations"); and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina
("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro,
North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG";
together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in
Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in
Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky,
pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television
station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement
with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas
pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA
Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, the parties desire that, before the Closing and after receipt
of any required approval of the FCC, MMP transfer all partnership interests it
holds in Dayton
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LP and Tri-Cities LP to Max Media Properties II LLC, a newly-created Virginia
limited liability company ("MMP II) (the "MMP II Transfers"); and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the membership interests in MMP
II (the "MMP II Distribution"); and
WHEREAS, on the consummation of this Agreement, the MTC Agreement, the
Investors Agreement and the Management Agreement (collectively, the "Purchase
Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431
Membership Units of MMP and all general and limited partnership interests in the
FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II
Licensees"); and
WHEREAS, MMP holds certain assets more fully described below (the
"Excluded Assets") that will not be acquired by Purchaser; and
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, all of the issued and outstanding shares of Stock.
SECTION 1
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex 1 hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
SECTION 2
SALE OF SHARES/EXCLUDED ASSETS
------------------------------
2.1 SALE OF SHARES. At the Closing, each Seller shall sell, assign,
transfer and deliver to Purchaser, and Purchaser shall purchase from each
Seller, that number and class of shares of Stock as is set forth opposite the
name of each Seller in Annex 2 hereto. Each Seller consents to the sale of stock
by each other Seller pursuant to this Agreement.
2.2 EXCLUDED ASSETS.
(a) The following assets (collectively, the "Excluded Assets") may
be distributed by MMP to the holders of Membership Units in MMP, and may be
distributed by the Company and MTR to their shareholders or their designee prior
to the Closing:
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(i) 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, and Treasury Bills;
(ii) all furniture, fixtures and equipment located at the
principal place of business of MMP, the address of which is 900 Laskin Road,
Virginia Beach, Virginia 23451 and the leasehold interest therein;
(iii) the Option Agreement with Gary and Susan Clarke, WWBI
TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and
agreements related thereto and all related collateral and other documents;
(iv) all notes payable and other amounts due from MCC Air Inc.
and all assets, including real property, promissory notes and agreements
relating solely to the sale and lease of WMQX-AM, Greensboro, NC to
Winston-Salem Radio Corporation and Willis Broadcasting Corporation;
(v) subject to the terms and conditions of the Indemnification
Escrow Agreement (as defined below), the accounts receivable of the Company and
of MMP;
(vi) the names "Max Media," "Max Television," "Max Radio" and
"Max Media Properties".
Any distribution of Excluded Assets by MMP will be made pro rata to the
holders of Membership Units in MMP unless otherwise agreed by Purchaser.
(b) Notwithstanding anything to the contrary in Section 2.2(a)
above, the Company, MTR and MMP shall each retain an amount of cash, cash
equivalents and other cash items that are sufficient to cover and pay their
respective Closing Date Liabilities. For purposes of this Agreement, the term
"Closing Date Liabilities" shall mean the liabilities of the Company, MTR and
MMP (other than for Funded Debt, liabilities with respect to program contract
liabilities accruing after the Closing Date and liabilities with respect to
trade and barter obligations arising after the Closing Date) whether or not
disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations
prior to the Closing Date; and (C) for all liabilities of any kind whatsoever
under that certain Mutual Release dated as of January 1, 1997 and that certain
Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder
Settlement Agreements"). Except as otherwise provided in this Section 2.2(b),
the Closing Date Liabilities shall be determined in accordance with GAAP
consistently applied with prior
4
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periods, and shall be consistent with the books and records of the Company, MTR
and MMP. The amount of cash, cash equivalents and cash items retained to cover
the Closing Date Liabilities shall not be considered Excluded Assets.
(i) MMP shall deliver to Purchaser at the Closing a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of the Closing Date Liabilities, which shall be used to determine the amount of
cash, cash equivalents and other cash items required to be retained by the
Company, MTR and MMP pursuant to this Section 2.2(b).
(ii) Within one hundred twenty (120) days of the Closing,
Purchaser shall cause its accountant to prepare and deliver to Sellers a
certificate setting forth its calculation of the Closing Date Liabilities (the
"Accountant's Certificate"). The amount of the Closing Date Liabilities as set
forth on the Accountant's Certificate shall be final unless Sellers' Agents
notify Purchaser within thirty (30) days from their receipt of the Accountant's
Certificate that they dispute the Accountant's Certificate. If Sellers' Agents
and Purchaser are unable to agree on the amount of the Closing Date Liabilities
within fifteen (15) days after Sellers' Agents' notice, the parties shall
jointly appoint and engage an independent accountant of national or regional
repute (the "Independent Accountant") to perform an independent evaluation of
the Closing Date Liabilities. The findings of the Independent Accountant as to
the amount of the Closing Date Liabilities shall be final and binding on the
parties hereto.
(iii) Upon the determination of the Closing Date Liabilities
becoming final which is different from the Estimate Certificate either (A)
Purchaser shall be entitled to a payment from the Indemnification Escrow equal
to the amount by which the aggregate amount of the Closing Date Liabilities
exceeds the Closing Date Liabilities shown on the Estimate Certificate, taking
into account any amounts paid from the Indemnification Escrow under provisions
similar to this provision in the MTC Agreement, the Management Agreement and the
Investors Agreement, or (B) Purchaser shall pay to Disbursing Agent an amount by
which the aggregate amount of Closing Date Liabilities shown on the Estimate
Certificate exceeds the Closing Date Liabilities as finally determined.
(iv) For purposes of determining the amount of the Tax
liabilities of the Company and MTR to be included in the Closing Date
Liabilities (the "Closing Date Tax Liabilities"), such Tax liabilities shall
include all Tax liabilities of the Company and MTR that are attributable to
items of income, gain, loss, deduction and credit of MMP and the FCC Licensee
Entities accruing through and including the Closing Date, notwithstanding that
such items may be reported by the Company, MTR, Purchaser, or Purchaser's
Affiliates in Taxable Periods ending after the Closing Date. The amount of the
Tax liabilities attributable to the Tax items of MMP and the FCC Licensee
Entities shall be
5
<PAGE>
determined by assuming that the taxable years of MMP and the FCC Licensee
Entities, as well as the taxable years of the Company and MTR, end as of the
close of business on the Closing Date and by assuming Purchaser's compliance
with Section 8.8. The Closing Date Tax Liabilities shall not include, and
Purchaser shall have no rights of Indemnification under Section 10 with respect
to, any Tax Liabilities arising from the MMP II Distribution
(v) Notwithstanding anything to the contrary contained in this
Section 2.2, the final determination of the Closing Date Liabilities hereunder
shall not affect Purchaser's indemnification rights pursuant to Section 10 to
the extent the actual Closing Date Liabilities exceed the final determination
thereunder.
SECTION 3
PURCHASE PRICE
--------------
3.1 Payment. In consideration for the sale of the Stock, Purchaser
shall pay to Sellers the aggregate amount of the "Purchase Price", payable as
follows:
(1) Purchaser has deposited with First Union National Bank, as
Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which
shall be distributed in accordance with the Deposit Escrow Agreement in the form
attached hereto as Exhibit A.
(2) At the Closing, the "Initial Deposit" which shall be held in
Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent pursuant
to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the
"Indemnification Escrow Agreement"); and
(3) the balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available funds to the accounts
specified by Disbursing Agent pursuant to wire instructions delivered in writing
to Purchaser not later than two (2) Business Days prior to the Closing.
3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase
Price to Sellers in accordance with the Disbursement Agreement.
SECTION 4
CLOSING
-------
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held
6
<PAGE>
at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia
Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have
occurred at the close of business on such day), on the later to occur of (a)
five Business Days after all applicable waiting periods under the H-S-R Act
shall have expired or terminated, or (b) five Business Days after the Final
Order (the date of Closing being the "Closing Date"), unless (i) Purchaser
elects to close upon receipt of Initial Grant, in which case Purchaser shall
give Sellers reasonable notice of the Closing, or (ii) the parties shall
mutually agree upon a different date or location; provided, however, that in no
event shall the Closing be held prior to March 18, 1998; and provided, further,
that in the event the Closing is postponed past July 15, 1998, due to a
postponement of the Closing under Section 9.8(b) or otherwise, Sellers, in their
sole discretion, may postpone the Closing to September 1, 1998. In no event
shall Closing occur later than the Termination Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
5.1. REPRESENTATIONS AS TO SHARES, ETC. Each Seller hereby represents
and warrants to Purchaser that:
a. (i) such Seller is the record and the beneficial owner of all
the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto;
(ii) such Seller holds of record and owns beneficially all of the shares of the
Stock set forth opposite such Seller's name in Annex 2 hereto free and clear of
any lien, security interest, pledge or encumbrance other than those set forth on
Schedule 5.1a(ii) hereof, all of which will be released at or before the
Closing; (iii) except for any lien, security interest, pledge or encumbrance
created by Purchaser on or subsequent to the Closing Date, upon transfer of the
Stock set forth opposite such Seller's name in Annex 2 hereto to Purchaser at
the Closing, Purchaser will have legal and equitable title to such Stock, free
and clear of any lien, security interest, pledge or encumbrance; (iv) such
Seller has full power and authority to enter into this Agreement, and the
consummation of the transactions contemplated hereby has been duly authorized by
all necessary action on the part of such Seller, and if such Seller is an entity
that such entity is duly and validly organized, existing and in good standing in
the jurisdiction of its formation; (v) this Agreement has been duly executed and
delivered by such Seller and constitutes a legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity); and (vi) except as described on Schedule
5.1a(vi), the shares are not subject to any option(s) warrant(s), voting trusts,
outstanding proxies, registration rights agreement(s), or other agreements
regarding voting
7
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rights (other than that contemplated by Section 16 hereof).
b. Except as described on Schedule 5.1b, no Seller nor anyone
acting on behalf of any Seller, has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders fees in connection
with the sale of the Stock and the transactions contemplated by this Agreement.
The payment of such brokerage fees, commissions, or finders fees, if any, shall
remain the sole obligation of Sellers.
c. NO CONFLICTS. Except as described on Schedule 5.1(c), neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, as to any Seller (a) violate any
provision of the articles of incorporation, by-laws, general or limited
partnership agreement or limited liability company operating agreement with
respect to any Seller that is an entity, (b) violate any provision of applicable
law, rule and regulation, which violation would prevent or interfere with any
Seller's ability to perform hereunder, or (c) conflict with or result in a
breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent
decree, or any agreement, indenture, mortgage or instrument, to which any Seller
is a party or to which their property is subject, or constitutes to default
thereunder, where such conflict, breach, right of termination, acceleration or
default would prevent or materially interfere with any Seller's ability to
perform hereunder.
5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY.
Sellers and the Company, jointly and severally, hereby represent and
warrant to Purchaser as to the Company as follows:
a. ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia hereto and has full corporate power and authority to
carry on its business as it is now being conducted and to own and use the assets
owned and used by it. The Company is qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
Other than stock of MTR, the Company does not own any direct or indirect
subsidiary corporation.
b. CAPITALIZATION. The designations of each class of the capital
stock of the Company and the number of authorized and issued and outstanding
shares thereof is as described on Schedule 5.2b. All the shares of the Stock
have been validly issued and are fully paid and nonassessable and are held of
record by the respective Sellers as set forth on Annex 2 hereto. Except as
described on Schedule 5.2b, (i) no shares of capital stock of the
8
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Company is held in treasury, (ii) there are no other issued or outstanding
equity securities of the Company, (iii) there are no stock appreciation rights,
phantom stock rights, profit participation rights, or other similar rights with
respect to shares outstanding; and (iv) there are no other issued or outstanding
securities of the Company convertible or exchangeable at any time into equity
securities of the Company. The Company is not subject to any commitment or
obligation that would require the issuance or sale of additional shares of
capital stock of the Company at any time under options, subscriptions, warrants,
rights or any other obligations. Schedule 5.2b sets forth the equity interests
in any corporation, partnership, limited liability company, joint venture or
other entity owned by the Company.
c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of incorporation or by-laws of the Company, (ii) violate any provision of
applicable law, rule and regulation, which violation would prevent or materially
interfere with Sellers' ability to perform hereunder or have a Material Adverse
Effect, or (iii) conflict with or result in a breach of, or give rise to a right
of termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which the Company is a party or to which its property is
subject, or constitute a default thereunder, where such conflict, breach, right
of termination, acceleration or default would prevent or materially interfere
with the Company's ability to perform hereunder or have a Material Adverse
Effect; provided, however, that clause (iii) above shall be limited to Sellers'
Knowledge.
d. FINANCIAL STATEMENTS. The Company has provided or made
available to Purchaser copies of the Financial Statements. The Financial
Statements have been prepared in accordance with GAAP consistently applied with
prior periods. The Financial Statements present fairly the financial position of
the Company as at and for the periods indicated therein. Except as set forth on
Schedule 5.2.d hereto, since December 31, 1996, there has not been any Material
Adverse Effect on the business, financial condition, operations or results of
operations of the Company taken as a whole. Without limiting the generality of
the foregoing, since December 31, 1996, except as set forth on Schedule 5.2d:
(i) the Company has not sold, leased, transferred, or assigned
any material assets, tangible or intangible;
(ii) the Company has not entered into any material agreement,
contract, lease, or license;
(iii) the Company has not accelerated, terminated, made
material
9
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modifications to, or canceled any material agreement, contract, lease, or
license to which the Company is a party or by which the Company is bound;
(iv) the Company has not imposed any security interest upon
any of its assets, tangible or intangible;
(v) the Company has not made any material capital
expenditures;
(vi) the Company has not made any material capital investment
in, or any material loan to, any Person;
(vii) the Company has not directly created, incurred, assumed,
or guaranteed any indebtedness for borrowed money and capitalized lease
obligations;
(viii) the Company has not granted any license or sublicense
of any material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
charter or bylaws of the Company;
(x) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(xi) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees;
(xiv) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xv) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
10
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(xvi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Company Plan or
Company Benefit Arrangement);
(xvii) the Company has not made any other material change in
employment terms for any of its directors, officers, and employees;
(xviii) the Company has not made or changed any material Tax
election or taken any other action with respect to Taxes inconsistent with past
practices;
(xix) the Company has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xx) except as set forth in this Agreement, the Company has
not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit
Plans and Benefit Arrangements:
(a) Schedule 5.2e completely and accurately lists all
Company Plans and Company Benefit Arrangements and specifically identifies any
that are Qualified Plans. Neither Company nor any ERISA Affiliate has ever
maintained or contributed to any Qualified Plans other than those listed on
Schedule 5.2e. The Qualified Plan has always qualified in form and operation
under Code Section 401(a) and has a currently applicable determination letter
from the Internal Revenue Service, and its trust has always been exempt under
Code Section 501, and nothing has occurred with respect to such plan and trust
that could cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Code.
(b) Each Company Plan and each Company Benefit Arrangement has
been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other domestic and foreign laws,
including federal, state, and foreign securities laws and all laws respecting
reporting and disclosure. No Company Plan holds employer securities.
(c) Neither the Company nor any ERISA Affiliate (since August
1, 1992) has sponsored, maintained, or had any liability (direct or indirect,
actual or contingent) with respect to any Benefit Plan subject to Title IV of
ERISA. Neither the
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Company nor any ERISA Affiliate has ever made or been obligated to make, or
reimbursed or been obligated to reimburse another employer for, contributions to
any multiemployer plan (as defined in ERISA Section 3(37)). The Company has no
liability (whether actual, contingent, or otherwise) with respect to any Benefit
Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with
respect to any Benefit Plan sponsored or maintained (or which has been or should
have been sponsored or maintained) by any ERISA Affiliate; and no facts exist
that could reasonably be expected to result in such liability, as a result of
termination, withdrawal or funding waiver with respect to any such plan,
program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-Company Benefit Plans or non-Company Benefit Arrangements
that would, if successful, result in liability for the Company, and no claims or
lawsuits (other than routine benefit claims) have been asserted, instituted or,
to the Knowledge of the Company, threatened by, against, or relating to any
Company Plan or Company Benefit Arrangement, and the Company does not have
Knowledge of any fact that could form the basis for any such claim or lawsuit.
The Company Plans and Company Benefit Arrangements are not presently under audit
or examination (and have not received notice of a potential audit or
examination) by any governmental authority, and no matters are pending with
respect to the Qualified Plan under any governmental compliance programs.
(e) No Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and the Company has not
declared or paid any bonus or other incentive compensation or established any
severance plan, program, or arrangement in contemplation of the transactions
contemplated by this Agreement.
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(f) With respect to each Company Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for the Company or any Person
required to be indemnified by it.
(g) The Company has made all required contributions to the
Company Plan as of the last day of each plan's most recent fiscal year, all
benefits accrued under any unfunded Company Plan or Company Benefit Arrangement
will have been paid, accrued, or otherwise adequately reserved in accordance
with generally accepted accounting principles; and all monies withheld from
employee paychecks with respect to Company Plans have been transferred to the
appropriate plan within the timing required by governmental regulations.
(h) The Company and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of the Company nor beneficiary
of any such employee or former employee is, by reason of such employee's or
former employee's employment, entitled to receive any benefits subject to
reporting under Statement of Financial Accounting Standards No. 106, other than
as required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount (or portion thereof) that would not
be deductible pursuant to Code Sections 280G, 404 or 162.
f. LABOR. With respect to employees of and service providers to
the Company, except as set forth on Schedule 5.2f:
(a) The Company is and has been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice.
(b) The employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, the Company, and
to the Company's
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knowledge, no labor representation organization effort exists nor has there been
any such activity within the past three years.
(c) All Persons classified by the Company as independent
contractors do satisfy and has satisfied the requirements of law to be so
classified, and the Company have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, the Company has not employed
any employees.
(e) There is no charge or compliance proceeding actually
pending or threatened against the Company before the Equal Employment
Opportunity Commission or any state, local, or foreign agency responsible for
the prevention of unlawful employment practices.
g. INSURANCE. Schedule 5.2g hereto contains a list of all
insurance policies concerning the Business and describes coverage thereunder
(including whether occurrence or claims made), other than employee-benefit
related insurance policies. All such policies are legal, valid, binding,
enforceable and in full force and effect subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by court of law or equity).
There are no existing breaches or defaults by the Company or, to the Company's
Knowledge by any other party with respect to such policies, and no notice of
cancellation or termination has been received.
h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of
all the Material Contracts and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts listed on Schedule 5.2h are legal, valid and binding obligations of
the Company enforceable in accordance with their terms and in full force and
effect subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the right of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity). There exists no default or event which,
with notice or lapse of time, or both, would constitute a default by the Company
or to the Company's Knowledge any other party to any such Material Contract or
which would permit termination, modification or acceleration. Neither Sellers
nor the Company has received notice (or otherwise has knowledge) that any party
to any Material Contract intends to cancel or terminate any such agreement or to
exercise or not to exercise any option to renew thereunder.
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i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i,
the Company is in material compliance with all material applicable Federal,
state and local laws, rules and regulations, and to the Company's knowledge,
there are no actions threatened or pending alleging noncompliance therewith.
j. LITIGATION. Except as set forth on Schedule 5.2j hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to the
Company's Knowledge, threatened against (i) any of Sellers that seeks to enjoin
or obtain damages in respect of the transactions contemplated hereby, or (ii)
the Company. There is no outstanding citation, order, judgment, writ,
injunction, or decree of any court, government, or governmental or
administrative agency specifically against or specifically affecting the
Business or the Company, except as disclosed on Schedule 5.2j.
k. NO BROKERS. Except as described on Schedule 5.2k, the
Company has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the sale of the
Stock and the transactions contemplated by this Agreement.
l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto,
(b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no
filing, consent, approval or authorization of any governmental authority or of
any third party on the part of any Seller or the Company is required in
connection with the execution and delivery of this Agreement by Sellers or the
consummation of the transactions contemplated hereby (including any consents
required under any Company Material Contract as a result of the change in
control contemplated hereby).
m. TAX MATTERS.
(a) Except as set forth on Schedule 5.2m(a) hereto:
(i) All Tax Returns required to be filed by or with
respect to the Company have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to the Company for Taxable
Periods ending on or before December 31, 1997 will have been filed prior to the
Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by
or with respect to the Company are true, correct and complete in all material
respects.
(ii) The Company has paid in full on a timely basis all
Taxes owed by the Company, whether or not shown on any Tax Return, and the
Company will have paid prior to the Closing Date all Taxes owed with respect to
Taxable Periods
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ending on or before December 31, 1997, even if such Taxes are not yet due.
(iii) The Company's liability for unpaid Taxes did not,
as of the date of the Financial Statements exceed the liability for such Taxes
(excluding reserves for deferred Taxes) set forth on the Financial Statements.
The Company has no liability for unpaid income Taxes other than its Tax
liability attributable to the Company's allocable share of MMP's items of
income, gain, loss, deduction and credit accruing through the date hereof. The
Company's actual liability for unpaid Taxes (determined consistently with
Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability for
such Taxes reflected in the Closing Date Tax Liabilities (as finally determined
pursuant to Section 2.2(b)(ii).
(iv) The Company has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending with respect
to the Company and the Company has not received notice from any Tax Authority
that it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect with respect to the assessment, collection or
payment of Taxes of the Company or for which the Company is liable.
(vii) No extension of the time within which to file any
Tax Return of the Company is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted, or assessed against the Company.
(ix) There are no liens on the assets of the Company
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) The Company is not and has not been at any time
during the preceding five years a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under
Section 341(f) of the Code affecting the Company.
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<PAGE>
(xii) The Company has not agreed to, nor is it required
to, make any adjustments under Section 481(a) of the Code as a result of a
change in accounting methods.
(xiii) The Company is not and has not at any time been
a party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the Tax liability of any other entity or person under
contract.
(xiv) The Company is not and has not at any time been a
member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MMP and RLLP, the Company is not a
party to any joint venture, partnership or other arrangement that is treated as
a partnership for U.S. federal income tax purposes.
(xvi) None of the Company's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Sellers have furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to the Company since January 1,
1994; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to the Company relating to Taxes.
(c) Schedule 5.2m(c) contains complete and accurate
descriptions of (i) the Company's basis in its assets, (ii) the amount of any
net operating loss, net capital loss and any other Tax carryovers of the Company
and (iii) material Tax elections made by or with respect to the Company. The
Company has no net operating losses or other Tax attributes presently subject to
limitation under Code Sections 382, 383 or 384, or the federal consolidated
return regulations.
n. DIVIDENDS. Since December 31, 1996, no dividends have been
declared, issued or otherwise approved by the Board of Directors of the Company
in respect of the Stock.
o. ACCOUNTS RECEIVABLE. The Company has no accounts receivable
other than amounts due as Tax refunds from certain Tax Authorities.
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<PAGE>
p. COMPANY ASSETS. The Company owns no other assets other than
cash or cash equivalents received or due from Tax refunds, 31% of the equity of
MTR, 3,069,000 Class A Membership Units of MMP, and a 2% limited partnership
interest in RLLP.
q. REPRESENTATIONS AS TO THE COMPANY INTERESTS.
(i) The Company is the record and the beneficial owner of
3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units)
of MMP, thirty-one (31) shares (out of a total one hundred (100) issued and
outstanding shares) of the issued and outstanding shares of MTR and a 2% limited
partnership interest in RLLP (collectively, the "Company Interests"); (ii) the
Company holds of record and owns beneficially the Company Interests free and
clear of any lien, security interest, pledge or encumbrance other than those set
forth on Schedule 5.2q hereof, all of which will be released at or before the
Closing; (iii) the Company has full power and authority to enter into this
Agreement, and the consummation of the transactions contemplated hereby has been
duly authorized by all necessary action on the part of the Company; (iv) this
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or equity);
and (v) except as described on Schedule 5.2q, the Company Interests are not
subject to any option(s) warrant(s), voting trusts, outstanding proxies,
registration rights agreement(s), or other agreements regarding voting rights.
5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE
ENTITIES.
Sellers, MMP and the Company, jointly and severally, hereby represent
and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows:
a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited liability
company duly organized and validly existing under the laws of Virginia and has
full corporate power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. To the extent
required by law, MMP is qualified as a foreign limited liability company and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification. MMP
owns 98% of the outstanding partnership interests in the FCC Licensee Entities.
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b. CAPITALIZATION OF MMP. The designations of each class of the
membership units of MMP and the number of authorized and issued and outstanding
membership units thereof is as described on Schedule 5.3b. All membership units
have been validly issued and are fully paid and nonassessable and are held of
record by the respective members of MMP as set forth on Schedule 5.3b. Except as
described on Schedule 5.3b, (i) there are no other issued or outstanding equity
securities of MMP; (ii) there are no membership or value appreciation rights,
phantom membership rights, profit participation rights, or other similar rights
with respect to membership units outstanding; and (iii) there are no other
issued or outstanding membership interests or other securities of MMP
convertible or exchangeable at any time into equity securities of MMP. Except as
set forth in the Operating Agreement of MMP as amended, MMP is not subject to
any commitment or obligation that would require the issuance or sale of
additional membership interests or membership units of MMP at any time under
options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b
sets forth the equity interests in any corporation, partnership, limited
liability company, joint venture or other entity owned by MMP.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES.
Each FCC License Entity is a limited partnership duly organized and validly
existing under the laws of the Commonwealth of Virginia and has full partnership
power and authority to carry on its business as it is now being conducted and to
own and use the assets owned and used by it. Each FCC License Entity is
qualified as a foreign corporation and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. No FCC License Entity owns
any direct or indirect subsidiaries. MMP is the sole general partner and owns
ninety-eight percent (98%) of the partnership interests of each of the FCC
License Entities. MTC is the sole limited partner and owns two percent (2%) of
the partnership interests of each of the FCC License Entities other than RLLP.
The Company is the sole limited partner and owns two percent (2%) of the
partnership interests of RLLP. All such partnership interests have been validly
issued and are fully paid and nonassessable and are held of record by the
respective partners as set forth above. There are no (i) other issued or
outstanding equity securities of any FCC License Entity, (ii) partnership or
value appreciation rights, phantom partnership rights, profit participation
rights, or other similar rights with respect to partnership interests
outstanding and (iii) other issued or outstanding partnership interests or other
securities of any FCC License Entity convertible or exchangeable at any time
into equity securities of such FCC License Entity. No FCC License Entity is
subject to any commitment or obligation that would require the issuance or sale
of additional partnership interests of any FCC License Entity at any time under
options, subscriptions, warrants, rights or any other obligations. No FCC
License Entity holds any equity interest in any
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<PAGE>
corporation, partnership, limited liability company, joint venture or other
entity.
d. NO CONFLICTS. Except as described on Schedule 5.3d, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of organization or operating agreement of MMP or the limited partnership
agreements of the FCC Licensee Entities, (ii) violate any provision of
applicable material law, rule and regulation, or (iii) conflict with or result
in a breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent
decree, or any material agreement, indenture, mortgage or instrument to which
either MMP or any FCC Licensee Entity is a party or to which any of their
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would have a MMP Material
Adverse Effect.
e. REAL PROPERTY. The MMP Real Property owned and all leaseholds
and other interests in MMP Real Property used or useful in the Business and all
buildings, structures, towers, and improvements thereon used or useful in the
business and operations of the Stations are listed on Schedule 5.3e to this
Agreement and, except for Permitted Encumbrances and as disclosed in Schedule
5.3e to this Agreement, MMP has good and marketable fee simple title (insurable
at standard rates by a reputable national title insurer) to all fee estates
included in the Real Property, and good title to all other MMP Real Property, in
each case clear of all liens. The FCC Licensee Entities own no real property,
leaseholds or other interests in real property. No portion of the MMP Real
Property or any building, structure, fixture or improvement thereon is the
subject of, or affected by, any condemnation, eminent domain or inverse
condemnation proceeding currently instituted or pending or, to MMP's Knowledge,
threatened.
MMP has a valid leasehold interest in all leased property and subleases
to which it is a party, and MMP is the owner and holder of all the leased
property purported to be granted by such leases and subleases. The MMP Real
Property and the leases and subleases listed on Schedule 5.3e constitute all of
the real property owned, leased or used by MMP in the business and operations of
the Stations, which is material to the business and operations of the Stations.
The Sellers have delivered or caused to be delivered to the Purchaser correct
and complete copies of the deeds, leases and subleases listed in Schedule 5.3e.
With respect to each lease and sublease listed in Schedule 5.3e:
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(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with several principles of equity (whether applied by a
court of law or equity);
(b) MMP and, to MMP's knowledge, no other party to the
lease or sublease is in material breach or default, and no event has occurred
which, with notice or lapse of time, would constitute a material breach or
default or permit termination, modification, or acceleration thereunder;
(c) MMP and, to MMP's knowledge, no other party to the
lease or sublease has repudiated any material provision thereof;
(d) MMP is not a party to and, to MMP's knowledge, there
are no material disputes, oral agreements, or forbearance programs in effect as
to the lease or sublease;
(e) except as set forth on Schedule 5.3e, MMP has not
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder material
to the operation of the Stations have received all approvals of governmental
authorities (including material licenses and permits) required in connection
with the operation thereof, and have been operated and maintained in accordance
with applicable laws, rules, and regulations in all material respects.
f. PERSONAL PROPERTY. Schedule 5.3f lists as of the date
hereof all items of Personal Property having a fair market value in excess of
$5,000.00. Except as set forth on Schedule 5.3f hereto, MMP has good and
marketable title to all of its material items of tangible personal property and
assets used or useful by MMP located on its premises or shown on the MMP
Financial Statements are free and clear of all liens, security interests and
encumbrances other than those that would not materially affect Purchaser's use
or ownership of such personal property after the Closing. The tangible personal
property of MMP has been maintained in accordance with normal industry practice
and is in good condition and repair given the age and use of such property
(subject to normal wear and tear) and is adequate for its present use by MMP.
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g. FINANCIAL STATEMENTS. MMP has provided or made available to
Purchaser copies of the MMP Financial Statements. The MMP Financial Statements
have been prepared in accordance with GAAP consistently applied with prior
periods except in the case of the unaudited MMP Financial Statements, the
absence of year-end audit adjustments and notes. The MMP Financial Statements
present fairly the financial position of MMP as at and for the periods indicated
therein, and are consistent with the books and records of MMP. Except as set
forth on Schedule 5.3g hereto, since December 31, 1996, there has not been any
Material Adverse Effect on the business, financial condition, operations, or
results of operations of MMP taken as a whole. Without limiting the generality
of the foregoing, since that date, except as described on Schedule 5.3g:
(i) MMP has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MMP has not entered into any material agreement,
contract, lease, or license outside the ordinary course of business;
(iii) MMP has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MMP is a party or by which MMP is bound;
(iv) MMP has not imposed any security interest upon any of
its assets, tangible or intangible;
(v) MMP has not made any material capital expenditures
outside the ordinary course of business;
(vi) MMP has not made any material capital investment in,
or any material loan to, any other Person outside the ordinary course of
business;
(vii) MMP has not created, incurred, assumed, or guaranteed
more than $45 million in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) MMP has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
operating agreement of MMP;
(x) MMP has not experienced any material damage,
destruction,
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<PAGE>
or loss (whether or not covered by insurance) to its property;
(xi) MMP has not made any loan to, or entered into any
other transaction with, any of its managers, officers, and employees outside the
ordinary course of business;
(xii) MMP has not entered into any employment contract
outside the ordinary course of business or collective bargaining agreement,
written or oral, or modified the terms of any such existing contract or
agreement;
(xiii) MMP has not granted any increase in the base
compensation of any of its members outside the ordinary course of business;
(xiv) MMP has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its managers, officers, and employees (or
taken any such action with respect to any other MMP Plan or MMP Benefit
Arrangement);
(xv) MMP has not made any other material change in
employment terms for any of its members or employees outside the ordinary course
of business;
(xvi) MMP has not made or changed any material Tax election
or taken any other action with respect to Taxes not in the ordinary course of
business and consistent with past practice;
(xvii) MMP has not made any distributions other than in the
ordinary course of business, and has not made any non-pro rata distributions;
(xviii) MMP has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xix) except as contemplated by this Agreement, the
Investors Agreement, the Management Agreement, the MTC Agreement, and Assignment
and Assumption Agreement by and between MMP and the Max Media LLC II
Distribution Agreement, MMP has not committed to any of the foregoing.
h. FCC. MMP and the FCC Licensee Entities have been and
currently are operated in material compliance with the terms of the FCC
Licenses, the Communications Act of 1934, as amended, and applicable rules,
regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC
Licenses, a true and complete list of which is set forth on Schedule 5.3h, and
true and complete copies of each of which have
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<PAGE>
been delivered to Purchaser, are valid and in full force and effect. Except as
set forth on Schedule 5.3h, no application, action or proceeding is pending for
the renewal or modification of any of the FCC Licenses and, to Sellers' and
MMP's Knowledge, there is not now before the FCC any investigation or complaint
against MMP or the FCC Licensee Entities relating to the Stations, the
unfavorable resolution of which would impair the qualifications of the FCC
Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule
5.3h, there is no proceeding pending before the FCC, and there is no outstanding
notice of violation from the FCC with respect to the Stations. Except as set
forth on Schedule 5.3h, no order or notice of violation has been issued by any
governmental entity which permits, revocation, adverse modification or
termination of any FCC License. Except as set forth on Schedule 5.3h and except
for those conditions or restrictions appearing on the face of the FCC Licenses,
or other licenses, none of the FCC Licenses or other licenses is subject to any
restriction or condition which would limit the operation of the Stations as
currently operated. The FCC Licenses listed in Schedule 5.3h are currently in
effect and are not subject to any liens, or other encumbrances. No license
renewal applications are pending with respect to any of the FCC Licenses. As of
the date hereof, Sellers, the Company, MMP, and the FCC License Entities have no
reason to believe that the FCC would not renew the FCC Licenses in the ordinary
course for a full license term without any adverse conditions, upon the timely
filing of appropriate applications and payment of the required filing fee. As of
the date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no
reason to believe that the FCC would not grant the FCC Application in the
ordinary course without any adverse conditions. All documents required by 47
C.F.R. Section 73.3526 to be kept in each Station's public inspection files are
in such file, and such file will be maintained in proper order and complete up
to and through the Closing Date.
i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i is a
complete list of all Intellectual Property owned by or licensed to MMP on the
date hereof material to the operations of the Stations. To MMP's Knowledge,
except as otherwise set forth on Schedule 5.3i hereto, MMP owns such
Intellectual Property free and clear of any royalty, lien, encumbrance or charge
and does not interfere with the rights of others. Except as set forth on
Schedule 5.3i, MMP has not received any written notice or written claim that any
such Intellectual Property is not valid or enforceable, or of any infringement
upon or conflict with any patent, trademark, service mark, copyright or trade
name of any third party by MMP. Except as set forth on Schedule 5.3i, MMP has
not given any notice of infringement to any third party with respect to any of
the Intellectual Property and to MMP's Knowledge no such infringement exists.
There is no Intellectual Property owned by or licensed to the FCC Licensee
Entities.
j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
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(a) Schedule 5.3j completely and accurately lists all MMP
Plans and MMP Benefit Arrangements currently in existence and specifically
identifies any that are Qualified Plans. Since January 1, 1996 (the date of
formation of MMP), MMP has maintained or contributed solely to the Qualified
Plans listed on Schedule 5.3j. The Qualified Plans listed on Schedule 5.3j have
always qualified in form and operation under Code Section 401(a) and have a
currently applicable determination letter from the Internal Revenue Service, and
its trust has always been exempt under Code Section 501, and nothing has
occurred with respect to such plan and trust that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty, or
tax under ERISA or the Code.
(b) Each MMP Plan and each MMP Benefit Arrangement has been
maintained in accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other domestic and foreign laws, including
federal, state, and foreign securities laws and all laws respecting reporting
and disclosure. No MMP Plan holds employer securities.
(c) Neither MMP nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any
ERISA Affiliate has never made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit
Plan sponsored or maintained (or that has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that could reasonably be
expected to result in such liability, as a result of termination, withdrawal or
funding waiver with respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that
would, if successful, result in liability for MMP, and no claims or lawsuits
(other than routine benefit claims) have been asserted, instituted or, to the
knowledge of Sellers and the Company after due inquiry of MMP, threatened by,
against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has
advised Sellers and the Company that MMP does not have knowledge of any fact
that could form the basis for any such claim or lawsuit. MMP Plans and MMP
Benefit Arrangements are not presently under audit or examination (and have not
received notice of a potential audit or examination) by any governmental
authority, and no matters are pending with respect to the Qualified Plan under
any governmental compliance programs.
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(e) No MMP Plan or MMP Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and MMP has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, the Investors Agreement, the Management Agreement or the MTC
Agreement.
(f) With respect to each MMP Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for MMP or any Person required
to be indemnified by it.
(g) MMP has made all required contributions to each MMP
Plan as of the last day of each plan's most recent fiscal year, all benefits
accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been
paid, accrued, or otherwise adequately reserved in accordance with generally
accepted accounting principles; and all monies withheld from employee paychecks
with respect to MMP Plans have been transferred to the appropriate plan within
the timing required by governmental regulations.
(h) MMP and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of MMP nor beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of MMP that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
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(j) The FCC Licensee Entities employ no employees and do
not and have not in the past maintained or contributed to any Benefit Plans or
Benefit Arrangements.
k. LABOR. Except as set forth on Schedule 5.3k, with respect
to employees of and service providers to MMP and the FCC Licensee Entities:
(a) MMP has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and have not and are not engaged in
any unfair labor practice.
(b) The employees of MMP are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, MMP or, to MMP's
Knowledge, no labor representation organization effort exists nor has there been
any such activity within the past three years.
(c) All Persons classified by MMP and the FCC Licensee
Entities as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and MMP has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, except as described on
Schedule 5.3k(d), no employee of or group of employees, the loss of whom would
have significant adverse effect on the business of MMP or the FCC Licensee
Entities, has notified MMP of his or their intent to (A) terminate his or their
relationship with MMP or the FCC Licensee Entities, or (B) make any demand for
material payments or modifications of his or their arrangements with MMP.
(e) There is no charge or compliance proceeding actually
pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee
Entities before the Equal Employment Opportunity Commission or any state, local,
or foreign agency responsible for the prevention of unlawful employment
practices.
(f) The FCC Licensee Entities do not employ, and have not
in the past, employed employees.
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l. INSURANCE. Schedule 5.3l hereto contains a list of all
insurance policies concerning the Business and describes coverage (including
whether occurrence or claims made), other than employee-benefit related
insurance policies. All such policies are legal, valid, binding, enforceable and
in full force and effect subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by court of law or equity). There are no
existing breaches or defaults with respect to such policies, and no notice of
cancellation or termination has been received.
m. MATERIAL CONTRACTS. Schedule 5.3m hereto contains a list of
all the Material Contracts of MMP and the FCC Licensee Entities (other than cash
agreements for the sale of advertising time and retransmission consent
agreements) and true copies of such agreements have been furnished to Purchaser
or have been made available to Purchaser. All Material Contracts are legal,
valid and binding obligations of MMP or the FCC Licensee Entities, as the case
may be, enforceable in accordance with their terms and in full force and effect.
There exists no default or event which, with notice or lapse of time, or both,
would constitute a default by any party to any such Material Contract or which
would permit termination, modification or acceleration. Neither MMP nor the FCC
Licensee Entities have received notice, nor to MMP's Knowledge, does any party
to any Material Contract intend to cancel or terminate any such agreement or to
exercise or not to exercise any option to renew thereunder.
n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n,
MMP and the FCC Licensee Entities are in material compliance with all material
applicable Federal, state and local laws, rules and regulations, and there are
no actions threatened or pending alleging noncompliance therewith.
o. LITIGATION. Except as set forth on Schedule 5.3o hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to MMP's
Knowledge, threatened against MMP or the FCC Licensee Entities that seeks to
enjoin or obtain damages in respect of MMP's conduct of the Business or
operation of the Stations, or the transactions contemplated hereby. There is no
outstanding citation, order, judgment, writ, injunction, or decree of any court,
government, or governmental or administrative agency against or affecting the
Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule
5.3o.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p hereto,
(b) for filings pursuant to the H-S-R Act, or (c) the FCC Application, no
filing, consent, approval or authorization of any governmental authority or of
any third party on the part of MMP or the FCC Licensee Entities is required in
connection with the execution and delivery of this
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Agreement by Sellers or the consummation of any of the transactions contemplated
hereby (including any consents required under any MMP or FCC Licensee Entities
contract as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q hereto:
(a) All of the operations of MMP at or from any MMP Real
Property comply in all material respects with applicable Environmental Laws. MMP
has not engaged in or permitted any operations or activities upon any of the MMP
Real Property for the purpose of or involving the treatment, storage, use,
generation, release, discharge, emission, or disposal of any Hazardous
Substances at the MMP Real Property, except in substantial compliance with
applicable Environmental Laws.
(b) None of the MMP Real Property is listed or, to MMP's
Knowledge, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. MMP has not received any notice from any governmental
entity or third party of any actual or threatened Environmental Liabilities with
respect to the MMP Real Property or the conduct of the Business.
(c) To MMP's Knowledge, after due inquiry, there are no
conditions existing at the MMP Real Property that require, or which with the
giving of notice or the passage of time or both would likely require remedial or
corrective action, removal or closure pursuant to the Environmental Laws.
(d) To MMP's Knowledge, after due inquiry, MMP has all the
material permits, authorizations, licenses, consents and approvals necessary for
the current conduct of the Business and for the operations on, in or at the MMP
Real Property which are required under applicable Environmental Laws and are in
substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
(e) To MMP's Knowledge, after due inquiry, there are no
Hazardous Substances present on or in the MMP Real Property or at any
geologically or hydrologically adjoining property, including any Hazardous
Substances contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the MMP Real Property or such adjoining property, or
incorporated into any structure therein or thereon. Neither
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MMP or any other Person for whose conduct it is or may be held responsible, nor
to MMP's Knowledge after due inquiry or any other Person, has permitted or
conducted, or was aware of, any Hazardous Substances, or any illegal activity
conducted with respect to the MMP Real Property or any other properties or
assets (whether real, personal, or mixed) in which MMP has or had an interest.
r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) hereto:
(i) All Tax Returns required to be filed by or with
respect to MMP have been filed when due in a timely fashion, and all Tax Returns
required to be filed by or with respect to MMP for Taxable Periods ending on or
before December 31, 1997 will have been filed prior to the Closing Date, even if
such Tax Returns are not yet due. All Tax Returns filed by or with respect to
MMP are correct and complete in all material respects.
(ii) MMP has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return, and MMP will have paid prior
to the Closing Date all Taxes payable with respect to Taxable Periods ending on
or before December 31, 1997, even if such Taxes are not yet due.
(iii) MMP's liability for unpaid Taxes (including any
liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not,
as of the date of the MMP Financial Statements, exceed the current liability
accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the
MMP Financial Statements, (b) does not exceed such accruals as adjusted on the
books of MMP for transactions and events through the date hereof in accordance
with the past custom and practice of MMP, and (c) will not, as of the Closing
Date, exceed its liability for such Taxes as reflected in the Closing Date Tax
Liabilities as finally determined pursuant to Section 2.2(b)(ii).
(iv) MMP has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with respect
to MMP and MMP has not received notice from any Tax Authority that it intends to
commence a Tax Proceeding.
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(vi) No waiver or extension of any statute of
limitations is currently in effect or has been requested with respect to the
assessment, collection or payment of Taxes of MMP or for which MMP is liable.
(vii) No extension of the time within which to file any
Tax Return of MMP is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted or assessed against MMP.
(ix) There are no liens on the assets of MMP relating
or attributable to Taxes (except liens for Taxes not yet due).
(x) MMP is and has since its formation been classified
as a partnership for U.S. federal income tax purposes and has in effect a valid
election under Section 754 of the Code.
(xi) MMP has not agreed to, nor is it required to, make
any adjustments under Section 481(a) of the Code as a result of a change in
accounting methods.
(xii) MMP is not and has not at any time been a party
to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not
assumed the Tax liability of any other entity or person under contract.
(xiii) MMP does not have any liability for the Taxes of
another entity or person as a transferee or successor, or otherwise.
(xiv) Except for itself and the FCC Licensee Entities,
MMP is not and has not at any time been a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes.
(xv) None of MMP's assets are treated as "tax exempt
use property" within the meaning of Section 168(h) of the Code.
(xvi) The FCC Licensee Entities' sole asset is the FCC
Licenses, and the FCC Licensee Entities are not and have not been required to
file Tax Returns or pay Taxes.
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(b) Sellers have furnished or otherwise caused to be made
available to Purchaser correct and complete copies of (i) all income, franchise
and other material Tax Returns filed by or with respect to MMP since January 1,
1996; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to MMP relating to Taxes.
(c) Schedule 5.3r(c) contains complete and accurate
descriptions of (i) MMP's basis in its stock of MTR and its tax capital account
in MMP, and (ii) material Tax elections made by or with respect to MMP.
s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that
are reflected on the MMP Financial Statements or on the accounting records of
MMP as of the Closing Date (collectively, the "MMP Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the MMP Accounts Receivable are or will be as of the
Closing Date current and collectable net of the respective reserve shown on the
MMP Financial Statements or on the accounting records of MMP as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the MMP Accounts Receivable as of the Closing Date than
the reserve reflected in the MMP Financial Statements represented of the MMP
Accounts Receivable reflected therein and will not represent a MMP Material
Adverse Effect in the composition of such MMP Accounts Receivable in terms of
aging). Subject to such reserves, each of the MMP Accounts Receivable either has
been or will be collected in full, without any setoff, within ninety (90) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of setoff, other than returns in the ordinary course of
business, under any contract with any obligor of an MMP Accounts Receivable
relating to the amount or validity of such MMP Accounts Receivable. MMP shall
deliver on the Closing Date a complete and accurate list of all MMP Accounts
Receivable as of the Closing Date.
t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record
and the beneficial owner of a 98% general partnership interest in each of the
Television Licensees; (ii) MMP holds of record and owns beneficially these
interests free and clear of any lien, security interest, pledge or encumbrance
other than those set forth on Schedule 5.3t hereof, all of which will be
released at or before the Closing; (iii) MMP has full power and authority to
enter into this Agreement, and the consummation of the transactions contemplated
hereby has been duly authorized by all necessary action on the part of MMP; (iv)
this Agreement has been duly executed and delivered by MMP and constitutes a
legal, valid and binding obligation of MMP, enforceable against MMP in
accordance with its
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terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the rights of creditors generally and to the exercise
of judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity); and (v) except as described on Schedule
5.3t, MMP's interests in the Television Licensees are not subject to any
option(s) warrant(s), voting trusts, outstanding proxies, registration rights
agreement(s), or other agreements regarding voting rights.
5.4. REPRESENTATIONS AND WARRANTIES AS TO MTR.
Sellers and the Company, jointly and severally, hereby represent and
warrant to Purchaser as to MTR as follows:
a. ORGANIZATION AND GOOD STANDING. MTR is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has full corporate power and authority to carry on
its business as it is now being conducted and to own and use the assets owned
and used by it. MTR is not qualified as a foreign corporation in any foreign
jurisdiction.
b. CAPITALIZATION. The designations of each class of the capital
stock of MTR and the number of authorized and issued and outstanding shares
thereof is as described on Schedule 5.4b. All the shares of capital stock of MTR
have been validly issued and are fully paid and nonassessable and are held of
record by the respective shareholders as set forth on Schedule 5.4b hereto.
Except as described on Schedule 5.4b, (i) no shares of capital stock of MTR are
held in treasury, (ii) there are no other issued or outstanding equity
securities of MTR, (iii) there are no stock appreciation rights, phantom stock
rights, profit participation rights, or other similar rights with respect to
shares outstanding; and (iv) there are no other issued or outstanding securities
of MTR convertible or exchangeable at any time into equity securities of MTR.
MTR is not subject to any commitment or obligation that would require the
issuance or sale of additional shares of capital stock of MTR at any time under
options, subscriptions, warrants, rights or any other obligations. Except for
its ownership interest in MMP, MTR holds no equity interests in any corporation,
partnership, limited liability company, joint venture or other entity owned by
MTR.
c. NO CONFLICTS. Neither the execution and delivery of this
Agreement by Sellers, MMP and the Company nor the consummation of the
transactions contemplated hereby will (a) violate any provision of the articles
of incorporation or by-laws of MTR, (b) violate any provision of applicable law,
rule and regulation, which violation would prevent or interfere with Sellers'
ability to perform hereunder, or (c) conflict with or result in a breach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture,
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mortgage or instrument to which MTR is a party or to which its property is
subject, or constitute a default thereunder, where such conflict, breach, right
of termination, acceleration or default would prevent or materially interfere
with the Company's ownership of 31% of the equity of MTR.
d. FINANCIAL MATTERS. Except as set forth on Schedule 5.4.d
hereto, since January 1, 1996 (the date MTR first held any assets), there has
not been any material adverse effect on the business, financial condition,
operations or results of operations of MTR taken as a whole. Without limiting
the generality of the foregoing, since that date:
(i) MTR has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MTR has not entered into any material agreement, contract,
lease, or license outside the ordinary course of business;
(iii) MTR has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MTR is a party or by which MTR is bound;
(iv) MTR has not imposed any security interest upon any of its
assets, tangible or intangible;
(v) MTR has not made any material capital expenditures outside
the ordinary course of business;
(vi) MTR has not made any material capital investment in, or
any material loan to, any other Person other than MMP;
(vii) MTR has not created, incurred, assumed, or guaranteed any
indebtedness for borrowed money and capitalized lease obligations;
(viii) MTR has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the charter
or bylaws of MTR;
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(x) other than its initial issuance of Stock to the Company and
MTC, MTR has not issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock;
(xi) MTR has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(xii) MTR has not experienced any material damage, destruction,
or loss (whether or not covered by insurance) to its property;
(xiii) MTR has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
ordinary course of business;
(xiv) MTR, since its formation, has had no employees;
(xv) MTR has not made or changed any material Tax election or
taken any other action with respect to Taxes not in the ordinary course of
business and consistent with past practices;
(xvi) MTR has not adopted any material change in any method of
accounting or accounting practice, except as contemplated or required by GAAP;
and
(xvii) except as set forth in this Agreement and the MTC
Agreement, MTR has not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. MTR does not, and has not in the past,
instituted or maintained any Benefit Arrangement or Benefit Plan. Neither MTR
nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct
or indirect, actual or contingent) with respect to any Benefit Plan subject to
Title IV of ERISA. Neither MTR nor any ERISA Affiliate has ever made or been
obligated to make, or reimbursed or been obligated to reimburse another employer
for, contributions to any multiemployer plan (as defined in ERISA Section 3(37).
MTR has no liability (whether actual, contingent, or otherwise) with respect to
any Benefit Plan or Benefit Arrangement.
f. LABOR. Prior to the date of this Agreement, MTR has not
employed any employees.
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g. INSURANCE. MTR maintains no insurance policies.
h. MATERIAL CONTRACTS. Schedule 5.4h hereto contains a list of all
the Material Contracts and true copies of such agreements have been furnished to
Purchaser or have been made available to Purchaser. All Material Contracts
listed on Schedule 5.4h are legal, valid and binding obligations of MTR
enforceable in accordance with their terms and in full force and effect subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the right of creditors generally and the exercise of judicial
discretion in accordance with general principles of equity (whether applied by a
court of law or equity). There exists no default or event which, with notice or
lapse of time, or both, would constitute a default by any party to any such
Material Contract or which would permit termination, modification or
acceleration. MTR has not received notice (or otherwise has knowledge) that any
party to any Material Contract intends to cancel or terminate any such agreement
or to exercise or not to exercise any option to renew thereunder.
i. COMPLIANCE WITH LAWS. MTR is in material compliance with all
applicable Federal, state and local laws, rules and, regulations, and to MTR's
knowledge, there are no actions threatened or pending alleging noncompliance
therewith.
j. LITIGATION. There is no suit, claim, action, proceeding or
arbitration pending or threatened against MTR. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency against or affecting MTR.
k. CONSENTS. No filing, consent, approval or authorization of any
governmental authority or of any third party on the part of MTR is required in
connection with the execution and delivery of this Agreement by Sellers, the
Company and MMP or the consummation of any of the transactions contemplated
hereby (including any consents required under any MTR contract as a result of
the change in control contemplated hereby).
l. TAX MATTERS.
(a) Except as set forth on Schedule 5.4l(a) hereto:
(i) All Tax Returns required to be filed by or with respect
to MTR have been filed when due in a timely fashion, and all Tax Returns
required to be filed by or with respect to MTR for Taxable Periods ending on or
before December 31, 1997 will have been filed prior to the Closing Date, even if
such Tax Returns are not yet due. All Tax Returns filed by or with respect to
MTR are true, correct and complete in all material respects.
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(ii) MTR has paid in full on a timely basis all Taxes owed
by it, whether or not shown on any Tax Return, and MTR will have paid prior to
the Closing Date all Taxes payable with respect to Taxable Periods ending on or
before December 31, 1997, even if such Taxes are not yet due.
(iii) MTR has no liability for unpaid income Taxes other
than its Tax liability attributable to MTR's allocable share of MMP's items of
income, gain, loss, deduction and credit accruing through the date hereof. MTR's
actual liability for unpaid Taxes (determined consistently with Section
2.2(b)(iv)) will not as of the Closing Date exceed its liability for such Taxes
as reflected in the Closing Date Tax Liabilities as finally determined pursuant
to Section 2.2(b)(ii).
(iv) MTR has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(V) No Tax Proceeding is currently pending with respect to
MTR and MTR has not received notice from any Tax Authority that it intends to
commence a Tax Proceeding.
(vi) No waiver or extension of any statute of limitations
is currently in effect with respect to the assessment, collection or payment of
Taxes of the MTR or for which MTR is liable.
(vii) No extension of the time within which to file any Tax
Return of MTR is currently in effect.
(viii) No deficiency for Taxes has been proposed, asserted,
or assessed against MTR.
(ix) There are no liens on the assets of MTR relating or
attributable to Taxes (except liens for Taxes not yet due).
(x) MTR is not and has not been at any time during the
preceding five years a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under Section
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341(f) of the Code affecting MTR.
(xii) MTR has not agreed to, nor is it required to, make
any adjustments under Section 481(a) of the Code as a result of a change in
accounting methods.
(xiii) MTR is not and has not at any time been a party to a
tax sharing, tax indemnity or tax allocation agreement, and MTR has not assumed
the Tax liability of any other entity or person under contract.
(xiv) MTR is not and has not at any time been a member of
an affiliated group filing a consolidated federal income tax return and does not
have any liability for the Taxes of another entity or person under Section
1.1502-6 of the Treasury Regulations (or any similar provision of state, local
or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MTR's ownership of 100,000 Class C
Membership Units of MMP, MTR is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for U.S. federal income tax
purposes.
(xvi) None of MTR's assets are treated as "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(b) Sellers have furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to MTR since January 1, 1996; and
(ii) all examination reports, statements of deficiencies and closing agreements
with respect to MTR relating to Taxes.
(c) Schedule 5.4l(c) contains complete and accurate
descriptions of (i) MTR's basis in its assets, (ii) the amount of any net
operating loss, net capital loss and any other Tax carryovers of MTR and (iii)
material Tax elections made by or with respect to MTR. MTR has no net operating
losses or other Tax attributes presently subject to limitation under Code
Sections 382, 383 or 384, or the federal consolidated return regulations.
m. DIVIDENDS. Since its formation, no dividends have been
declared, issued or otherwise approved by the Board of Directors of MTR. The
Company has no accounts receivable other than amounts due as Tax refunds from
certain Tax Authorities.
n. MTR ASSETS. Except for the 100,000 Class C Membership Units of
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MMP and cash or cash equivalents received or due from Tax refunds, MTR owns no
other assets and has not engaged in any business other than in connection with
its ownership of the 100,000 Class C Membership Units.
o. REPRESENTATIONS AS TO MTR INTERESTS. (i) MTR is the record
and beneficial owner of 100,000 Class C Membership Units (out of a total
11,631,431 Membership Units) of MMP; (ii) MTR holds of record and owns
beneficially this interest free and clear of any lien, security interest, pledge
or encumbrance other than those set forth on Schedule 5.4o hereof, all of which
will be released at or before the Closing; and (iii) except as described on
Schedule 5.4o, MTR's interest in MMP is not subject to any option(s) warrant(s),
voting trusts, outstanding proxies, registration rights agreement(s), or other
agreements regarding voting rights.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Sellers, the Company and
MMP that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 hereof, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any of the provisions of the
articles of incorporation or by-laws of Purchaser, (ii) violate any provision of
applicable law, rule or regulation, which violation would prevent or interfere
with Purchaser's ability to perform hereunder, or (iii) conflict with or result
in a breach of, or give rise to a right of termination of, or accelerate the
performance required by the terms of any judgment, court order or consent
decree, or
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any agreement, indenture, mortgage or instrument to which Purchaser is a party
or to which its property is subject, or constitute a default thereunder, except
where such conflict, breach, right of termination, acceleration or default would
not have a material adverse effect on the business or financial condition of
Purchaser or prevent or materially interfere with Purchaser's ability to perform
hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 hereto, (ii) for
filings pursuant to the H-S-R Act, or (iii) the FCC Application, no filing,
consent, approval or authorization of any governmental authority or of any third
party on the part of Purchaser is required in connection with the execution and
delivery of this Agreement by Purchaser or the consummation of any of the
transactions contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 hereto, there is
no suit, claim, action, proceeding or arbitration pending or, to Purchaser's
Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages
in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7, Purchaser is legally and financially qualified to be the Licensee
of, acquire, own and operate the Stations under the Communications Act and the
rules, regulations and policies of the FCC. Purchaser knows of no fact that
would, under existing law and the existing rules, regulations, policies and
procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC
Licenses or as the owner and operator of the Stations, or (b) cause the FCC to
fail to approve in a timely fashion the application for the FCC Consent. Except
as described on Schedule 6.7, no waiver of any FCC rule or policy is necessary
to be obtained for the grant of the applications for the assignment of the FCC
Licenses to Purchaser, nor will processing pursuant to any exception or rule or
general applicability be requested or required in connection with the
consummation of the transactions contemplated by this Agreement Purchaser will
have on hand at the Closing, adequate financial resources to consummate the
transactions contemplated by this Agreement, the Investors Agreement, the
Management Agreement and the MTC Agreement.
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SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND
WARRANTIES
----------
7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2
of the Indemnification Escrow Agreement, and subject to the provisions of
Section 10.3, the representations and warranties herein and the obligations of
the parties shall survive the Closing for a period ending on the earlier to
occur of (i) 15 calendar months after the Closing Date and (ii) October 31,
1999, but in no event shall the period be less than 12 calendar months after the
Closing Date; and provided further, however, that representations and warranties
relating to any claims as to which notice shall have been given pursuant to
Section 10.4 on or before such date shall survive until the final resolution of
such claims.
SECTION 8
TAX MATTERS
-----------
8.1. SECTION 338 ELECTION. Purchaser shall not make an election under
Section 338 of the Code (or any comparable provision of state, local or foreign
law) with respect to the purchase of stock in the Company as provided herein.
8.2. TAX RETURNS.
(a) Sellers shall prepare or cause to be prepared and file or
cause to be filed, within the time (including extensions) and manner provided by
law, all Tax Returns of the Company, MTR, MMP, and the FCC Licensee Entities
that are required to be filed on or before the Closing Date. In addition,
Sellers shall prepare or cause to be prepared and file or cause to be filed
prior to the Closing Date all Tax Returns for Taxable Periods of the Company,
MTR, MMP, and the FCC Licensee Entities for Taxable Periods ending on or before
December 31, 1997, even if such Tax Returns are not yet due. Each of the
Company, MTR, MMP and the FCC Licensee Entities shall pay or cause to be paid
all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity
to review and consent to the filing of all such Tax Returns, which consent shall
not be unreasonably withheld or delayed.
(b) Purchaser shall prepare or cause to be prepared and file
or cause to be filed, within the time and manner provided by law, all Tax
Returns of the Company, MTR, MMP, and the FCC Licensee Entities (i) for Taxable
Periods ending on or before the Closing Date that are due after the Closing
Date, except as otherwise provided in
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Section 8.2a, and (ii) for Taxable Periods beginning before and ending after the
Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all
Taxes shown as due on such Tax Returns; provided that this sentence shall not in
any way limit or affect Purchaser's rights to indemnification under other
provisions of this Agreement. Purchaser shall provide Sellers a reasonable
opportunity to review and consent to the filing of such Tax Returns, which
consent shall not be unreasonably withheld or delayed. Purchaser shall not file
amended Tax Returns with respect to Taxable Periods ending on or before the
Closing Date or Straddle Periods without Sellers' consent; provided, however,
that Purchaser may file amended Tax Returns for such Taxable Periods without
Sellers' consent if (i) such amended Tax Returns are filed to correct errors or
omissions in previously filed Tax Returns that either constitute or are related
to a breach of any representation or warranty set forth in Sections 5.2m, 5.3r
or 5.4l (determined without regard to the limitation on the survival of such
representations and warranties set forth in Section 7.1), or (ii) the filing of
such amended Tax Return would not increase the Taxes of Sellers or Taxes for
which Sellers have indemnification responsibility hereunder by more than
$25,000.
(c) All Tax Returns prepared and filed pursuant to this
Section 8.2 shall be prepared and filed in accordance with applicable law and in
a manner consistent with past practices of the Company, MTR, and MMP (to the
extent consistent with applicable law).
8.3. APPORTIONMENT. The parties agree to cause the Company, MTR, MMP,
and the FCC Licensee Entities to file all Tax Returns for any Taxable Period
that would otherwise be a Straddle Period on the basis that the relevant Taxable
Period consists of two periods, one ending as of the close of business on the
Closing Date and one beginning the day after the Closing Date, unless the
relevant Tax Authority will not accept a Tax Return filed on that basis. For
purposes of apportioning any Tax to the portion of any Straddle Period that ends
on the Closing Date, the determination shall be made assuming that there was a
closing of the books as of the close of business on the Closing Date and that
the taxable years of the Company, MTR, MMP and the FCC Licensee Entities ended
on that date, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Straddle Period
in question.
8.4. COOPERATION IN TAX MATTERS. Sellers and Purchaser shall (a)
cooperate fully, as reasonably requested, in connection with the preparation and
filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to the Company, MTR, MMP and the
FCC Licensee Entities for all Taxable Periods ending on or before the Closing
Date and Straddle Periods; and (c) preserve
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information, records or documents relating to Tax matters pertinent to the
Company, MTR, MMP and the FCC Licensee Entities that is in their possession or
under their control until the expiration of any applicable statute of
limitations.
8.5. CERTAIN TAXES. Sellers shall timely pay all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Stock, and Sellers shall at their own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Sellers shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee
Entities to make a Code Section 754 Election with respect to the Taxable Period
in which the Closing occurs or later Taxable Periods.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause the Company, MTR, MMP or the FCC Licensee Entities to take any actions on
the Closing Date other than in the ordinary course of their business, except (i)
such actions as are expressly contemplated by this Agreement, including the
repayment of MMP's Funded Debt, and (ii) such actions as would not increase
Taxes for which Sellers have indemnification responsibility hereunder.
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
-------------------------------------
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Sellers, the
Company and MMP (and MMP shall cause the FCC Licensee Entities) to agree that
each will execute and deliver to the other any and all documents, in addition to
those expressly provided for herein, that may be necessary or appropriate to
implement the provisions of this Agreement, whether before, at, or after the
Closing. The parties agree to cooperate with each other to any extent reasonably
required in order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. The Company and MMP, from and after the
date of
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this Agreement and until the Closing Date or termination pursuant to Section
14.1, shall give Purchaser and Purchaser's employees and counsel full and
complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of the
Company, MMP, the FCC Licensee Entities or otherwise relating to the Business,
shall provide Purchaser with all financial statements of the Company, the FCC
Licensee Entities and MMP which are currently prepared in the ordinary course of
business, which shall be prepared and delivered to Purchaser each month between
the date hereof and the Closing Date, and shall provide copies of such
information concerning the Company, MMP, the FCC Licensees and the Business as
Purchaser may reasonably request; provided, however, that the foregoing shall
not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii)
contact any employee of the Company or MMP without providing reasonable prior
notice to Sellers and allowing a representative of the Company or MMP to be
present. The Company and Sellers will use their commercially reasonable efforts
to obtain the consent of its auditors to permit inclusion of the Financial
Statements and the MMP Financial Statements in applicable securities filings of
Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have
the immediate right, without causing unreasonable disruption to the Business, to
have the access provided for in the first sentence hereof to conduct an audit of
each Station's financial information, and, subject to the foregoing, the
Company, MMP and Sellers shall cooperate with Purchaser's reasonable requests in
connection with such audit, including, without limitation, giving all reasonable
consents thereto as long as any expenses thereof are borne by Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Sellers, the Company and MMP
shall cause the Business to be conducted in the ordinary course. Except as
contemplated by this Agreement or as consented to by Purchaser (which consent
shall not unreasonably be withheld), from and after the date hereof, Sellers,
the Company, and MMP shall act and cause the FCC Licensee Entities to act, as
follows:
(a) The Company and MMP will not adopt or cause the FCC Licensee
Entities to adopt any material change in any method of accounting or accounting
practice, except as contemplated or required by GAAP;
(b) The Company shall not change or amend its charter or by-laws
and MMP shall not change or amend the operating agreement dated as of January 1,
1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee
Entities to change or amend any limited partnership agreement;
(c) Except (i) for the disposition of obsolete equipment in the
ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the
transfers of the MMP II
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Licenses to MMP II and the distribution of MMP II to MTC or (iv) as set forth on
Schedule 9.3(c) hereto, neither Company nor MMP shall sell, mortgage, pledge or
otherwise dispose of any assets or properties owned, leased or used in the
operation of the Business;
(d) Neither the Company nor MMP or the FCC Licensee Entities will
merge or consolidate with, agree to merge or consolidate with, or purchase or
agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity;
(e) MMP will not merge or consolidate with, or agree to merge or
consolidate with, or purchase or agree to purchase all or substantially all of
the assets of, or otherwise acquire, any other business entity or cause the FCC
Licensee Entities to do likewise;
(f) Neither the Company nor MMP or the FCC Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital stock
or any securities or obligations convertible or exchangeable into shares of its
capital stock or issue or grant any option, warrant or other right to purchase
any shares of its capital stock;
(g) Neither the Company nor MMP or the FCC Licensee Entities will
incur, or agree to incur, any debt for borrowed money other than draws under the
Company's or MMP's, as the case may be, existing revolving credit agreements;
(h) Neither the Company nor MMP or the FCC Licensee Entities will
change its historical practices concerning the payment of accounts payable; and
(i) Neither the Company nor MMP or the FCC Licensee Entities will
declare, issue, or otherwise approve the payment of dividends or distributions
of any kind in respect of the Stock or redeem, purchase or otherwise acquire any
of its stock.
(j) The Company and MMP shall maintain the existing insurance
coverages on the assets of the Stations or other policies providing
substantially similar coverages.
(k) The Company and MMP will not permit any increases in the
compensation of any of the employees of the Company or MMP except as required by
law or existing contract or agreement or enter into or amend any Company Plan,
MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as
contemplated by MMP's operating budgets and in accordance with the past
practice.
(l) Neither the Company nor MMP or the FCC Licensee Entities
shall
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enter into or renew any contract or commitment relating to the Stations or the
assets of the Company or MMP, or incur any obligation that will be binding on
Purchaser after Closing, except in the ordinary course of business, and MMP
shall not enter into, modify, amend, renew, or change any contract with respect
to programming for the Station for any period after the Closing Date without the
prior approval of Purchaser.
(m) Neither the Company nor MMP or the FCC Licensee Entities
shall enter into any transactions with any Affiliate of the Company or any
Seller that will be binding upon Purchaser, or the Station following the Closing
Date.
(n) The Company and MMP shall use all commercially reasonable
efforts to maintain the assets of the Stations or replacements thereof in good
operating condition and adequate repair, normal wear and tear excepted.
(o) The Company and MMP shall, in connection with the operation
of the Stations, make expenditures materially consistent with the estimates of
expenses set forth in MMP's operating budgets of the Stations and, including,
without limitation, expenditures in respect of promotional, programming and
engineering activities for the Station (and any employee expenditures related to
such activities) for any period covered by the current operating budgets of the
Stations.
(p) Neither the Company nor MMP shall make or allow MTR or the
FCC Licensee Entities to make or change any material Tax election, amend any Tax
Return, or take or omit to take any other action not in the ordinary course of
business and consistent with past practice that would have the effect of
increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of the
Company or MMP for any Post-Closing Tax Period.
(q) Except as provided by Section 2.2 hereof and the MMP II
Distribution, the Company, MMP and the FCC Licensee Entities shall not make
distributions other than in the ordinary course of business and consistent with
past practice, and shall not make non-pro rata distributions.
(r) MMP shall not enter into or renew any Tradeout Agreement that
would be binding on Purchaser after the Closing Date, except in the ordinary
course of business, as contemplated by MMP's operating budgets and in accordance
with past practice.
(s) Except as provided in Section 9.3(r) above, MMP shall not
enter into or renew any Time Sales Agreement except in the ordinary course of
business and which are for cash at prevailing rates for a term not exceeding
twelve (12) months.
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(t) MMP shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior approval of Purchaser other than as
contemplated by this Agreement, the Management Agreement, the MTC Agreement, and
the Investor Agreement.
(u) Neither the Company nor MMP shall enter into or become
subject to any employment, labor, union or professional service contract not
terminable at will, or any bonus, pension, insurance, profit sharing, incentive,
deferred compensation, severance pay, retirement, hospitalization, employee
benefit, or other similar plans, or increase the compensation payable or to
become payable to any employee, except in the ordinary course of business, other
than any value appreciation rights agreement with current employees of MMP, all
of which liabilities shall be paid by MMP at or prior to Closing.
(v) Neither the Company nor MMP or the FCC Licensee Entities
shall take any action which may jeopardize the validity or enforceability of or
rights under the FCC Licenses.
(w) Before Closing, MMP shall pay all one-time fees under Section
3.1 of the Time Brokerage Agreements ("LMAs") (aggregating $1,430,000.00) and
MMP shall amend the LMAs with the LMA Stations to reflect the payment by MMP
before the Closing of the fees set forth in Section 3.1 of the LMAs (aggregating
$1,430,000.00) and the reduction of continuing fees as a result of such
payments.
9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten
Business Days following the date hereof, file duly completed and executed
Pre-Merger Notification and Report Forms as required under the H-S-R Act and
shall otherwise use their respective best efforts to comply promptly with any
requests made by the Federal Trade Commission ("FTC") or the Department of
Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated
thereunder. Sellers shall cause MMP, to the extent required by law, to join in
or provide information in connection with such filing, including, but not
limited to, any response to any request by the FTC or DOJ. All filing fees and
other similar payments in connection with the H-S-R Act shall be split equally
by Purchaser and the Sellers.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP and Sellers shall, within seven
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall
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in good faith and with due diligence take all reasonable steps necessary to
expedite the processing of the FCC Application and to secure such consents or
approvals as expeditiously as practicable; and provided further that MMP shall
cause the FCC Licensee Entities, to the extent deemed reasonably necessary by
counsel to Purchaser to join in and provide information in connection with the
FCC Application and comply with the immediately preceding provisions and 9.5(b)
below. If the Closing shall not have occurred for any reason within the initial
effective periods of the granting of FCC approval of the FCC Application, and no
party shall have terminated this Agreement under Section 14, the parties shall
jointly request and use their respective best efforts to obtain one or more
extensions of the effective periods of such grants. No party shall knowingly
take, or fail to take, any action the intent or reasonably anticipated
consequence of which would be to cause the FCC not to grant approval of the FCC
Application.
(b) Sellers, the Company and MMP, as the case may be, shall
publish (and cause the FCC Licensee Entities to publish) the notices required by
the FCC Rules and Regulations relative to the filing of the FCC Application.
Copies of all applications, documents and papers filed after the date hereof and
prior to the Closing, or filed after the Closing with respect to the transaction
under this Agreement, by Purchaser , Sellers, MMP, or the FCC Licensee Entities
with the FCC shall be mailed to the other simultaneously with the filing of the
same with the FCC. Each party shall bear its own costs and expenses (including
the fees and disbursements of its counsel) in connection with the preparation of
the portion of the application to be prepared by it and in connection with the
processing of that application. All filing and grant fees, if any, paid to the
FCC, shall be split equally by Purchaser and the Sellers. None of the
information contained in any filing made by Purchaser or Sellers with the FCC
with respect to the transaction contemplated by this Agreement shall contain any
untrue statement of a material fact.
(c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Sellers,
the Company and MMP shall cause the FCC Licensee Entities holding the FCC
Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in
Greeneville, Tennessee within five (5) Business Days following the date hereof,
to file with the FCC the MMP II FCC Applications and take all reasonable steps
necessary to expedite the processing of the MMP II FCC Applications to secure
the Consent of the FCC to the transfer of control of the FCC Licenses from MMP
to MTC.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
each Seller (a) to have reasonable access to the books and records of Purchaser
and those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
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records for a period of four (4) years following the Closing.
9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or
contemplating, and has not made or taken, any decisions or actions concerning
the employees of the Stations after the Closing Date that would require the
service of notice under the Worker Adjustment and Retraining Notification Act of
1988, as amended, (the so-called WARN Act) or any other similar law.
9.8. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment, confiscation
or condemnation of any of the assets of the Stations prior to the completion of
the Closing that interferes with the normal operation of the Stations, MMP shall
notify Purchaser of same in writing immediately, specifying with particularity
the loss, damage or impairment, confiscation or condemnation incurred, the cause
thereof, if known or reasonably ascertainable, and the insurance coverage. MMP
shall apply the proceeds of any insurance policy, judgment or award with respect
thereto and take such other commercially reasonable actions, as determined in
its sole discretion, as are necessary to repair, replace or restore such assets
of any Station so damaged to their prior condition as soon as possible after
such loss, damages or impairment, confiscation or condemnation.
(b) If before the Closing Date, due to damage or destruction of
the assets of any Station (other than WMMP-TV in the Charleston, South Carolina
market), the regular broadcast transmission of one (1) or more Television
Stations or two (2) or more Radio Stations in the normal and usual manner is
interrupted for a period of twelve (12) continuous hours or more, MMP shall give
prompt written notice thereof to Purchaser. If on the Closing Date, due to
damages or destruction of the assets of one (1) or more Television Stations
(other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more
Radio Stations the regular broadcast transmission of one (1) or more Television
Stations (other than WMMP-TV in the Charleston, South Carolina market) or two
(2) or more Radio Stations in the normal and usual manner is interrupted such
that the regular broadcast signal of any such Station (including its effective
radiated power) is diminished in any material respect, then (i) MMP shall
immediately give written notice thereof to Purchaser; and (ii) Purchaser shall
have the right, by giving prompt written notice to the other, to postpone the
Closing Date for a period of up to sixty (60) days provided, however, that the
Closing shall occur no later than ten (10) Business Days after regular broadcast
transmission has been restored.
(c) In the event any one (1) or more Television Stations (other
than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio
Stations normal and usual transmission has not been resumed by the Closing Date
as postponed
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pursuant to section (b) above, Purchaser may, pursuant to Section 14.1(e),
terminate this Agreement by written notice to the Sellers' Agent.
Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to
close this Agreement and complete the restoration and replacement of any damaged
assets of the Station in question after the Closing Date, MMP shall deliver or
assign to Purchaser all insurance or other proceeds received in connection
therewith to the extent such proceeds are received by or payable to the Company
or MMP and have not therefore been used in or committed to the restoration or
replacement of the assets.
(d) If before the Closing Date, due to damage or destruction of
the assets the regular broadcast transmission of any Station (other than WMMP-TV
in the Charleston, South Carolina market) in the normal and usual manner is
interrupted for a period of seven (7) continuous days or more, MMP shall give
prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon
receipt of the Interruption Notice, Purchaser shall have the right, in its sole
and absolute discretion, by giving prompt written notice thereof to Sellers and
MMP within two (2) Business Days of the date of the Interruption Notice, to
terminate this Agreement with the effect specified in Section 14.2(b) hereof.
(e) Until the Closing Date, the Company and MMP will maintain and
cause MMP to maintain the existing insurance coverages listed on Schedule 5.3l
on the Stations and each Station's assets.
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not relying on the specification of any dollar amount in any representation
or warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
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9.10. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) At the Closing, Sellers' Agents shall designate Purchaser as
its agent solely for the purposes of collecting the MMP Accounts Receivable.
Purchaser will collect the MMP Accounts Receivable during the period beginning
on the Closing Date and ending on the 180th day after the Closing Date (the
"Collection Period") with the same care and diligence Purchaser uses with
respect to its own accounts receivable and hold all such MMP Accounts Receivable
in trust for Sellers until remitted by Purchaser to the Indemnification Escrow
Agent or the Collections Account pursuant hereto. Purchaser shall not make any
referral or compromise of any of the MMP Accounts Receivable to a collection
agency or attorney for collection and shall not settle or adjust the amount of
any of the MMP Accounts Receivable without the written approval of Sellers'
Agent. If, during the Collection Period, Purchaser receives monies from an
account debtor of Purchaser that is also an account debtor of MMP with respect
to any MMP Accounts Receivable, Purchaser shall credit the sums received to the
oldest account due, except where an account is disputed by the account debtor as
properly due, and the account debtor has so notified Purchaser in writing, in
which case, payments received shall be applied in accordance with the account
debtor's instructions; provided that upon resolution of such dispute if any
amounts in dispute are received by Purchaser, Purchaser shall remit such amounts
to the Indemnification Escrow Agent in accordance with the Indemnification
Escrow Agreement up to the amount of the Additional Indemnification Amount
Deposit and, thereafter, to the Collections Account.
(b) On the ninetieth (90th) day after the Closing Date and on or
before the fifth Business Day after the end of each full fifteen (15) day period
thereafter during the Collection Period, Purchaser shall deliver to Sellers'
Agents a list of the amounts collected by Purchaser before the end of such
period with respect to the Accounts Receivable. On or before the fifth Business
Day after the end of the Collection Period, Purchaser shall deliver to Sellers'
Agents a list of all of the Accounts Receivable that remain uncollected.
(c) Sellers' Agents shall establish and maintain during the
Collection Period (and for as long after the Collection Period as Sellers deem
appropriate) a bank account (the "Collections Account") at a commercial bank in
Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for
the deposit of collections of the MMP Accounts Receivable in accordance with
this Section 9.10. Sellers' Agents shall have sole disbursement authority over
the Collections Account. On the ninetieth (90th) day after the Closing Date (or
if such day is not a Business Day, on the next succeeding Business Day),
Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to
the Indemnification Escrow Agreement all amounts collected with respect to
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any MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the
Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii)
deposit in the Collections Account any other MMP Accounts Receivable collected
by Purchaser as of such date. On and after the ninetieth (90th) day after the
Closing Date until the expiration of the Collections Period, within five (5)
Business Days of the end of each full fifteen (15) day period, Purchaser shall
deposit all amounts collected with respect to the Accounts Receivable with the
Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement
until the total of all amounts deposited pursuant to the previous sentence and
this sentence equals the Additional Indemnification Amount Deposit and,
thereafter, in the Collections Account. Sellers' Agents shall be entitled to
dispose of all amounts deposited in the Collections Account from time to time as
it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow
Agent shall have no rights therein; provided, however, that Purchasers shall
have no liability whatsoever to Sellers with respect to Sellers' Agents
disposition of any amounts disbursed by Sellers' Agent from the Collections
Account.
(d) After the expiration of the Collection Period, Purchaser
shall have no further obligation hereunder other than (1) so long as Sellers'
Agents continue to maintain the Collections Account, to deposit in such account
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives.
(e) Any MMP Accounts Receivable remaining uncollected 180 days
after the Closing Date shall be transferred to Sellers' Agents, together with
all files concerning the collection or attempt to collect such MMP Accounts
Receivable hereunder, and Purchaser shall thereafter have no further
responsibility with respect thereto.
(f) Purchaser shall have no right to setoff any amounts collected
for MMP Accounts Receivable against any amounts owed to Purchaser by Sellers;
provided that this Section 9.10 shall not be deemed to limit the right of
Purchaser to make claims against the Indemnification Amount in accordance with,
and subject to, the terms and conditions of this Agreement and the
Indemnification Escrow Agreement.
9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this
Agreement, prior to the Closing, without the prior written consent of Sellers'
Agents, neither Purchaser nor any of its subsidiaries or any party acting
directly or indirectly by or on behalf of any of them shall acquire or enter
into any agreement to acquire a television station or radio station in any
markets in which any Television Station or Radio Station currently broadcasts,
if such acquisition would materially delay the granting of the FCC
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Application; provided, however, that nothing in this Section 9.11 shall be
construed to preclude Purchaser proceeding to closing with respect to any
transaction pending as of the date hereof.
9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Sellers, the
Company, and MMP shall comply in all respects with their obligations under
Section 2.2(b) of this Agreement.
9.13. [RESERVED]
9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP
shall make all payments, discharge all obligations and terminate any and all
Value Appreciation Rights Agreements ("VARS"), and the Management Incentive
Agreements ("Incentive Agreements"), including, but not limited to, the VARS and
Incentive Agreements listed on Schedule 5.3j or Schedule 5.3m.
SECTION 10
INDEMNIFICATION
---------------
10.1. INDEMNIFICATION OF PURCHASER BY SELLERS.
(a) Subject to Section 10.3 hereof after the Closing Date, each
Seller, jointly and severally, shall indemnify and hold Purchaser harmless from
and against any and all Losses, however incurred, which arise out of or result
from any breach by such Seller of any representation or warranty of such Seller
as to itself, himself or herself, in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof after the Closing Date,
Sellers shall jointly and severally indemnify and hold Purchaser harmless from
and against any and all Losses, howsoever incurred, which arise out of or result
from:
(i) any breach of any representation or warranty of Sellers
set forth in Sections 5.2, 5.3 or 5.4 of this Agreement other than any
representation or warranty of any Seller set forth in Section 5.1 of this
Agreement; provided, however, for purposes of this Section 10.1(b)(i), the
representation set forth in Sections 5.2c and 5.3d will be deemed not to include
the requirement of a MMP Material Adverse Effect;
(ii) the material failure by Sellers to perform any
covenant of Sellers contained herein;
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(iii) breaches by Seller, the Company, MMP, MTR or any of
the FCC License Entities of any other agreements and certificates specifically
contemplated hereby;
(iv) any and all Taxes of the Company, MTR, MMP and the FCC
Licensee Entities (including any liability of the Company, MTR, MMP or the FCC
Licensee Entities for Taxes of any other entity or person) for any Pre-Closing
Tax Period except to the extent that such Taxes are specifically identified in
the Closing Date Tax Liabilities as finally determined pursuant to Section
2.2(b)(ii) (excluding reserves for deferred Taxes);
(v) [Reserved]
(vi) any liabilities under the Shareholder Settlement
Agreements; or
(vii) the Closing Date Liabilities, to the extent the
Closing Date Liabilities exceed (A) the aggregate cash, cash equivalents and
other cash items retained as provided by Section 2.2(b), and (B) payments made
from the Indemnification Escrow as provided by Section 2.2(b)(iii);
(c) For purposes of Section 10.1(b)(iv), Taxes of the Company and
MTR for Pre-Closing Tax Periods shall be deemed to include Taxes payable by the
Company, MTR, Purchaser, or Purchaser's Affiliates that are attributable to
items of income, gain, loss, deduction, and credit of MMP and the FCC Licensee
Entities accruing through the Closing Date, determined on the basis of a closing
of the books of MMP and the FCC Licensee Entities as of that date,
notwithstanding that such items may be reported in Taxable Periods ending after
the Closing Date.
10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3
hereof after the Closing, Purchaser shall indemnify and hold Sellers harmless
from and against any and all Losses, howsoever incurred, which arise out of or
result from:
(a) any breach by Purchaser of any representation or warranty of
Purchaser set forth in Section 6 of this Agreement; or
(b) the material failure by Purchaser to perform any covenant of
Purchaser contained herein.
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(c) any and all Taxes of the Company, MTR, MMP and the FCC
Licensee Entities (including any liability of the Company, MTR, MMP or the FCC
Licensee Entities for Taxes of any other persons) for any Post-Closing Tax
Period except to the extent that (i) such Taxes should have been but were not
specifically identified in the Closing Date Liabilities or are described in
Section 10.1(c), or (ii) such Taxes arise out of, result from or are
attributable to a breach of any representation, warranty or covenant of Sellers
set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Sellers' obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Purchaser agrees that the payment of any claim
(whether such claim is framed in tort, contract, or otherwise) made by Purchaser
for indemnification hereunder subsequent to the Closing Date, for whatever
reason, shall be limited to, and shall only be made from, the Indemnification
Amount in accordance with the Indemnification Escrow Agreement and, except for
claims against the Indemnification Amount, Purchaser waives and releases, and
shall have no recourse against, Sellers as a result of the breach of any
representation, warranty, covenant or agreement of Sellers contained herein, or
otherwise arising out of or in connection with the transactions contemplated
hereby or the operation of the Stations, and such indemnification shall be the
sole and exclusive remedy for Purchaser with respect to any such claim for
indemnification after the Closing Date; provided, however, that nothing herein
shall be deemed to limit any rights or remedies that Purchaser may have for
Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with
the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Purchaser that, other
than with respect to Sellers (but not including any partner, director, officer,
employee, agent or Affiliate Sellers (including any shareholder, director,
officer, employee, agent or Affiliate of the Sellers)) as expressly provided for
in Section 10.1, no partner, director, officer, employee, agent or Affiliate of
Sellers (including any shareholder, director, officer, employee, agent or
Affiliate of Sellers) shall have (i) any personal liability to Purchaser as a
result of the breach of any representation, warranty, covenant or agreement of
Sellers contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations,
or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's
claims pursuant to Section 10.1 and Purchaser waives and releases and shall have
no recourse against any of such parties described in this
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Section 10.3(c) as a result of the breach of any representation, warranty,
covenant or agreement of Sellers contained herein or otherwise arising out of or
in connection with the transactions contemplated hereby or thereby or the
operations of the Stations; provided, however, that nothing herein shall be
deemed to limit any rights or remedies that Purchaser may have for Sellers'
fraud.
(c) Notwithstanding any other provision of this Agreement to the
contrary, Sellers shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement, the Management Agreement, the MTC Agreement and the
Investors Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Basket Amount"), and then only to the extent of the excess of Losses over
the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided,
however, that this paragraph shall not apply to (i) payments pursuant to Section
2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi)
and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii)
relates to an item either disclosed on a Schedule and/or set forth on the
Estimate Certificate or the Accountant's Certificate), or (iii) indemnification
pursuant to Sections 10.1(b)(i) for breaches of the representations and
warranties set forth in Sections 5.2m, 5.3r, and 5.41.
(d) In determining the amount of any Tax or other Loss for which
indemnification is provided under this Agreement, such Loss shall be (i) net of
any insurance recovery made by the indemnified party, (ii) reduced to take into
account any net Tax benefit realized by the indemnified party arising from the
deductibility of such Tax or Loss, and (iii) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Losses, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless a final determination with respect to the indemnified party or
any of its affiliates causes any such payment not to be treated as an adjustment
to the Purchase Price.
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(e) No claim for indemnification for Losses shall be made after
expiration of the applicable period set forth in Section 7.1 hereof.
(f) Anything to the contrary in this Section 10.3
notwithstanding, the terms, conditions and limitations set forth in this Section
10.3 do not apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the Sellers' Agent
notice of any matter which an indemnified party has determined has given or
could give rise to a right of indemnification under this Agreement, stating the
nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice promptly thereafter of all developments
coming to Sellers' Agent's attention materially affecting any matter relating to
any indemnification claims.
(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified
party shall give prompt notice thereof to Sellers' Agent and the indemnifying
part(ies) shall be entitled to participate therein or, to the extent that it
desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume the
defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the
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indemnified party from all liability arising out of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects to
assume the defense of any action or claim, the indemnifying part(ies) shall not
be liable for any compromise or settlement of any such action or claim effected
without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement, including, without limitation, making available all
witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing Authority
of any Tax Proceeding with respect to any Tax for which the other party is
obligated to provide indemnification under this Agreement, such party shall give
prompt written notice thereof to the other party; provided, however, that the
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent that the failure to give such notice materially
prejudices the indemnifying party.
(b) Sellers, acting through Sellers' Agents, shall have the right,
at their own expense, to control and make all decisions with respect to any Tax
Proceeding relating solely to Taxes of the Company and MTR for Taxable Periods
ending on or before the Closing Date; provided, that Purchaser and counsel of
its own choosing shall have the right, at Purchaser's own expense, to
participate fully in all aspects of the prosecution or defense of such Tax
Proceeding; and provided further that Sellers shall not settle any such Tax
Proceeding without the prior written consent of Purchaser if such settlements
could increase the past, present or future Tax liability of Purchaser or any of
its Affiliates, or any Tax liability of the Company or MTR for any Post-Closing
Tax Period by an amount greater than $25,000.
(c) Sellers, acting through Sellers' Agents, shall have the right,
at their own expense, to jointly control and participate with Purchaser in all
Tax Proceedings relating to Taxes of the Company or MTR for a Straddle Period.
If Sellers exercise such right, neither party shall settle any such Tax
Proceeding without the prior written consent of the other.
(d) If Sellers, acting through Sellers' Agents, do not exercise
their right to assume control of or participate in any Tax Proceeding as
provided under this Section
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10.5, Purchaser may, without waiving any rights to indemnification hereunder,
defend or settle the same in such manner as it may deem appropriate in its sole
and absolute discretion.
(e) Purchaser shall control all Tax Proceedings relating to Taxes
or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax
Proceedings relating solely to Taxable Periods of MMP ending on or before the
Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers fully
informed as to the status of any such Tax Proceeding and shall not settle such a
Tax Proceeding without the prior written consent of Sellers, which consent shall
not be unreasonably withheld; provided that Sellers' Agents' consent to a
settlement shall only be required if such settlements could increase Sellers'
Taxes or Taxes for which Sellers' Agents have indemnification responsibility
hereunder by an amount greater than $25,000.
(f) In the event that the provisions of this Section 10.5 and the
provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
-----------------------------------------------------------
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Sellers shall have complied in all material respects with
their agreements and covenants contained herein to be performed at or prior to
the Closing, and the representations and warranties of Sellers contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate of one of Sellers' Agents, dated as
of the Closing Date and signed by Sellers Agent, certifying as to the
fulfillment of the condition set forth in this Section 11.1(a) ("Sellers'
Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Stock or the assets of the Station.
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(c) All applicable waiting periods under the H-S-R Act shall have
expired or been terminated.
(d) All consents identified on Schedules 5.2h, 5.3e and 5.3m as
required consents shall have been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses (other than the MMP II Licenses) shall have been
obtained. All the material conditions contained in the Final Order required to
be satisfied on or prior to the Closing Date shall have been duly satisfied and
performed. Notwithstanding the foregoing, other than conditions relating the
broadcast industry generally, if the consent of the FCC is conditional or
qualified in any manner that has a material adverse effect on Purchaser or
requires Purchaser or any of its subsidiaries to divest any television or radio
station owned, operated or programmed by Purchaser or any of its subsidiaries.
Purchaser may, nevertheless, in its sole discretion, require the consummation of
the transactions contemplated by this Agreement, but shall not be required to do
so.
(f) Sellers shall have delivered to Purchaser at the Closing each
document required by Section 12.1 hereof.
(g) Since the date of this Agreement through the Closing Date,
there shall not have been either a Material Adverse Effect with respect to the
Company or a MMP Material Adverse Effect with respect to the business,
operations, properties, assets, or condition of MMP, and no event shall have
occurred or circumstance exist that reasonably could be expected to result in
either a Material Adverse Effect or an MMP Material Adverse Effect.
(h) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the
distribution of MMP II to MTC shall have occurred pursuant to the Assignment and
Assumption Agreement and the Distribution Agreement substantially in the form
attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or
more Time Brokerage Agreements generally in the form attached (subject to such
revisions, additions and deletions as determined by counsel to MMP II and
Purchaser prior to the Closing) hereto as Exhibit D.
(i) The closings under the Investors Agreement, the MTC Agreement
and the Management Agreement shall have occurred or will occur simultaneously
with the Closing.
(j) Sellers, the Company or MMP, as the case may be, shall have
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complied with their obligations under Section 9.12.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation
of Sellers to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Seller shall have received a certificate of Purchaser, dated as of the Closing
Date and signed by an officer of Purchaser, certifying as to the fulfillment of
the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down
Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Sellers
from consummating the transactions contemplated hereby.
(c) All applicable waiting periods under the H-S-R Act shall have
expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Sellers at the Closing the
Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the Investors Agreement, the MTC Agreement
and the Management Agreement shall have occurred or occur simultaneously with
the Closing.
SECTION 12
DELIVERIES AT THE CLOSING
-------------------------
12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or
cause to be
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delivered at the Closing to Purchaser:
(a) Sellers' Bring-Down Certificate;
(b) a legal opinion of Clark & Stant, P.C., counsel to Sellers',
the Company and MMP substantially in the form attached as Exhibit E hereto;
(c) a legal opinion of counsel to the FCC Licensee Entities in the
form attached hereto as Exhibit F;
(d) stock certificates evidencing the Stock, together with stock
powers, dated as of the Closing Date and executed by the respective Sellers,
transferring the Stock to Purchaser;
(e) the original corporate minute books, stock registry and seal
of each of the Company;
(f) a certificate as to the existence of the Company issued by the
Secretary of the State Corporation Commission of the Commonwealth of Virginia
dated not more than five (5) Business Days before the Closing Date;
(g) a certificate as to the existence and good standing of MMP
issued by the Secretary of the State Corporation Commission of the Commonwealth
of Virginia not more than five (5) Business Days before the Closing Date and
certificates issued by the appropriate governmental authorities in each
jurisdiction in which MMP is qualified to do business and a certificate as to
the existence for each of the FCC Licensee Entities of the Secretary of the
State Corporation Commission of the Commonwealth of Virginia dated not more than
five (5) Business Days before the Closing Date;
(h) receipt for Purchase Price;
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(i) resignations of each of the officers and directors of the
Company effective as of the Closing Date;
(j) the certificate(s) required by Section 8.6;
(k) a copy of any instrument evidencing any consents received;
(l) the Indemnification Escrow Agreement duly executed by Sellers
and Sellers' Agent;
(m) a copy of any instrument evidencing any consent received,
including, but not limited to, estoppel certificates from MMP's landlords with
respect to the Real Property;
(n) RESERVED;
(o) the Estimate Certificate;
(p) the employee releases with respect to the VARS and Incentive
Agreements duly executed by each employee to such Agreements;
(q) the amendments to the LMAs in a form reasonably satisfactory
to Purchaser duly executed by the necessary parties thereto as contemplated by
Section 9.3(w); and
(r) evidence reasonably satisfactory to Purchaser that the Limited
Partnership Agreements of the FCC Licensee Entities have been amended, and that
sufficient actions have been taken by or with respect to MMP, to require
allocation of items of income, gain, loss, deduction and credit with respect to
transferred interests in the FCC Licensee Entities and MMP based on the interim
closing of the books method authorized by Code Section 706 and the regulations
promulgated thereunder;
(s) release and indemnity agreements property executed by MTC and
the shareholders of MTC in a form reasonably satisfactory to Purchaser releasing
MMP from all liabilities for Taxes of such persons under certain Assignment and
Assumption Agreements dated as of January 1, 1996, and indemnifying and holding
harmless MMP from and against all such liabilities; and
(t) such other documents as Purchaser shall reasonably request.
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12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Sellers, the Disbursing Agent or the Indemnification
Escrow Agent, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Thomas & Libowitz, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit G hereto;
(c) the Purchase Price as required pursuant to Section 3.1 hereof;
(d) the Indemnification Escrow Agreement duly executed by
Purchaser;
(e) a certificate as to the existence and good standing of the
Purchaser issued by the Maryland Department of Assessments and Taxation of the
State of Maryland dated as of the Closing Date;
(f) one or more fully executed Time Brokerage Agreements as
negotiated pursuant to Section 11.1(h) hereof; and
(g) such other documents as the Company shall reasonably request.
SECTION 13
EXPENSES
--------
Except as provided in Sections 9.4 and 9.5, each party will pay its own
fees, expenses, and disbursements and those of its counsel in connection with
the subject matter of this Agreement (including the negotiations with respect
hereto and the preparation of any documents) and all other costs and expenses
incurred by it in the performance and compliance with all conditions and
obligations to be performed by it pursuant to this Agreement or as contemplated
hereby.
SECTION 14
TERMINATION
-----------
14.1 TERMINATION. This Agreement may be terminated:
(a) At any time by mutual written consent of Purchaser and
Sellers;
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(b) By either Purchaser or Sellers, if the terminating party is
not in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before October 31,
1998, except where the Closing has been postponed pursuant to the provisions of
Section 9.8, in which case the applicable date shall be upon the expiration of
the period referred to in Section 9.8(b) (the "Termination Date");
(c) by Sellers, if Sellers are not in default or breach in any
respect of their obligations under this Agreement, if all of the conditions in
Section 11.2 have not been satisfied or waived by the date scheduled for the
Closing (as such date may be postponed pursuant to Section 9.8);
(d) by Purchaser, if Purchaser is not in default or breach in any
material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing (as such date may be postponed pursuant to
Section 9.8);
(e) by Purchaser, pursuant to Section 9.8.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Sellers pursuant to Sections 9.8 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein, all
filings, applications and other submissions relating to the transactions
contemplated hereby as to which termination has occurred shall, to the extent
practicable, be withdrawn from the agency or other Person to which such filing
is made.
(b) If this Agreement is terminated pursuant to Section 14.1(d),
the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to
Purchaser and Purchaser shall have the right to pursue all remedies available
hereunder at law or in equity, including, without limitation, the right to seek
specific performance and/or actual monetary damages, but excluding consequential
and incidental damages. In recognition of the unique character of the property
to be sold hereunder, and the damages which Purchaser will suffer in the event
of a termination pursuant to the foregoing Sections of this Agreement, Sellers
hereby waive any defense that Purchaser has an adequate remedy at law for the
breach of this Agreement by Sellers.
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(c) If this Agreement is terminated pursuant to Section 14.1(c)
and Purchaser shall be in breach in any material respect of its representations,
warranties, covenants, agreements, or obligations set forth in this Agreement,
then and in that event, Sellers shall have the right to retain the amount
delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as
the sole and exclusive remedy of Sellers as a consequence of Purchaser's default
(which aggregate amount the parties agree is a reasonable estimate of the
damages that will be suffered by Sellers as a result of the default by Purchaser
and does not constitute a penalty), the parties hereby acknowledging the
inconvenience and nonfeasability of otherwise obtaining inadequate remedy.
(d) If this Agreement is terminated pursuant to Sections 14.1(a),
14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1)
shall be returned to Purchaser.
(e) A notice of termination made under any provision of Section
14.1 of this Agreement shall be deemed to be a notice of termination under the
termination provisions of the Investor Agreement, the Management Agreement and
the MTC Agreement.
(f) In the event of a default by either party that results in a
lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
SECTION 15
NOTICES
-------
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as follows:
To Purchaser: SINCLAIR COMMUNICATIONS, INC.
------------ 2000 W. 41st Street
Baltimore, Maryland 21211
Attention: David D. Smith
Telecopy: (410) 467-5043
Telephone: (410) 662-1008
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with copies Sinclair Communications, Inc.
(which shall not constitute 2000 W. 41st Street
notice) to: Baltimore, Maryland 21211
Attention: General Counsel
Telecopy: (410) 662-4707
Telephone: (410) 662-1422
and
Thomas & Libowitz, P.A.
Suite 1100
100 Light Street
Baltimore, Maryland 21202
Attention: Steven A. Thomas
Telecopy: (410) 752-2046
Telephone: (410) 752-2468
To Sellers' Agents: Anthony R. Ignaczak
------------------ Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Telecopy: (804) 979-1145
Telephone: (804) 979-9227
Allen B. Rider, III
Colonnade Capital, L.L.C.
13th Floor
901 East Byrd
Richmond, Virginia 23219
Telecopy: (804) 782-6606
Telephone: (804) 782-3512
Stephen W. Burke
Clark & Stant, P.C.
Suite 900
One Columbus Center
Virginia Beach, Virginia 23462
Telecopy: (757) 473-0395
Telephone: (757) 499-8800
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or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Each of the Sellers hereby irrevocably appoints
Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called
the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by such Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall be unanimous. In the event of the death,
incapacity or liquidation of any of Sellers' Agents, such person or entity shall
not be replaced, and the remaining Sellers' Agents shall continue in that
capacity. The Sellers agree jointly and severally to indemnify the Sellers'
Agents from and against and in respect of any and all liabilities, damages,
claims, costs, and expenses, including, but not limited to attorneys' fees,
arising out of or due to any action by them as the Sellers' Agents and any and
all actions, proceedings, demands, assessments, or judgments, costs, and
expenses incidental thereto, except to the extent that the same result from bad
faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be
entitled to rely exclusively upon any communications given by the Sellers'
Agents on behalf of any Seller, and shall not be liable for any action taken or
not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to
disregard any notices or communications given or made by Sellers unless given or
made through the Sellers' Agents.
SECTION 17
MISCELLANEOUS
-------------
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and
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terms used in the masculine gender shall be read in the feminine or neuter
gender when the context so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to this Agreement constitute an integral part of this Agreement as if
fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the
Management Agreement, the MTC Agreement and the FCC Licensee Transfer Agreement,
the Annexes, Schedules and Exhibits and the documents to be delivered hereunder
and thereunder constitute the entire understanding and agreement between the
parties hereto concerning the subject matter hereof. All negotiations and
writings between the parties hereto are merged into this Agreement, the
Investors Agreement, the Management Agreement, the MTC Agreement, the FCC
Licensee Transfer Agreement, and there are no representations, warranties,
covenants, understandings, or agreements, oral or otherwise, in relation thereto
between the parties other than those incorporated herein or to be delivered
hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended except
in writing signed by each of the Purchaser and Sellers' Agent.
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its obligations hereunder; and provided further that any change of control in
respect of Purchaser's parent, SBGI, shall not require the consent of Sellers.
In the event of such permitted assignment or other transfer, all of the rights,
obligations, liabilities, and other terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against, the
respective successors and assigns of the parties hereto, whether so expressed or
not.
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17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent any Seller or any Affiliate thereof or
Purchaser from making any disclosure in connection with the transactions
contemplated by this Agreement if required by applicable law or otherwise as a
result of its, or its Affiliate's, being a public company, provided that prior
notice of such disclosure is given to the other party hereto.
17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will
have no adequate remedy at law if Sellers fail to perform their obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however,
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that all transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Sellers and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Sellers. Purchaser hereby waives compliance with the provisions of any
applicable bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits hereto are
the result of the efforts of all parties to this Agreement and every covenant,
term, and provision of this Agreement shall be construed according to its fair
meaning and shall not be construed against any particular party as the drafter
of such covenant, term, and/or provision. The Purchaser and Sellers agree that
this Agreement is to be construed in a manner consistent with the terms of the
Investors Agreement, the Management Agreement and the MTC Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
SINCLAIR COMMUNICATIONS, INC.,
a Maryland corporation
By
-------------------------------------------------
its
----------------------------------------
AARDVARKS UNLIMITED, INC.,
a Virginia corporation
By
-------------------------------------------------
its
----------------------------------------
COMMONWEALTH INVESTORS, L.P., a
Virginia limited partnership
By: its general partner
Riverfront Partners
By
-------------------------------------------------
its
----------------------------------------
QUAD-C PARTNERS L.P., a
Delaware limited partnership
By: its general partner
Quad-C X, L.C.
By
-------------------------------------------------
its
----------------------------------------
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QUAD-C OFFSHORE INVESTORS L.P., a
Delaware limited partnership
By: its general partner
Quad-C X, L.C.
By
-------------------------------------------------
its
----------------------------------------
QUAD-C PARTNERS II, L.P., a
Virginia limited partnership
By: its general partner
Quad-C XI, L.C.
By
-------------------------------------------------
its
----------------------------------------
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ANNEX 1
DEFINITIONS
-----------
As used in the attached Stock Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Allocable Portion" shall mean 0% in the case of each of Investors and
the Company, 96.470% in the case of MTC and 3.530% in the case of Management.
"Basket Amount" has the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
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"Broadcast Time Sales Agreement" shall mean all contracts and
agreements pursuant to which MMP has sold commercial air time on the Stations
for cash.
"Business" means the business of owning and operating the Stations.
"Business Day" means any day on which banks in New York City are open
for business.
"Cash Price" shall mean the excess of $252 million over the Funded Debt
immediately prior to the Closing.
"CERCLA" has the meaning set forth in Section 5.3q of the Agreement.
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Liabilities" has the meaning set forth in Section 2.2(b)
of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Estimated Accounts Receivable" has the meaning of an
amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP
as of the Closing Date, which have been outstanding for no more than 120 days,
as set forth in the Certificate of Sellers' Agent delivered to Purchaser five
(5) days before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" has the meaning set forth in the recitals to the Agreement.
"Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
or may have any liability (whether actual, contingent, with respect to any of
its assets or otherwise) as of the Closing Date, in each case with respect to
any present or former directors, employees, or agents of the Company.
"Company Interests" shall have the meaning set forth in Section 5.2q.
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"Company Plan" shall mean, as of the Closing Date, any Benefit Plan for
which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments, in each case with respect to any present or former
employees of the Company. Company Plan shall include any Qualified Plan
terminated within the preceding six years.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock and the Station assets to Purchaser to maintain the validity and
effectiveness (any default or violation of the terms thereof) of any Material
Contract and any licenses (including, without limitation, the FCC Licenses) to
be transferred to Purchaser, or otherwise to consummate the transactions
contemplated by this Agreement.
"Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of
the Agreement.
"Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and
Stephen W. Burke.
"Disbursement Agreement" means that certain Disbursement Agreement
dated not later thirty (30) days prior to the Closing, among the Disbursing
Agent and the Sellers.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any Person that together with the Company
or MMP, as applicable, would be or was at any time treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which the Company or MMP, as applicable, is or has been a general
partner.
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"Estimate Certificate" shall have the meaning set forth in Section
2.2(b)(i).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Applications" means the applications requesting the approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Licensee Entities" shall have the meaning set forth in the
Recitals.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3h
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"Financial Statements" means the unaudited balance sheet of the Company
at December 31, 1996, and the statement of operations for the year then ended.
"GAAP" means generally accepted accounting principles.
"Funded Debt" means indebtedness of MMP for borrowed money, including
any and all fees, costs or other payments associated with its payoff or
retirement, other than (i) any indebtedness due after the Closing Date with
respect to program contract liabilities, and (ii) Closing Date Liabilities.
"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" or any similar denomination intended to classify
substances by
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reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity
under any Environmental Laws.
"H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Deposit" means $12,750,000 less an amount equal to the lesser
of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts
Receivable.
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service mark registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Incentive Agreements" has the meaning set forth in Section 9.14.
"Indemnification Amount" means $12,750,000.00 deposited or collected
pursuant to the Indemnification Escrow Agreement.
"Indemnification Escrow Agreement" has the meaning set forth in Section
3.1 of the Agreement.
"Indemnification Escrow" has the meaning set forth in Section 3.1 of
the Agreement.
"Investors Agreement" has the meaning set forth in the Recitals.
"Investors" has the meaning set forth in the Recitals.
"Knowledge or knowledge" shall mean with respect to the Company, MMP,
MTR and the FCC Licensee Entities the actual knowledge (without any requirement
of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr.,
John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J.
Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the
managers and officers of MMP, and the
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officers and directors of the Company.
"LMA Stations" shall have the meaning set forth in the Recitals.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Accounts Receivable" has the meaning given in Section 5.3s.
"MMP's Benefit Arrangements" means any Benefit arrangement sponsored or
maintained by MMP or by the FCC Licensee Entities or with respect to which MMP
or the FCC Licensee Entities has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former director, employees, or
agent of MMP or the FCC Licensee Entities.
"MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan
for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC
Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make
payments, in each case with respect to any present or former employees of MMP or
the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan
terminated within the preceding six (6) years.
"MMP II FCC Applications" means the application requesting the approval
and consent of the FCC to the transfer of control of Television Stations WKEF-TV
and WEMT-TV from MMP to MTC.
"MMP Financial Statements" means the audited consolidated balance sheet
of MMP at December 31, 1996, the audited consolidated statements of operations
cash flows for the year then ended, all notes thereto and the independent
auditor's audit report thereon, together with the unaudited balance sheet of MMP
at September 30, 1997 and the unaudited statement of operations for the nine (9)
months then ended.
"MMP Material Adverse Effect" shall mean a material adverse effect on
the business, or financial condition of any Television Station with the
exception of WMMP-TV in the Charleston, South Carolina market or the Radio
Stations taken as a whole.
"MMP Real Property" means all real property owned or leased by MMP.
"MTC" shall have the meaning set forth in the Recitals.
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"MTC Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Management Agreement" shall have the meaning set forth in the
Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of the Company taken as a whole.
"Material Contract" means all agreements to which the Company or MMP is
a party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
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"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
"Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167%
in the case of Management, 26.6519% in the case of the Company, and 44.7881% in
the case of MTR.
"Purchase Price" shall mean the sum of (a) the Pro Rata Share of the
excess of the Cash Price over 40% of the Step Up, plus (b) the Allocable Portion
of 40% of the Step Up.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
"Qualified Plan" shall mean any Company Plan or MMP Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by the Company.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Sellers" has the meaning set forth in the preamble to the Agreement.
"Sellers' Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Shareholder Settlement Agreements" shall have the meaning set forth in
Section 2.2(b).
"Stations" has the meaning set forth in the recitals to the Agreement.
"Step Up" shall mean the amount of Code Section 754 basis step-up,
calculated as the present value (determined using an 8.0% discount rate over a
15-year period assuming
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straight line amortization) of 45.812% of the Cash Price minus (or plus in the
case of a negative) the aggregate tax basis capital accounts of MTR and
Management in MMP immediately prior to the Closing.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Television Licensee" shall have the meaning set forth in the Recitals.
"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
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"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
"VARS" has the meaning set forth in Section 9.14.
83
AGREEMENT AND PLAN OF MERGER
AMONG
SULLIVAN BROADCAST HOLDINGS, INC.,
SINCLAIR BROADCAST GROUP, INC.,
and
ABRY PARTNERS, INC.
(as Stockholder Representative)
EFFECTIVE AS OF
FEBRUARY 23, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into on March 16,
1998, but is effective as of February 23, 1998, among Sullivan Broadcast
Holdings, Inc., a Delaware corporation ("Sullivan"), Sinclair Broadcast Group,
Inc., a Maryland corporation ("Sinclair"), on behalf of itself and a subsidiary
to be formed by it pursuant to Section 1.A below, and ABRY Partners, Inc., a
Delaware corporation ("ABRY Partners"), solely in its capacity as the
Stockholder Representative referred to in this Agreement.
WHEREAS, the parties to this Agreement are among the parties
to an Agreement and Plan of Merger dated as of February 23, 1998 (the "Prior
Agreement"), and the parties to the Prior Agreement have agreed to restate the
Prior Agreement by entering into this Agreement and certain other agreements;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows, effective as of the date of the Prior Agreement:
ARTICLE I
THE SPIN-OFF TRANSACTIONS
1.A. FORMATION OF MERGER SUB. On or prior to March 20, 1998,
Sinclair will form a wholly-owned Subsidiary which will be a Delaware
corporation. Such Subsidiary will be the "Merger Sub" referred to in this
Agreement. Sinclair will cause such Subsidiary to become a party to this
Agreement, the Indemnity Agreement, the Earnest Money Escrow Agreement, the
Estimate Escrow Agreement and the Indemnity Escrow Agreement by executing and
delivering to Sullivan a counterpart thereof.
1.B. SULLIVAN TWO SPIN-OFF. At or prior to the time of the
Closing, so long as all required Consents of the FCC for the Sullivan Two
Spin-Off are then effective and any other required Consent for the Sullivan Two
Spin-Off has been obtained and is then effective, Sullivan will, and will cause
its Subsidiaries to, take such actions as may be required to (1) cause the
capital stock of Sullivan Two to be distributed to the holders of the Sullivan
Common Share Equivalents immediately prior to such distribution, with each such
holder receiving a number of shares of common stock which is equal to the number
of shares of common stock of Sullivan then held by such holders (on a
fully-diluted, as-exercised basis) and with such shares of common stock of
Sullivan Two having the same relative voting rights as such shares of common
stock of Sullivan which are then held by each of them (on a similar
fully-diluted, as-exercised basis), and (2) cause the FCC Authorizations
relating to the Sullivan Two Stations and the other assets described in the
attached Exhibit A to be transferred to Sullivan Two in consideration for a
promissory note of Sullivan Two in a principal amount equal to the amount
specified on the attached Exhibit A. The transactions described the preceding
sentence are referred to as the "Sullivan Two Spin-Off."
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1.C SULLIVAN THREE SPIN-OFF. At or prior to the time of the
Closing, so long as all required Consents of the FCC for the Sullivan Three
Spin-Off are then effective and any other required Consent for the Sullivan
Three Spin-Off has been obtained and is then effective, Sullivan will, and will
cause its Subsidiaries to, take such actions as may be required to (1) cause the
capital stock of Sullivan Three to be distributed to the holders of the Sullivan
Common Share Equivalents immediately prior to such distribution, with each such
holder receiving a number of shares of common stock which is equal to the number
of shares of common stock of Sullivan then held by such holders (on a
fully-diluted, as-exercised basis) and with such shares of common stock of
Sullivan Three having the same relative voting rights as such shares of common
stock of Sullivan which are then held by each of them (on a similar
fully-diluted, as-exercised basis), and (2) cause the FCC Authorizations
relating to the Sullivan Three Stations and the other assets described in the
attached Exhibit B to be transferred to Sullivan Three in consideration for a
promissory note of Sullivan Three in a principal amount equal to the amount
specified on the attached Exhibit B. The transactions described in the preceding
sentence are referred to as the "Sullivan Three Spin-Off," and each of the
Sullivan Two Spin-Off and the Sullivan Three Spin- Off is referred to as a
"Spin-Off."
1.D SPIN-OFF TAXES. Sullivan and its Subsidiaries will be
responsible for the payment of any Tax arising solely by reason of either
Spin-Off (a "Spin-Off Tax"). To the extent not paid at the Effective Time, the
liability of Sullivan and its Subsidiaries (if any) for any Spin- Off Tax
arising by reason of the Sullivan Three Spin-Off (as determined in accordance
with Section 3.D(6)) will be reflected in the computation of the Current
Liabilities.
ARTICLE II
THE MERGER
2.A GENERAL. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date, effective as of the Effective
Time, the Merger Sub will merge with and into Sullivan in accordance with the
terms and conditions of this Agreement. Sullivan will be the corporation which
survives such merger (the "Merger") and in such capacity is sometimes referred
to in this Agreement as "Post-Merger Sullivan."
2.B EFFECT ON SULLIVAN SHARE EQUIVALENTS. Immediately after
the Closing, effective at the Effective Time, subject to the terms and
conditions of this Agreement (1) the Merger will be effected by the filing with
the Secretary of the State of Delaware of a Certificate of Merger; (2) each
Sullivan Share Equivalent outstanding at the Effective Time, by said occurrence
and with no further action on the part of the holder thereof, will be
transformed and converted into the right to receive the Merger Consideration for
such Sullivan Share Equivalent, without interest or any similar payment thereon
or with respect thereto, upon surrender of the certificate representing such
Sullivan Share Equivalent; (3) each share of common stock of the Merger Sub
outstanding immediately prior to the Effective Time will, by said occurrence and
with no further action on the part of the holder thereof, be transformed and
converted into one share of common stock of Post-Merger Sullivan, so that
immediately thereafter Sinclair will be the sole and exclusive owner of all
equity securities of Post-Merger Sullivan; and (4) Post-Merger Sullivan will be
the owner of the business, assets, rights, privileges, immunities, powers,
franchises and other attributes of Sullivan
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<PAGE>
and the Merger Sub.
2.C CERTIFICATE OF INCORPORATION. Immediately after the
Effective Time, the certificate of incorporation of Post-Merger Sullivan will be
the certificate of incorporation of the Merger Sub as in effect immediately
prior to the Effective Time.
2.D BYLAWS. Immediately after the Effective Time, the bylaws
of Post-Merger Sullivan will be the bylaws of the Merger Sub as in effect
immediately prior to the Effective Time.
2.E BOARD OF DIRECTORS AND OFFICERS. The board of directors
and officers of the Merger Sub immediately prior to the Effective Time will be
the board of directors and the officers, respectively, of Post-Merger Sullivan
immediately after the Effective Time, and such individuals will serve in such
positions for the respective terms provided by applicable Legal Requirements or
in the bylaws of Post-Merger Sullivan until their respective successors are
elected and qualified.
2.F NAME. The name of Post-Merger Sullivan will be designated
by Sinclair.
2.G EXCHANGE PROCEDURES. At or after the Closing, each holder
of record of Sullivan Share Equivalents will deliver to Post-Merger Sullivan for
cancellation the certificate(s) representing such Sullivan Share Equivalents
(the "Old Sullivan Certificates"). Upon surrender of any Old Sullivan
Certificate for cancellation, subject to the provisions of this Agreement, (a)
the holder of such Old Sullivan Certificate will receive in exchange therefor
the Merger Consideration for the Sullivan Share Equivalents represented by such
Old Sullivan Certificate, and (b) such Old Sullivan Certificate will be
canceled. Until surrendered as contemplated by this Section 2.G, each Old
Sullivan Certificate will, at and after the Effective Time, be deemed to
represent only the right to receive, upon surrender of such Old Sullivan
Certificate, the Merger Consideration for the Sullivan Share Equivalents
represented by such Old Sullivan Certificate.
2.H NO FURTHER RIGHTS; TRANSFER OF SULLIVAN STOCK. The Merger
Consideration paid for any Sullivan Share Equivalent in accordance with the
terms of this Agreement will be deemed to have been paid in full satisfaction of
all rights pertaining to such Sullivan Share Equivalent. At the Effective Time,
the stock transfer books of Sullivan will be closed and no transfer of Sullivan
Share Equivalents will thereafter be made.
ARTICLE III
MERGER CONSIDERATION AND CLOSING
3.A MERGER CONSIDERATION.
(1) AMOUNT FOR ALL SULLIVAN SHARE EQUIVALENTS IN THE
AGGREGATE. The amount of the aggregate "Merger Consideration" for all
Sullivan Share Equivalents will an amount equal to the result of:
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(a) (i) the sum of (x) the product of the Cash Flow
Multiplier and the Annualized Trailing Cash Flow plus (y) if
the Cash Flow Multiplier is 12.00 and the Annualized Trailing
Cash Flow is not less than the amount of the Target Cash Flow,
then $2,620,000, plus (ii) the KOKH Amount, plus (iii) the
Adjustment Amount (the amount described in this clause (a)
being the "Base Merger Consideration") plus
(b) an amount equal to the Sullivan Receivable
Proceeds (the "Receivable Merger Consideration"), which amount
will be payable as provided in Section 3.G;
provided that, if the Closing occurs on or prior to September 21, 1998,
then the amount described in clauses (a)(i) above will not exceed
$970,000,000. Subject to Section 3.A(4), the "Cash Flow Multiplier"
means (x) 12.00, if the Closing occurs on or prior to June 23, 1998;
(y) 12.25, if the Closing occurs after June 23, 1998 and on or prior to
September 21, 1998; and (z) 12.5, if the Closing occurs after September
21, 1998. The "Target Cash Flow" means $78,115,000 plus the amount of
all discretionary contributions actually made by Sullivan and its
Subsidiaries to the 401(k) Plan with respect to any period after
December 31, 1997.
(2) AMOUNT FOR ANY PARTICULAR SULLIVAN SHARE
EQUIVALENT. With respect to any particular Sullivan Share Equivalent,
the "Merger Consideration" means the portion of the aggregate Merger
Consideration for all Sullivan Share Equivalents which is equal to the
amount that the holder of such Sullivan Share Equivalent would receive
in respect of such Sullivan Share Equivalent if:
(a) all Sullivan Rights outstanding
immediately prior to the Effective Time were converted into or
exercised or exchanged for Sullivan Shares to the fullest
extent permitted by the terms of such Sullivan Rights,
immediately prior to the Effective Time,
(b) Sullivan (instead of the Old Sullivan
Stockholders) received an amount equal to the aggregate Merger
Consideration for all Sullivan Share Equivalents and applied a
portion of such aggregate Merger Consideration to the
redemption in full, in accordance with the provisions of its
certificate of incorporation, of all preferred stock of
Sullivan, if any, which is outstanding immediately prior to
the Effective Time, and
(c) Sullivan thereafter distributed to the
holders of the Sullivan Shares outstanding immediately prior
to the Effective Time (after giving effect to the conversions,
exercises and exchanges referred to in clause (a) above and
the redemption described in clause (b) above), in accordance
with the provisions of its certificate of incorporation, an
amount equal to the aggregate Merger Consideration for the
Sullivan Share Equivalents reduced by the amount required to
effect the redemption described in clause (b) above,
reduced, in the case of any Sullivan Right, by the exercise price (if
any) payable upon the exercise of such Sullivan Right as described in
clause (a) above. Sullivan will cause the
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<PAGE>
holders of all Sullivan Rights to accept the Merger Consideration for
such Sullivan Right in consideration for the cancellation of such
Sullivan Right.
(3) FORM OF MERGER CONSIDERATION.
(A) FOR SULLIVAN PREFERRED STOCK. Subject to
the provisions of Article II regarding the surrender of Old
Sullivan Certificates, the amount of the aggregate Merger
Consideration for the Sullivan Preferred Stock will be paid on
behalf of the holders of Sullivan Preferred Stock on the
Closing Date in cash by wire transfer of immediately available
funds to such bank account(s) as the Stockholder
Representative may designate to the Merger Sub not less than
two (2) Business Days prior to the Closing Date.
(B) FOR OTHER SULLIVAN SHARE EQUIVALENTS.
Subject to the provisions of Article II regarding the
surrender of Old Sullivan Certificates, the Receivable Merger
Consideration will be paid as provided in Section 3.G, and:
(i) at the option of the Merger Sub, up to
One Hundred Million Dollars ($100,000,000) of the
aggregate amount of the estimated Base Merger
Consideration for the Sullivan Share Equivalents
which are not Sullivan Preferred Stock (the "Sullivan
Common Share Equivalents") will be paid to the
holders of Sullivan Common Share Equivalents on the
Closing Date (the "Old Sullivan Common Stockholders")
by the issuance of validly-issued, fully-paid and
nonassessable shares of Sinclair Common Stock which
have been registered under the Securities Act (and
which therefore will be tradeable on the Nasdaq
National Market upon receipt thereof), and
(ii) the remainder of the estimated amount
of such aggregate Base Merger Consideration will be
paid for the account of the Old Sullivan Common
Stockholders on the Closing Date in cash by wire
transfer of immediately available funds to such bank
account(s) as the Stockholder Representative may
designate to the Merger Sub not less than two (2)
Business Days prior to the Closing Date.
The portion of the Base Merger Consideration which is payable
in respect of the Sullivan Common Share Equivalents is
referred to as the "Sullivan Common Base Merger
Consideration." For purposes of this Section 3.A(3)(b), shares
of Sinclair Common Stock will be valued at the Average Trading
Price. Notwithstanding the foregoing, the entire amount of the
Sullivan Common Base Merger Consideration will be payable in
cash in the manner provided in clause (ii) above if on the
Closing Date shares of Sinclair Common Stock are not
registered under the Securities Exchange Act, the registration
described in clause (i) above has not been effected, and/or
shares of Sinclair Common Stock are not traded on the Nasdaq
National Market or a domestic national securities exchange.
The respective portions of the Sullivan Common Base Merger
Consideration which are payable in Sinclair Common Stock and
cash will be allocated among the Old Sullivan Common
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<PAGE>
Stockholders pro rata according to the respective amounts of
the Sullivan Common Base Merger Consideration to be received
by them, as determined in accordance with Section 3.A(2);
provided that, in lieu of issuing a fractional share of
Sinclair Common Stock to any Old Sullivan Common Stockholder,
Sinclair or the Merger Sub will pay the Stockholder
Representative as provided in clause (ii) above (for the
account of such Old Sullivan Stockholder) an amount in cash
equal to a corresponding fraction of the Average Trading
Price.
(C) SHARE CERTIFICATES FOR ABRY FUND
PARTNERS. Sinclair and the Merger Sub acknowledge that at or
after the time of the Closing the ABRY Fund will distribute to
its partners (who may in turn distribute to their partners,
and so on) any or all of the shares of the Sinclair Common
Stock which may be issuable to the ABRY Fund as part of the
Sullivan Common Base Merger Consideration. At the request of
the Stockholder Representative, the Merger Sub will cause to
be issued and delivered to the Stockholder Representative (for
the account of the ABRY Fund) certificates for any or all of
such shares of Sinclair Common Stock, issued in such
whole-number denominations and registered in such names or
nominees, as the Stockholder Representative may request. Such
certificates will be issued in whole number of shares only,
and in lieu of any fractional share Sinclair or the Merger Sub
will pay the Stockholder Representative (for the account of
the ABRY Fund) an amount in cash equal to a corresponding
fraction of the Average Trading Price.
(D) ESCROW DEPOSIT UNDER CERTAIN
CIRCUMSTANCES. Notwithstanding the foregoing, if the Estimated
Receivable Amount set forth in Sullivan's Estimate Report (as
it may be revised by Sullivan as provided in the penultimate
sentence of Section 3.E(2)) is less than $24,000,000, then an
amount equal to the excess of $24,000,000 over such Estimated
Receivable Amount will be withheld from the cash portion of
the Sullivan Common Base Merger Consideration to be paid to
the Stockholder Representative pursuant to Section 3.A(3)(b)
and will instead be deposited with the Estimate Escrow Agent
as the Estimate Fund.
(4) EFFECT OF DELAY.
(A) IF CAUSED BY SULLIVAN. If the Closing is
delayed (a "Delay") solely by reason of (i) a breach by
Sullivan of its obligations under this Agreement, (ii) the
failure of a Sullivan Consent to be obtained, (iii) any loss,
damage, impairment, condemnation, confiscation or interruption
described in Section 7.L(1) or 7.L(2), and/or (iv) a delay in
the Grant of any Required FCC Consent for a Spin-Off, or in
the expiration of the applicable waiting period under the
Hart-Scott-Rodino Act, solely as a result of actions taken by
Sullivan or its Subsidiaries (items described in clauses (i),
(ii), (iii), and (iv) being "Causes"), then for purposes of
determining the Cash Flow Multiplier and the amount described
in Section 3.D(1)(b), the Closing will be deemed to have
occurred on the day upon which it would have occurred but for
such breach, failure, loss, damage, impairment, condemnation,
confiscation or interruption.
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<PAGE>
(B) IF CAUSED BY GROSS REVENUE SHORTFALL. As
part of the Cash Flow Report delivered pursuant to Section
7.C(1) for each of March, April and May of 1998, Sullivan will
deliver to Sinclair its good faith determination of the amount
of the Gross Revenues, determined as if the last day of the
month in question were the Measurement Date (such amount being
the "Estimated Gross Revenues" for such month). If the
Estimated Gross Revenues for each of March, April and May of
1998 set forth in the corresponding Cash Flow Reports is less
than the corresponding amount set forth in Section 10.E and
all conditions to the Closing set forth in Articles IX and X
(other than Section 10.E) have been satisfied or waived in
writing (or would be satisfied by the delivery of documents or
taking of other actions to be delivered or taken at the
Closing) on June 23, 1998, then for purposes of determining
the Cash Flow Multiplier, the Closing will be deemed to have
occurred prior to June 23, 1998, if the Closing actually
occurs on or prior to the fifth (5th) Business Day after the
delivery of the Monthly Cash Flow Report for June, 1998.
3.B ANNUALIZED TRAILING CASH FLOW.
(1) TRAILING CASH FLOW -- BASIC DEFINITION. Subject to
Sections 3.B(2), 3.B(3), 3.B(4), 3.B(5), 3.B(6), and 13.Q, the
"Trailing Cash Flow" means the amount of
(a) the consolidated net operating income of Sullivan
and its Subsidiaries for the period (the "Measurement Period")
beginning on January 1, 1998 and ending on the earlier of (i)
the last day of the last full calendar month ended prior to
the Closing Date and (ii) August 31, 1998 (such earlier date
being the "Measurement Date"),
(b) increased by the amount of all non-recurring
items incurred other than in the ordinary course of business,
corporate overhead (including management and consulting fees,
reimbursements paid or payable to ABRY Partners and all
discretionary profit-sharing and 401(k) plan contributions),
income taxes, interest expense, depreciation and amortization
(including amortization in respect of Film Obligations)
deducted in computing such net operating income,
(c) reduced by the aggregate amount of all Film
Obligations which were actually paid in cash pursuant to
Program Contracts with respect to the Stations during such
period and which became due after September 30, 1997
(determined under the terms and conditions of the related
Program Contracts as in effect on December 31, 1997, or as
initially entered into, if entered into after December 31,
1997), and
(d) further reduced by the aggregate amount of all
Film Obligations which were not paid in cash on or prior to
the Measurement Date and which became due prior to the
three-calendar-month-period ending on the Measurement Date
(determined under the terms and conditions of the related
Program Contracts as in effect on December 31, 1997, or as
initially entered into, if entered into after December 31,
1997).
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For purposes of clause (b) above, except as provided in Section 3.B(3),
"corporate overhead" is understood and agreed to include all expenses
incurred in connection with the activities of the Corporate Personnel
and (without duplication) all expenses which are not incurred for the
benefit of a single Station (with an LMA Station and the Owned Station
serving the same market being considered a single "Station" for
purposes of this sentence) and which would not be incurred for the
benefit of a single Station under customary industry practice.
(2) TREATMENT OF BARTER-RELATED ITEMS. Notwithstanding
GAAP to the extent GAAP are to the contrary, the Trailing Cash Flow
will be determined exclusive of the value of any consideration received
in barter for time on any Station pursuant to any Trade and expenses
pertaining to air time provided in barter for products or services
pursuant to any Trade.
(3) LOBBYING EXPENSES. For purposes of determining the
Trailing Cash Flow, and notwithstanding GAAP to the extent GAAP are to
the contrary, 50% (and only 50%) of the amounts paid or payable to
Policy Communications, Inc. and which are attributable to the
Measurement Period will be deemed to constitute a part of corporate
overhead, and therefore will be added pursuant to clause (b) of Section
3.B(1).
(4) TREATMENT OF CERTAIN CASCOM ITEMS. For purposes of
determining the Trailing Cash Flow, and notwithstanding GAAP to the
extent GAAP are to the contrary, any payment or accrual in respect of
the "Cascom Bonus" (as that term is defined in the Executive Employment
Agreement dated as of December 9, 1996 among Sullivan, Sullivan
Broadcasting and Victor Rumore ("Rumore")) (so long as, by its terms,
such Cascom Bonus will not continue to accrue after the Closing Date),
and any expense relating to or arising out of the issuance in February,
1998 of shares of Sullivan Common Stock to Rumore, will be disregarded.
(5) TREATMENT OF CERTAIN LMA PAYMENTS. For purposes of
determining the Trailing Cash Flow, and notwithstanding GAAP to the
extent GAAP are to the contrary, a portion of the amount payable by
Sullivan or a Subsidiary of Sullivan under an Existing LMA for any
period which is equal to the amount of the interest expense of the
Person to whom such amount is payable for such period, plus the amount
of all repayments of the principal amount of indebtedness of such
Person from the proceeds of any such payment by Sullivan or a
Subsidiary of Sullivan, will be treated as if it were interest expense
of Sullivan and its Subsidiaries.
(6) APPLICATION OF GAAP. Except as otherwise provided in
this Agreement, the Trailing Cash Flow will be determined in accordance
with GAAP.
(7) ANNUALIZED TRAILING CASH FLOW DEFINED. The
"Annualized Trailing Cash Flow" means the product of the Trailing Cash
Flow multiplied by the amount (the "Annualization Factor") set forth
below for the date which is the Measurement Date:
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Measurement Date Annualization Factor
---------------- --------------------
March 31, 1998 5.81419
April 30, 1998 3.87381
May 31, 1998 2.90996
June 30, 1998 2.34386
July 31, 1998 2.02835
August 31, 1998 1.76026
3.C KOKH AMOUNT. The "KOKH Amount" means the result of:
(1) $30,066,000, plus a yield on such amount from January
30, 1998 to the date of the Closing computed at the Yield Rate, plus
(2) for each payment made by Sullivan or any of its
Subsidiaries after January 30, 1998 in respect of the "Purchase Price"
under the KOKH Purchase Agreement or any out-of-pocket expense incurred
in connection with the transactions contemplated by the KOKH Purchase
Agreement, the amount of such payment plus a yield on such amount from
the date it was paid to the Closing Date (or, if earlier in the case of
any such expense which is later reimbursed by Sinclair, the date it is
reimbursed by Sinclair), computed at the Yield Rate, plus
(3) for each capital contribution, loan or advance to
Sullivan Broadcasting of Oklahoma City, Inc., a Delaware corporation
("SBOC"), or Sullivan Broadcasting License Holder, Inc., a Nevada
corporation ("SBLH"), by Sullivan or another Subsidiary of Sullivan
after January 30, 1998 and prior to the Closing, to the extent the
proceeds thereof were used in connection with the operations of Station
KOKH, the amount of such capital contribution, loan or advance, plus a
yield on such amount from the date of such capital contribution, loan
or advance to the Closing Date (or, if earlier, the date upon which
such capital contribution, loan or advance is repaid) computed at the
Yield Rate, less
(4) the amount of each payment made to Sullivan or
any of its Subsidiaries after January 30, 1998 pursuant to the KOKH
Purchase Agreement representing a reduction in the "Purchase Price"
thereunder or a reimbursement of expenses incurred by SBOC or SBLH, and
less
(5) the amount of any capital contribution, loan or
advance described in clause (3) above which is repaid prior to the
Adjustment Time.
The "Yield Rate" will be 7.125% per annum.
3.D ADJUSTMENT AMOUNT.
(1) BASIC DEFINITION. Subject to the provisions of
Sections 3.D(2) through 3.D(6), the "Adjustment Amount" means:
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(a) the result of the following, as of the
Adjustment Time, for Sullivan and its Subsidiaries (including
Sullivan Two and Sullivan Three, as if it each were a
Subsidiary of Sullivan at the Adjustment Time), determined on
a consolidated basis:
(i) the aggregate amount of all
cash, cash equivalents, marketable securities,
prepaid expenses, deposits (other than film deposits,
if any) held by others and any current assets
(including amounts receivable from employees and
independent contractors and co-op receivables, and
amounts payable to Sullivan or any of its
Subsidiaries by reason of the termination of any
interest rate hedging arrangement, assuming such
arrangement were terminated immediately prior to the
Adjustment Time) not otherwise described in this
clause (i), other than the Sullivan Receivables
(collectively, but excluding the Sullivan
Receivables, the "Current Assets"), reduced (below
zero, if necessary) by
(ii) the aggregate principal amount
of all outstanding Funded Indebtedness and the
aggregate principal amount of the outstanding
indebtedness guaranteed by Sullivan Broadcasting
pursuant to the Mission Guarantees, in each case
together with the amount of all unpaid accrued
interest thereon, unpaid commitment fees and costs
incurred in connection with the termination of any
interest rate hedging arrangements, assuming such
arrangement were terminated immediately prior to the
Adjustment Time, but excluding any change of control,
prepayment or other premium in respect of any such
indebtedness, and excluding in all events the
indebtedness of Sullivan Two and Sullivan Three
represented by the promissory notes issued by them in
connection with the Spin-Offs, and further reduced
(below zero, if necessary) by
(iii) without duplication of any
amount reflected in clause (ii) above, all trade
accounts payable, accrued expenses (including accrued
vacation pay) and other current liabilities
(collectively, the "Current Liabilities"), and
further reduced (below zero, if necessary) by
(iv) the aggregate amount of the
proceeds (net of taxes and disposition costs) of all
Designated Sales (as that term is defined in Section
7.A(5)(a)(y) consummated after the date of this
Agreement and prior to the Adjustment Time; increased
by
(b) the applicable amount set forth below,
if the Closing occurs on or after October 21, 1998
Closing Date Amount
------------ ------
On or after October 21, 1998 but
10
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prior to November 20, 1998 $10,000,000
On or after November 20, 1998 but
prior to December 20, 1998 $20,000,000
On or after December 20, 1998 but
prior to January 19, 1999 $30,000,000
On or after January 19, 1999 but
prior to February 18, 1999 $40,000,000
On or after February 18, 1999 but
prior to March 20, 1999 $50,000,000
On or after March 20, 1999 but
prior to April 19, 1998 $60,000,000
On or after April 19, 1998 $70,000,000
and reduced by
(c) the excess, if any, of (i) the product
of $1,985,422 and a fraction, the numerator of which is the
number of days during calendar year 1998 prior to the Closing
Date and the denominator of which is 365, over (ii) the
aggregate amount of the capital expenditures made by Sullivan
and its Subsidiaries during calendar year 1998 and prior to
the Adjustment Time.
(2) CURRENT PORTION OF FUNDED INDEBTEDNESS. For purposes
of determining the Adjustment Amount, and notwithstanding GAAP to the
extent GAAP are
to the contrary, the "Current Liabilities" will not include the current
portion of any Funded Indebtedness or any accrued interest thereon.
(3) TRANSACTION EXPENSES. For purposes of determining the
Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to
the contrary, the "Current Liabilities" will include (i) all amounts
incurred by Sullivan or any of its Subsidiaries (including on behalf of
any Old Sullivan Stockholder, and including the fees and disbursements
of advisors to Sullivan, Sullivan Two, Sullivan Three, the Old Sullivan
Stockholders and the Stockholder Representative), in connection with
the negotiation of, the execution of, the performance of Sullivan's,
Sullivan Two's and Sullivan Three's obligations under, and the
consummation or preparation for consummation of the transactions
contemplated by, this Agreement and not paid prior to the Adjustment
Time (all of which amounts Sinclair and Post-Merger Sullivan will pay
and satisfy, or cause to be paid and satisfied, in full), other than
any item which this Agreement specifies is to be at any Acquiring
Party's expense, (ii) all amounts required to be paid by, or other
obligations of Sullivan, any of its Subsidiaries, Sullivan Two or
Sullivan Three from and after the Adjustment Time pursuant to the
various employment agreements among Sullivan, Sullivan
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Broadcasting and the Corporate Personnel (each of whom it is understood
will resign or be terminated as of the Effective Time), and (iii) all
amounts required to be paid by Sullivan, any of its Subsidiaries,
Sullivan Two or Sullivan Three from and after the Adjustment Time in
connection with the termination of employment by Sullivan and its
Subsidiaries of the Corporate Personnel or any Non-Continuing Station
Manager effective as of the Closing Date.
(4) TRADE-OUT ITEMS. For purposes of determining the
Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to
the contrary, with respect to Trade-Out Receivables and Trade-Out
Payables:
(a) the amount of Sullivan's or any of its
Subsidiaries' obligations under, and the amount of the goods,
services and other items to be received under, any Trade will
be determined in accordance with standard industry valuation
methods as of the date of this Agreement (provided that, in
the case of goods, services and other items to be so received,
no such item will be valued at an amount which is greater than
the fair value of such item at the Adjustment Time);
(b) the "Current Assets" will not include
Trade-Out Receivables with respect to any Station;
(c) the "Current Liabilities" will not
include Trade-Out Payables with respect to any Station except
to the extent (and only to the extent) that the aggregate
amount of the Trade-Out Payables with respect to such Station
as of the Adjustment Time exceeds the aggregate amount of the
Trade-Out Receivables with respect to such Station as of the
Adjustment Time by more than $50,000; and
(d) for purposes of this Agreement
(including clause (c) above), each Station which is a
television translator station will be considered together with
the related Station which is a full-power television station
and all other related television translator stations.
(5) PROGRAM PAYMENTS. For purposes of determining the
Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to
the contrary, "Current Assets" and "Current Liabilities" will not
include any amounts in respect of Film Obligations, except that:
(a) the Current Liabilities will include
the aggregate amount of all Film Obligations which become due
prior to the first day of the calendar month which includes
the Closing Date (determined under the terms and conditions of
the related Program Contracts as then in effect) and which are
not paid prior to the Adjustment Time;
(b) the Current Liabilities will include an
amount equal to (i) the aggregate amount of all Film
Obligations which are not paid prior to the Adjustment Time
and which become due during the calendar month which includes
the Closing
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Date (determined under the terms and conditions of the related
Program Contracts as then in effect), multiplied by (ii) a
fraction, the numerator of which is the number of days during
such calendar month prior to, but not including, the Closing
Date, and the denominator of which is the number of days
during such calendar month;1
(c) the Current Assets will include an
amount equal to (i) the aggregate amount of all Film
Obligations which are paid prior to the Adjustment Time and
which become due during the calendar month which includes the
Closing Date (determined under the terms and conditions of the
related Program Contracts as then in effect), multiplied by
(ii) a fraction, the numerator of which is the number of days
during such calendar month on and after, but not prior to, the
Closing Date, and the denominator of which is the number of
days during such calendar month;2 and
(d) the Current Assets will include an
amount equal to the aggregate amount of all Film Obligations
which become due after the final day of the calendar month
which includes the Closing Date (determined under the terms
and conditions of the related Program Contracts as then in
effect) and which are paid prior to the Adjustment Time.
(6) TAX MATTERS. For purposes of determining the
Adjustment Amount and notwithstanding GAAP to the extent GAAP are to
the contrary:
(A) CLOSING OF BOOKS. The Tax liabilities
for each Straddle Period will be determined by closing the
books and records of Sullivan, its Subsidiaries, Sullivan Two
and Sullivan Three as of the Adjustment Time, and by treating
the portion of such Straddle Period ending on (and including)
the day prior to the Closing Date and the portion of the
Straddle Period beginning on the Closing Date as if they were
separate Tax periods, and by employing accounting methods
which are consistent with those employed in preparing the Tax
Returns for Sullivan, its Subsidiaries, Sullivan Two and
Sullivan Three in prior periods except as otherwise required
by applicable law, and which do not have the effect of
distorting income or expenses (taking into account the
transactions contemplated by this Agreement), except that
Taxes based on items other than income or sales (for this
purpose, a Tax imposed under alternative methods, at least one
of which is based on income, will be considered an income Tax)
will be computed for such Straddle Period by prorating on a
time basis between the portion of the Straddle Period
beginning on the first day of the applicable Straddle Period
and ending on (and including) the day prior to the Closing
Date and the period beginning on the Closing Date and ending
on the last day of such Straddle Period; provided that (x)
with respect to any Tax which is not
- -------------------
1 e.g., if the Closing occurs on June 20, 1998, then the fraction described
in this clause (b) will be 19/30.
2 e.g., if the Closing occurs on June 20, 1998, then the fraction described
in this clause (c) will be 11/30.
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in effect during the entire Straddle Period, the proration of
such Tax will be based on the period during the Straddle
Period that such Tax was in effect, and (y) for all such
purposes, the Sullivan Two Spin-Off will be deemed to have
occurred after the Adjustment Time and the Sullivan Three
Spin-Off will be deemed to have occurred prior to the
Adjustment Time, with the effect that any liability for
Spin-Off Taxes relating to the Sullivan Three Spin-Off, but
not Spin-Off Taxes relating to the Sullivan Two Spin-Off, will
constitute Current Liabilities.
(B) DETERMINATION OF SPIN-OFF TAX
LIABILITIES. The respective amounts of Sullivan's, its
Subsidiaries', Sullivan Two's and Sullivan Three's aggregate
liabilities for the Spin-Off Taxes arising from the Sullivan
Two Spin- Off (the "Sullivan Two Spin-Off Tax Liability") and
the Sullivan Three Spin-Off (the "Sullivan Three Spin-Off Tax
Liability") will be determined by applying all available net
operating losses and other items of deduction and credit
(collectively, "Tax Benefits"). Those Tax Benefits which are
permitted under the applicable Legal Requirements to be
applied to reduce either the Sullivan Two Spin-Off Tax
Liability or Sullivan Three Spin-Off Tax Liability (as
distinct from those Tax Benefits which are only permitted to
be applied to reduce one such Tax Liability but not the other)
will be applied pro rata, based on the respective amounts of
the Sullivan Two Spin-Off Tax Liability for the Tax in
question and the Sullivan Three Spin-Off Tax Liability for the
Tax in question determined prior to the application of such
Tax Benefits.
(7) APPLICATION OF GAAP. Except as otherwise provided
in this Agreement, the Adjustment Amount will be determined in
accordance with GAAP.
3.E ESTIMATES OF ANNUALIZED TRAILING CASH FLOW, KOKH AMOUNT
AND ADJUSTMENT AMOUNT FOR CLOSING PURPOSES.
(1) ESTIMATES TO BE GIVEN EFFECT. For purposes of
determining the amount of Base Merger Consideration to be paid at the
Closing, the Annualized Trailing Cash Flow, the KOKH Amount and the
Adjustment Amount will be deemed to be equal to the Estimated
Annualized Trailing Cash Flow, the Estimated KOKH Amount and the
Estimated Adjustment Amount, respectively, determined under this
Section 3.E. Notwithstanding this Section 3.E and Section 3.F, if the
Annualized Trailing Cash Flow has been finally determined pursuant to
Section 3.J, then the amount so finally determined will be used to
determine the amount of the Sullivan Base Merger Consideration to be
paid at the Closing and the ultimate amount of the Sullivan Common Base
Merger Consideration, and the provisions of this Section 3.E and
Section 3.F will apply only to the KOKH Amount and the Adjustment
Amount and not the Annualized Trailing Cash Flow. For purposes of
determining the Estimated Adjustment Amount, the aggregate amount of
the Current Liabilities will be assumed to be $5,600,000 (unless
Sullivan proposes a larger amount in Sullivan's Estimate Report).
(2) SULLIVAN'S ESTIMATE REPORT. At least five Business
Days prior to any date scheduled for the Closing pursuant to Section
3.H, Sullivan will prepare and deliver to
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<PAGE>
Sinclair a written report ("Sullivan's Estimate Report") setting forth
in reasonable detail Sullivan's good faith estimates of the Annualized
Trailing Cash Flow, the KOKH Amount and the Adjustment Amount as of
such scheduled Closing date and Sullivan's good faith estimate of the
gross amount of all Sullivan Receivables for which the date of the
underlying invoice is not earlier than the 120th day prior to the
Closing Date (the amount of such latter estimate being the "Estimated
Receivable Amount"). After delivery of Sullivan's Estimate Report,
Sullivan will (and will cause its Subsidiaries to) allow Sinclair and
its legal and accounting representatives and advisors reasonable access
to Sullivan's and its Subsidiaries' books and records to enable
Sinclair to verify the accuracy of the estimated amounts set forth in
Sullivan's Estimate Report. Sullivan will, in good faith, consider and
make revisions to such estimated amounts, but will not be obligated to
make any adjustment with which, in good faith, it does not agree. The
estimates of the Annualized Trailing Cash Flow, the KOKH Amount and the
Adjustment Amount set forth in Sullivan's Estimate Report," as they may
be adjusted by Sullivan as described in the preceding sentence, will be
the "Estimated Annualized Trailing Cash Flow," the "Estimated KOKH
Amount" and the "Estimated Adjustment Amount," respectively, for the
scheduled Closing date in question.
3.F FINAL DETERMINATION OF BASE MERGER CONSIDERATION AFTER THE
CLOSING.
(1) POST-CLOSING REPORT. On or prior to the one hundred
tenth (110th) day after the Closing Date, Post-Closing Sullivan will
prepare and submit to the Stockholder Representative consolidated and
consolidating statements of income for Sullivan and its Subsidiaries
for the period beginning on January 1, 1998 and ending on the
Measurement Date and consolidated and consolidating balance sheets for
Sullivan and its Subsidiaries (including each of Sullivan Two and
Sullivan Three, as if it were a Subsidiary of Sullivan as of the
Adjustment Time) as of the Adjustment Time, together with Post-Merger
Sullivan's determination of the aggregate Base Merger Consideration
(the "Post-Closing Report"); provided that, if the Annualized Trailing
Cash Flow has been finally determined prior to the Closing pursuant to
Section 3.J, then the Post-Closing Report need not contain such
consolidated and consolidating statements of income. The Acquiring
Parties will (and will cause their respective Subsidiaries to) allow
the Stockholder Representative and its legal and accounting
representatives and advisors reasonable access to Post-Merger
Sullivan's and its Subsidiaries' books and records to enable the
Stockholder Representative to timely review and dispute the contents of
the Post-Closing Report. Post-Closing Sullivan's determination of the
aggregate Sullivan Common Base Merger Consideration set forth in the
Post-Closing Report will become final and binding upon the Parties and
the Old Sullivan Common Stockholders on the thirtieth (30th) day after
the Post-Closing Report is given to the Stockholder Representative
unless, prior to such thirtieth (30th) day, the Stockholder
Representative gives Post-Closing Sullivan written notice stating that
the Stockholder Representative disagrees with such determination and
stating in reasonable detail the nature, extent of, and basis for, the
Stockholder Representative's disagreement and the Stockholder
Representative's determination of the aggregate Sullivan Common Base
Merger Consideration.
(2) GOOD FAITH RESOLUTION. If the Stockholder
Representative timely gives Post-Closing Sullivan such a dispute
notice, then, during the thirty (30) days after the
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Stockholder Representative gives such dispute notice, the Stockholder
Representative and Post-Merger Sullivan will attempt in good faith to
resolve such disagreement, and any mutual determination of the amount
of the aggregate Sullivan Common Base Merger Consideration by the
Stockholder Representative and Post-Merger Sullivan will be final and
binding upon the Parties and the Old Sullivan Stockholders on the date
of such mutual determination.
(3) ARBITRATION OF DISPUTE. If any such dispute cannot be
resolved by the Stockholder Representative and Post-Merger Sullivan on
or prior to such thirtieth (30th) day, then such dispute will be
referred to Ernst & Young, and such firm's determination of the
aggregate Sullivan Common Base Merger Consideration will be final and
binding upon the Parties and the Old Sullivan Common Stockholders on
the date such firm's report of its determination of the aggregate
Sullivan Common Base Merger Consideration has been delivered to
Post-Merger Sullivan and the Stockholder Representative.
(4) COMPUTATION AND ENTITLEMENT TO PAYMENT AFTER
RESOLUTION. If the amount of the aggregate Sullivan Common Base Merger
Consideration finally determined in accordance with this Section 3.F
exceeds the amount of the estimated Sullivan Common Base Merger
Consideration paid to the Stockholder Representative for the account of
the Old Sullivan Common Stockholders at the Closing (disregarding the
amount, if any, deposited in the Estimate Fund pursuant to Section
3.A(3)(d)) (the "Estimated Sullivan Common Base Merger Consideration"),
then (subject to the provisions of Article II regarding the surrender
of Old Sullivan Certificates) the Old Sullivan Common Stockholders will
be entitled to receive the amount of such excess pursuant to Section
3.F(5). If the Estimated Sullivan Common Base Merger Consideration
exceeds the amount of the aggregate Sullivan Common Base Merger
Consideration finally determined in accordance with this Section 3.F,
then (subject to the limitation set forth in Section 3.F(5))
Post-Merger Sullivan will be entitled to receive the amount of such
excess pursuant to Section 3.F(5). Any amount which becomes payable
pursuant to this Section 3.F(4) (except to the extent paid to
Post-Merger Sullivan from the Estimate Fund) will constitute an
adjustment of the aggregate Sullivan Common Base Merger Consideration
paid at the Closing.
(5) PAYMENT AFTER RESOLUTION.
(A) IF PAYABLE TO THE OLD SULLIVAN
STOCKHOLDERS. Any amount which becomes payable to the Old
Sullivan Common Stockholders pursuant to Section 3.F(4) will
be paid to the Stockholder Representative, for distribution by
the Stockholder Representative to the Old Sullivan Common
Stockholders, pro rata according to the remaining amounts of
the Sullivan Common Base Merger Consideration payable to them.
Any such amount will be paid to the Stockholder Representative
from the amount (if any) deposited in the Estimate Fund
pursuant to Section 3.A(3)(d), to the extent of the amount so
deposited. If no such deposit is made, or if such deposit is
made and the amount to be paid to the Old Sullivan Common
Stockholders pursuant to Section 3.F(4) exceeds the amount so
deposited, then the amount (or the remaining amount, as
applicable) so payable (for the Old Sullivan Stockholders'
benefit) will be paid by Post-Merger Sullivan.
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(B) IF PAYABLE TO POST-MERGER SULLIVAN. Any
amount which becomes payable to Post-Merger Sullivan pursuant
to Section 3.F(4) will be paid from the amount (if any)
deposited in the Estimate Fund pursuant to Section 3.A(3)(d),
to the extent of the amount so deposited. If no such deposit
is made, or if such deposit is made and the amount to be paid
to Post-Merger Sullivan pursuant to Section 3.F(4) exceeds the
amount so deposited, then the amount (or the remaining amount,
as applicable) so payable to Post-Merger Sullivan may be
recovered by Post-Merger Sullivan from either or both of (i)
the proceeds of the Sullivan Receivables received by Sinclair
and its Subsidiaries during the Collection Period as provided
in Section 3.G(4) and (ii) the amounts deposited in the
Indemnity Fund, and no additional amount will be payable to
Post-Merger Sullivan (the amount, if any, deposited in the
Estimate Fund pursuant to Section 3.A(3)(d), the amount of
such proceeds of the Sullivan Receivables, and the amounts
deposited in the Indemnity Fund pursuant to Section 3.G(4)
being Post-Merger Sullivan's sole source of payment of any
amount which may be owing to Post-Merger Sullivan by reason of
the estimated amount of the aggregate Sullivan Common Base
Merger Consideration paid to the Stockholder Representative at
the Closing being greater than the Sullivan Common Base Merger
Consideration as finally determined pursuant to this Section
3.F).
(C) INTEREST ON CERTAIN AMOUNTS. Any amount
payable by Post-Merger Sullivan pursuant to this Section
3.F(5) will bear interest at the rate of 18% per annum from
the third (3rd) Business Day after the date upon which the
aggregate Sullivan Common Base Merger Consideration is finally
determined in accordance with this Section 3.F through and
including the date upon which such amount and all such
interest are paid in full (it being understood that in no
event will interest be payable to any Old Sullivan Common
Stockholder in respect of any period prior to the date upon
which such Old Sullivan Common Stockholder surrenders the Old
Sullivan Certificate representing the Sullivan Common Share
Equivalent in question).
(D) PAYMENT OF UNDISPUTED AMOUNT. To the
extent the aggregate Sullivan Common Base Merger Consideration
and the resulting amount of any payment which may be required
pursuant to Section 3.F(4) are not in dispute, Post-Merger
Sullivan may retain proceeds of Sullivan Receivables as
provided in Section 3.G(4), Post-Merger Sullivan or the
Stockholder Representative will be entitled to withdraw
amounts from the Estimate Fund and/or the Indemnity Fund, and
the Stockholder Representative will be entitled to receive
payments from Post-Merger Sullivan (for the account of the Old
Sullivan Common Stockholders) of the amounts payable to the
Old Sullivan Common Stockholders, as the case may be.3
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3 By way of illustration, assume that (a) the Estimated Adjustment
Amount is $20,000,000, (b) neither the amount of the Annualized Trailing Cash
Flow nor the KOKH Amount is in dispute, and (c) no amount is deposited in the
Estimate Fund. If the Post-Closing Report indicates that the
17
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(E) PAYMENTS FROM ESCROW FUNDS. All payments
made from the Estimate Fund or the Indemnity Fund pursuant to
this Section 3.F(5) will be requested and made in accordance
with the terms of the Estimate Escrow Agreement or the
Indemnity Escrow Agreement, as applicable. Earnings on the
amount (if any) deposited in the Estimate Fund or the
Indemnity Fund will be paid to the Person(s) ultimately
entitled to receive the amount so deposited, pro rata based on
the respective portions of the amount deposited in such Fund
to be paid to them.
(6) COSTS OF DISPUTE RESOLUTION. The prevailing party in
any determination pursuant to Section 3.F(3) will be entitled to
recover from the non-prevailing party such prevailing party's
reasonable attorneys' fees and disbursements in addition to any amount
owing to it at the Closing, and the nonprevailing party also will be
required to pay all other reasonable costs and expenses associated with
such determination; provided that (a) if the independent public
accounting firm which makes such determination is unable to determine
that a party is the prevailing party, then such costs and expenses will
be equitably allocated by such firm upon the basis of the outcome of
such determination, and (b) if such firm is unable to allocate such
costs and expenses in such a manner, then the costs and expenses of
such arbitration will be paid one-half by Post-Merger Sullivan and
one-half by the Stockholder Representative (on behalf of the Old
Sullivan Stockholders), and each of them will pay the out-of-pocket
expenses incurred by it. Such independent accounting firm may designate
the prevailing party for purposes of this Section 3.F(6).
3.G SULLIVAN RECEIVABLES.
(1) DEFINED. The "Sullivan Receivables" means all
trade and other accounts and notes receivable of Sullivan and its
Subsidiaries (including each of Sullivan Two and Sullivan Three, for
this purpose) arising from the sale of advertising time (including
so-called "infomercials") and other paid programming time on the
Stations, determined on a consolidated basis as of the Adjustment Time.
(2) COLLECTION AND APPLICATION. On, and during the
120 days after, the Closing Date (the "Collection Period"), Post-Merger
Sullivan and Sinclair will, and will cause their respective
Subsidiaries to, use reasonable efforts in accordance with their
respective normal business practices (not including resorting to or
threatening litigation) to collect the Sullivan Receivables, including
issuing invoices for those Sullivan Receivables for which invoices have
not been issued prior to the Closing Date. Collections from any Person
which is a debtor with respect to any Sullivan Receivable (a "Sullivan
Debtor") will be applied in the chronological order of the billings of
Sullivan, Sullivan Two, Sullivan
- -------------------
Adjustment Amount is $18,500,000 and the Stockholder Representative disputes
that determination and asserts that the Adjustment Amount is $19,000,000, then
only $500,000 is in dispute. In that case, even prior to the resolution of such
dispute, Post-Merger Sullivan will be entitled to retain from the proceeds of
the Sullivan Receivables as provided in Section 3.G(4), or withdraw from the
Indemnity Fund, $1,000,000 (along with a proportionate share of the "Escrow
Income" referred to in the Indemnity Escrow Agreement, in the case of such a
withdrawal from the Indemnity Fund).
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Three, Post-Merger Sullivan and their respective Subsidiaries, as
applicable, to such Sullivan Debtor (i.e., to the oldest unpaid
billing first) unless (i) such Sullivan Debtor disputes in writing its
obligation to pay such billing, (ii) such Sullivan Debtor indicates in
writing that such payment is to be applied in another, specified
manner, or (iii) other facts or circumstances exist in light of which
it would be reasonable to conclude that such Sullivan Debtor does not
intend such payment to be applied in such a manner.
(3) EFFORTS BY STOCKHOLDER REPRESENTATIVE OR OLD
SULLIVAN STOCKHOLDERS. So long as Post-Merger Sullivan and Sinclair are
in compliance with this Section 3.G, neither the Stockholder
Representative nor any Old Sullivan Stockholder will make any direct
solicitation of any Sullivan Debtor for purposes of collecting any
Sullivan Receivable during the Collection Period, except as may be
agreed to by Post-Merger Sullivan and the Stockholder Representative
and except with respect to those Sullivan Receivables which may be or
become more than 180 days past due and those Sullivan Receivables with
respect to which Post-Merger Sullivan, Sinclair or any of their
respective Subsidiaries has received written notice of a dispute from
the related Sullivan Debtor (a copy of which notice Post-Merger
Sullivan will promptly forward to the Stockholder Representative).
(4) PAYMENT OF PROCEEDS. After the end of the Collection
Period and on or prior to the 150th day after the Closing Date,
Post-Merger Sullivan will pay over an amount equal to the aggregate
proceeds received by Sinclair and its Subsidiaries in respect of
Sullivan Receivables during the Collection Period, plus interest
thereon computed as described below (collectively, the "Sullivan
Receivable Proceeds"), as follows (without set-off in respect of any
other liability or obligation of any Person, whether arising pursuant
to this Agreement or otherwise except as expressly provided in this
Section 3.G(4)):
(a) the sum of (x) an amount equal to the aggregate
amount of all Loss and Expense (as that term is defined in the
Indemnity Agreement) asserted in writing pursuant to Section 2
of the Indemnity Agreement as recoverable under Section 3 of
the Indemnity Agreement and (y) the amount which Post-Merger
Sullivan asserts in good faith it will be owed pursuant to
Section 3.F(4), if the amount of the aggregate Sullivan Common
Base Merger Consideration has not been finally determined in
accordance with Section 3.F (or, if less than such sum, the
entire amount of the Sullivan Receivable Proceeds) will be
paid to the Indemnity Escrow Agent and deposited in the
Indemnity Fund, and
(b) the remainder of the Sullivan Receivable Proceeds
will be paid to the Stockholder Representative, for the
account of the Old Sullivan Common Stockholders, as part of
the Merger Consideration for the Sullivan Common Share
Equivalents,
in each case by wire transfer of immediately available funds to the
account specified by the recipient thereof; provided that, from and
after the time when the amount of the aggregate Sullivan Common Base
Merger Consideration is finally determined in accordance with Section
3.F, if any amount is payable to Post-Merger Sullivan pursuant to
Section 3.F(4) based on such determination, then Post-Merger Sullivan
may retain from the aggregate
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proceeds received by Sinclair and its Subsidiaries in respect of the
Sullivan Receivables during the Collection Period the amount so owed to
it, and the Sullivan Receivable Proceeds will be reduced by such
amount. At the time of the payments described in clauses (a) and (b)
above, Post-Merger Sullivan will deliver to the Stockholder
Representative a report which specifies the application to the Sullivan
Receivables and other accounts receivable of the collections received
during the Collection Period. Interest will be computed on the full
amount of the Sullivan Receivable Proceeds (exclusive of interest which
is part thereof) from and after the 74th day after the Closing to the
date upon which the payments described in clauses (a) and (b) above are
made), at the rate of 7.125% per annum.
(5) TRANSFER AFTER COLLECTION PERIOD. Immediately
following the last day of the Collection Period, Post-Merger Sullivan
and Sinclair will, and will cause their respective Subsidiaries to,
transfer and assign to the Stockholder Representative (for the account
of the Old Sullivan Common Stockholders) all rights with respect to the
Sullivan Receivables to the extent they have not then been collected in
full, together with all files concerning such Sullivan Receivables, and
Post-Merger Sullivan, Sinclair and their respective Subsidiaries will
have no further responsibilities pursuant to this Section 3.G with
respect to any Sullivan Receivable except to remit to the Stockholder
Representative (on behalf of the Old Sullivan Stockholders) as provided
in Section 3.G(4) any Sullivan Receivable Proceeds received after the
Collection Period. Such transfer, assignment and remittance will
constitute a part of the payment of the Sullivan Common Merger
Consideration.
(6) ACCESS TO INFORMATION. During and after the
Collection Period, the Acquiring Parties will, and will cause their
respective Subsidiaries to, furnish the Stockholder Representative and
its agents, representatives and advisors with all information
(including reasonable access to their respective books and records)
which the Stockholder Representative reasonably requests in order to
monitor, confirm or dispute the Acquiring Parties' compliance with this
Section 3.G.
3.H CLOSING TIME AND PLACE. Subject to Section 12.A, the
consummation of the Merger and the payment of the Base Merger Consideration for
Sullivan Share Equivalents to be paid at such time (the "Closing") will be held
in the offices of Kirkland & Ellis, in New York, New York, at 10:00 a.m., local
time, on the date determined pursuant to the following two sentences, or at such
other place and/or at such other time and date as the Merger Sub and Sullivan
may agree in writing. The Closing will occur on a date designated by the Merger
Sub by written notice to Sullivan not less than ten Business Days in advance of
such date (which designated date will be not later than the Expiration Date).
Notwithstanding the foregoing, but subject to Section 12.A, if on a date for the
Closing described in the preceding sentence or specified pursuant to this
sentence any condition of the Merger Sub or Sullivan specified in Article IX or
X has not been satisfied (and will not be satisfied by the delivery of documents
at the Closing) or waived in writing, then the date for the Closing will be
extended to any date specified by the Merger Sub to Sullivan with not less than
10 Business Days' notice to the other (subject to the Merger Sub's and
Sullivan's respective conditions to the Closing set forth in Articles IX and X
being satisfied or waived in writing on such specified date); provided that any
such specified date will be on or prior to the Expiration Date.
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3.I DELIVERIES AT THE CLOSING. All actions on the Closing Date
(including those described in Sections 11.D and 11.E) will be deemed to occur
simultaneously, and no document or payment to be delivered or made on the
Closing Date will be deemed to be delivered or made until all such documents and
payments are delivered or made to the reasonable satisfaction of Sullivan, the
Merger Sub, the Stockholder Representative and their respective legal counsel.
(1) DELIVERY OF EARNEST MONEY. At the Closing, to the
extent then held by the Earnest Money Escrow Agent, the Earnest Money
Fund (together with all Earnest Money Income, if any, received and held
by the Earnest Money Escrow Agent and the right to receive all Earnest
Money Income, if any, not yet received by the Earnest Money Escrow
Agent) will be delivered to the Merger Sub.
(2) DELIVERIES BY SULLIVAN. At the Closing, Sullivan will
deliver to the Merger Sub the following:
(a) the minute book, stock transfer book and
other records relating to the internal corporate affairs of
Sullivan and each Subsidiary of Sullivan (other than Sullivan
Two and Sullivan Three) which are in Sullivan's and its
Subsidiaries' possession, and resignations of the officers and
directors of each of Sullivan and the Subsidiaries of
Sullivan, which resignations will be effective as of the
Effective Time;
(b) all mortgage discharges or releases of
Liens that, upon the repayment in full of all outstanding
Funded Indebtedness and other obligations of Sullivan and its
Subsidiaries (other than Sullivan Two and Sullivan Three)
under the Sullivan Senior Debt Arrangements as described in
Section 11.E and all other Funded Indebtedness of Sullivan and
its Subsidiaries (other than Sullivan Two and Sullivan Three)
and all related interest and other obligations, the release of
the Mission Guarantees, any required execution and delivery
thereof by Sullivan or a Subsidiary of Sullivan (other than
Sullivan Two and Sullivan Three), and any requisite filing
thereof, will be sufficient to cause the Station Assets held
by Sullivan and its Subsidiaries (other than the assets and
properties transferred in the Spin-Offs) and the capital stock
of Sullivan's Subsidiaries (other than Sullivan Two and
Sullivan Three) to be as described in the second sentence of
Section 4.G(1) and in Sections 4.G(4) and 4.Q;
(c) a certificate of the President or Chief
Executive Officer of Sullivan dated the Closing Date to the
effect that, except as specified in such certificate, to the
best of such officer's knowledge, the conditions set forth in
Sections 10.A(1) and 10.A(2) have been fulfilled;
(d) a certificate of Sullivan dated the
Closing Date to the effect that, except as specified in such
certificate, the conditions set forth in Sections 10.A(1) and
10.A(2) have been fulfilled;
(e) a certified copy of the resolutions or
action by written consent
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of the board of directors and stockholders of Sullivan
authorizing the Merger and Sullivan's execution, delivery and
performance of this Agreement;
(f) certificates as to the existence and/or
good standing of Sullivan and each of its Subsidiaries (other
than Sullivan Two and Sullivan Three), in each case issued by
the Secretary of State or a comparable official of each
jurisdiction specified for such corporation on the attached
Schedule 4O and dated on or after the fifth Business Day prior
to the Closing Date, certifying as to the existence and/or
good standing of such corporation in such jurisdictions;
(g) one or more opinions of counsel or
special counsel to Sullivan, each dated the Closing Date, as
to the matters set forth in the attached Exhibit C; and
(h) such other documents, instruments and
receipts as the Merger Sub may reasonably request in order to
effectuate the Merger and the other transactions contemplated
by this Agreement to be consummated at the Closing.
Each of the foregoing will be reasonably satisfactory in form to the
Merger Sub and its legal counsel.
(3) DELIVERIES BY THE MERGER SUB. At the Closing, the
Merger Sub will deliver or cause to be delivered to the Stockholder
Representative stock certificates for Sinclair Common Stock (if shares
of Sinclair Common Stock are to be part of the Merger Consideration)
and cash as described in Section 3.A representing the aggregate Base
Merger Consideration in respect of the Sullivan Share Equivalents,
determined based upon the Estimated Annualized Trailing Cash Flow (or
the Annualized Trailing Cash Flow, if it has been finally determined
pursuant to Section 3.J), the Estimated KOKH Amount and the Estimated
Adjustment Amount (subject to the provisions of Article II), together
with the following:
(a) a certificate of an officer or similar
official of the Merger Sub dated the Closing Date to the
effect that, except as specified in such certificate, to the
best of such officer's or official's knowledge, the conditions
set forth in Section 9.A(1) and 9.A(2) have been fulfilled;
(b) a certificate of an officer or similar
official of Sinclair dated the Closing Date to the effect
that, except as specified in such certificate, to the best of
such officer's or official's knowledge, the conditions set
forth in Sections 9.A(1) and 9.A(2) have been fulfilled;
(c) a certificate of the Merger Sub dated
the Closing Date to the effect that, except as specified in
such certificate, the conditions set forth in Sections 9.A(1)
and 9.A(2) have been fulfilled;
(d) a certificate of Sinclair dated the
Closing Date to the effect that, except as specified in such
certificate, the conditions set forth in Sections 9.A(1)
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and 9.A(2) have been fulfilled;
(e) a certified copy of the resolutions or
action by written consent of the board of directors and
stockholders of the Merger Sub authorizing the Merger and the
Merger Sub's execution, delivery and performance of this
Agreement;
(f) a certified copy of the resolutions or
action by written consent of the board of directors of
Sinclair authorizing Sinclair's execution, delivery and
performance of this Agreement;
(g) certificates as to the existence and/or
good standing of Sinclair and the Merger Sub, in each case
issued by the Secretary of State or a comparable official of
such jurisdictions as Sullivan may reasonably request and
dated on or after the fifth Business Day prior to the Closing
Date, certifying as to the existence and/or good standing of
such corporation in such jurisdictions;
(h) one or more opinions of counsel or
special counsel to Sinclair and the Merger Sub, each dated the
Closing Date, as to the matters set forth in the attached
Exhibit D; and
(i) such other documents, instruments and
receipts as Sullivan may reasonably request in order to
effectuate the Merger and the other transactions contemplated
by this Agreement to be consummated at the Closing (including
the registration and issuance of any Sinclair Common Stock
which is part of the Merger Consideration).
Each of the foregoing will be reasonably satisfactory in form to
Sullivan and its legal counsel.
3.J DETERMINATION OF TRAILING CASH FLOW AND GROSS REVENUES.
(1) GROSS REVENUES DEFINED. The "Gross Revenues" for any
period means the amount of the gross revenues of Sullivan and its
Subsidiaries from all sources, determined in accordance with GAAP on a
consolidated basis, but excluding revenues (other than from the sale of
advertising or paid programming time on the Stations) of a
non-recurring nature generated other than in the ordinary course of
business.
(2) EXAMINATION OF CASH FLOW REPORTS. Without limiting
Section 7.C(2), Sullivan will (and will cause its Subsidiaries to)
allow Sinclair and its legal and accounting representatives and
advisors reasonable access to Sullivan's and its Subsidiaries' books
and records to enable Sinclair to evaluate and dispute Sullivan's
determination of the Trailing Cash Flow and the Gross Revenues set
forth in each Cash Flow Report. Sullivan's determination of the
Trailing Cash Flow or the Gross Revenues set forth in any Cash Flow
Report will become final and binding upon the parties to this Agreement
and the Old Sullivan Stockholders on the fifteenth (15th) Business Day
after such Cash Flow Report is given to Sinclair unless, prior to such
fifteenth (15th) Business Day, Sinclair gives
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Sullivan written notice stating that Sinclair disagrees with such
determination and stating in reasonable detail the nature, extent of,
and basis for, Sinclair's disagreement and Sinclair's determination of
the Trailing Cash Flow or Gross Revenues, as the case may be, for the
period in question.
(3) GOOD FAITH RESOLUTION. If Sinclair timely gives
Sullivan such a dispute notice, then, during the five (5) Business Days
after Sinclair gives such dispute notice, Sullivan and Sinclair will
attempt in good faith to resolve such disagreement, and any mutual
determination of the amount of the Gross Revenues or the Trailing Cash
Flow, as the case may be, for the period in question by Sullivan and
Sinclair will be final and binding upon the parties to this Agreement
and the Old Sullivan Stockholders on the date of such mutual
determination.
(4) ARBITRATION OF DISPUTE. If any such dispute cannot be
resolved by Sullivan and Sinclair on or prior to such fifth (5th)
Business Day, then such dispute will be referred to Ernst & Young, and
such firm's determination of the Gross Revenues or the Trailing Cash
Flow, as the case may be, for the period in question will be final and
binding upon the parties to this Agreement and the Old Sullivan
Stockholders on the date such firm's report of its determination of the
Gross Revenues or the Trailing Cash Flow, as the case may be, for such
period has been delivered to Sullivan and Sinclair.
(5) COSTS OF DISPUTE RESOLUTION. The prevailing party in
any determination pursuant to Section 3.J(4) will be entitled to
recover from the non-prevailing party such prevailing party's
reasonable attorneys' fees and disbursements, and the nonprevailing
party also will be required to pay all other reasonable costs and
expenses associated with such determination; provided that (a) if the
independent public accounting firm which makes such determination is
unable to determine that a party is the prevailing party, then such
costs and expenses will be equitably allocated by such firm upon the
basis of the outcome of such determination, and (b) if such firm is
unable to allocate such costs and expenses in such a manner, then the
costs and expenses of such arbitration will be paid one-half by
Sullivan and one-half by Sinclair, and each of them will pay the
out-of-pocket expenses incurred by it. Such independent accounting firm
may designate the prevailing party for purposes of this Section 3.J(5).
(6) OUTDATED DETERMINATION. If the Trailing Cash Flow or
the Gross Revenues for any period believed to be the Measurement Period
are determined in accordance with this Section 3.J but such period is
not the actual Measurement Period, then the Trailing Cash Flow or the
Gross Revenues, as the case may be, will later be determined for the
actual Measurement Period in accordance with this Section 3.J.
3.K MANDATORY PAYMENT TO SULLIVAN.
(1) WHEN MANDATORY PAYMENT BECOMES OWING AND DUE. Except
as provided in Section 12.B(4)(d), on the Approval Date a payment in
the amount of Seventy Five Million Dollars ($75,000,000) will become
owing to Sullivan by the Merger Sub. Whether or not this Agreement is
thereafter terminated pursuant to Section 12.A, such
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payment (the "Mandatory Payment") will be due and payable upon the
termination of this Agreement pursuant to Section 12.A (or, if earlier,
the later of June 23, 1998 and the fifth Business Day after the
Approval Date), unless the Closing has occurred or the circumstances
described in Section 12.B(4)(d) apply. If the Merger Sub does not pay
such amount on or prior to such later date, then Sullivan may seek
payment of such amount from the Earnest Money Fund (including by means
a drawing under the Earnest Money Letter of Credit), in accordance with
the terms of the Earnest Money Escrow Agreement, unless the
circumstances described in Section 12.B(4)(d) exist.
(2) RETURN OF EARNEST MONEY FUND. Upon the making of the
Mandatory Payment, the Merger Sub will be entitled to a return of the
Earnest Money Fund. Any such return to the Merger Sub of the Earnest
Money Fund may be requested, and will be effected, in accordance with
the terms of the Earnest Money Escrow Agreement. After receipt of the
Mandatory Payment by Sullivan, at the Merger Sub's request Sullivan
will execute and deliver to the Merger Sub such joint written
instructions to the Earnest Money Escrow Agent as the Merger Sub may
reasonably request in order to effect the return of the Earnest Money
Fund to the Merger Sub.
(3) TREATMENT OF MANDATORY PAYMENT. The Parties intend
that, if the Mandatory Payment is required to be made, then the
Mandatory Payment will become the property of Sullivan, for the benefit
of its securityholders, and (whether or not the Closing occurs) will be
required to be repaid by Sullivan only as expressly provided in Section
12.B(4)(d). If the Mandatory Payment is made, then the amount of the
Mandatory Payment will constitute a prepayment of the portion of the
aggregate Base Merger Consideration payable in respect of the Sullivan
Share Equivalents and will be credited against the amount of such
portion of the aggregate Base Merger Consideration to be paid at the
Closing in cash. If this Agreement is terminated pursuant to Section
12.A after the Mandatory Payment is made, then Sullivan may retain the
Mandatory Payment except under the circumstances described in Section
12.B(4)(d). If this Agreement is terminated pursuant to Section 12.A
prior to the making of the Mandatory Payment, then the Mandatory
Payment will thereupon become due and payable, except under the
circumstances described in Section 12.A(4)(d), and the Earnest Money
Fund will not be released (except to Sullivan) until the Mandatory
Payment has been made. Unless this Agreement has been terminated
pursuant to Section 12.A and Sullivan is entitled to retain the
Mandatory Payment, Sullivan will not distribute or loan the proceeds of
the Mandatory Payment to its stockholders or their respective
Affiliates (other than Sullivan's Subsidiaries), but may utilize all or
a portion of such proceeds to repay Indebtedness of Sullivan and its
Subsidiaries (so long as the amount repaid may be reborrowed, subject
to the satisfaction of customary conditions for the purpose of repaying
such amount to Sinclair as provided in Section 12.B(4)(d)) or for any
other purpose not prohibited hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SULLIVAN
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Subject to Section 13.Q, Sullivan makes the following
representations and warranties:
4.A ORGANIZATION. Sullivan is a corporation which is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business or has similar status under the laws of
each jurisdiction in which such qualification is required by applicable Legal
Requirements. Sullivan has the power and authority to carry on the business
being conducted by it, to own and operate the Station Assets owned and operated
by it, and to enter into and consummate the transactions contemplated to be
consummated by it pursuant to this Agreement.
4.B ACTION. Each action necessary to be taken by or on the
part of Sullivan in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated to be consummated by
Sullivan pursuant to this Agreement and necessary to make the same effective
will be duly and validly taken by, and be effective at, the time by which such
action is required to be taken. This Agreement has been duly and validly
authorized, executed, and delivered by Sullivan and constitutes its valid and
binding agreement, enforceable against Sullivan in accordance with and subject
to its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, arrangement, moratorium or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies.
4.C FINANCIAL STATEMENTS.
(1) DESCRIPTION OF STATEMENTS. Attached to this Agreement
as Schedule 4C are copies of (a) the audited consolidated balance sheet
of Sullivan as at December 31, 1996, and the related statements of
operations and cash flows for the period from January 4, 1996 (the date
upon which Sullivan acquired Act III) to December 31, 1996, and related
notes, all reported on by Sullivan's independent certified public
accountants (collectively, the "12/31/96 Financial Statements"), and
(b) the internally prepared unaudited consolidated balance sheet of
Sullivan as at September 30, 1997 and the related statement of
operations for the nine-month period ended September 30, 1997 (the
"9/30/97 Financial Statements").
(2) REPRESENTATIONS AS TO 1996 STATEMENTS. The 12/31/96
Financial Statements are, in all material respects, (a) as of December
31, 1996, correct, complete and in agreement with the books and records
regularly maintained by Sullivan and its Subsidiaries, and (b) prepared
in accordance with generally accepted accounting principles applied on
a basis consistent with past practice throughout the year involved. The
12/31/96 Financial Statements present fairly, in all material respects,
the financial position of Sullivan and its Subsidiaries as at December
31, 1996 and the results of the operations and cash flow of Sullivan
and its Subsidiaries for the period covered thereby.
(3) REPRESENTATIONS AS TO 1997 STATEMENTS. When they are
delivered as provided in Section 7.C, the 12/31/97 Financial Statements
will be, in all material respects, (a) as of December 31, 1997,
correct, complete and in agreement with the books and records regularly
maintained by Sullivan and its Subsidiaries, and (b) prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with past practice throughout the year involved, and
will present fairly in all material respects, the
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financial position of Sullivan and its Subsidiaries as at December 31,
1997 and the results of the operations and cash flow of Sullivan and
its Subsidiaries for the period covered thereby.
(4) REPRESENTATIONS AS TO INTERIM STATEMENTS. Subject to
the effect of year-end adjustments which normally would arise in the
course of an audit, the 9/30/97 Financial Statements are, as of
September 30, 1997, in all material respects, correct, complete and in
agreement with the books and records regularly maintained by Sullivan
and its Subsidiaries, and, taken together, present fairly, in all
material respects, the financial position of Sullivan and its
Subsidiaries as at September 30, 1997 and the results of the operations
of Sullivan and its Subsidiaries for the nine months then ended.
4.D BUSINESS SINCE SEPTEMBER 30, 1997. Since September 30,
1997, except to the extent required or permitted by this Agreement or as set
forth on the attached Schedule 4D, the business of the Stations has in all
material respects been conducted in the ordinary course of business and in the
same manner as it had been conducted by Sullivan and its Subsidiaries from
January 4, 1996 (the date upon which Sullivan acquired Act III) through December
31, 1996.
4.E FCC AUTHORIZATIONS. As of the date of this Agreement, each
Person specified in the attached Schedule 4E as the holder of an FCC
Authorization has been authorized by the FCC to hold and is the holder of each
of the FCC Authorizations specified for such Person on the attached Schedule 4E.
Except as set forth on the attached Schedule 4E, (i) such FCC Authorizations
constitute all of the licenses and authorizations required under the
Communications Act, or the current rules, regulations, and policies of the FCC,
for the operation of the Stations as now conducted; (ii) such FCC Authorizations
are in full force and effect and are subject to or scheduled for renewal on the
respective dates specified on the attached Schedule 4E (unless theretofore
renewed after the date of this Agreement); (iii) such FCC Authorizations are
valid for the full respective terms thereof; (iv) none of Sullivan, its
Subsidiaries, Sullivan Two and Sullivan Three has any reason to believe that
such FCC Authorizations will not be renewed for a full and customary term in the
ordinary course with no materially adverse conditions (except with respect to
general rule-making and similar matters relating generally to television
broadcast stations); (v) there is not pending, or, to the knowledge of Sullivan
or any of its Subsidiaries, 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 there is not now pending, or, to the knowledge of
any such Person, 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 Sullivan, any of its
Subsidiaries, Sullivan Two or Sullivan Three with respect to any Station; (vi)
the Stations are operating in compliance, in all material respects, with the FCC
Authorizations, the Communications Act, and the current rules, regulations and
policies of the FCC; (vii) to the knowledge of Sullivan and its Subsidiaries, no
Station (other than any Station which is a low-power television station) is
short-spaced, on a grandfathered basis or otherwise, to any existing broadcast
television station, outstanding construction permit or pending application
therefor, domestic or international, or to any existing or proposed TV
allotment, domestic or international; (viii) neither Sullivan, any of its
Subsidiaries, Sullivan Two nor Sullivan Three has received any written notice to
the effect that it is causing objectionable interference to the transmissions of
any other television station or communications facility or has received any
written complaints with respect thereto;
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(ix) no other television station or communications facility is causing
objectionable interference to any Station's transmissions or the public's
reception of such transmissions; and (x) all documents required by 47 C.F.R.
Section 73.3526 to be kept in each Station's public inspection file are in such
file, and such file will be maintained in proper order and complete up to and
through the Closing Date. Except with respect to Market Cable Systems that are
parties to retransmission agreements, for each Station, there has been made a
valid election of must carry with respect to each Market Cable System. Except as
set forth on Schedule 4.E, no Market Cable System has advised Sullivan, its
Subsidiaries, Sullivan Two or Sullivan Three of any signal quality deficiency or
copyright indemnity or other prerequisite to cable carriage of any Station's
signal, and no Market Cable System has declined or threatened to decline such
carriage of such Station or failed to respond to a request for carriage of such
Station or sought any form of relief from carriage of such Station from the FCC.
Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three have filed with the
FCC, on a timely basis, all material reports and other material filings required
to be filed by them in connection with the Stations pursuant to the
Communications Act and the rules, regulations and policies of the FCC.
4.F CONDITION OF ASSETS. Except as set forth on the attached
Schedule 4F, the material tangible assets of Sullivan and its Subsidiaries and
the improvements on the Realty which are used by them (a) are in all material
respects in good and technically sound operating condition (ordinary wear and
tear excepted) and are not in need of repair, (b) are in all material respects
in a condition which would be sufficient to permit the owner thereof to operate
or program the Stations (in the manner in which the Stations are operated or
programmed by Sullivan and its Subsidiaries as of the date of this Agreement) in
compliance with the terms of the FCC Authorizations, the Communications Act and
current FCC rules and regulations, and (c) have in all material respects been
maintained in a manner consistent with generally accepted standards of good
engineering practice and to the knowledge of Sullivan, all applicable federal,
state and local statutes, ordinances, rules and regulations, including, without
limitation, all applicable tower painting and lighting requirements.
4.G TITLE, ETC.
(1) REALTY. The attached Schedule 4G contains a
description of all parcels of Realty owned by Sullivan, its
Subsidiaries, Sullivan Two and Sullivan Three (collectively, the "Owned
Realty"). The Person designated as the "Titleholder" on the attached
Schedule 4G has good and marketable fee title to such parcel, free and
clear of all Liens, except for Permitted Encumbrances. Included in the
attached Schedule 4G is a copy of the policy (if any) insuring the
Titleholder's title thereto as of the date of this Agreement. Sullivan
and its Subsidiaries have valid leasehold interests in all real
property subject to the leases (the "Leases") described on the attached
Schedule 4G. The attached Schedule 4G contains a description of all the
material Leases to which Sullivan, any Subsidiary of Sullivan, Sullivan
Two or Sullivan Three is a party as a tenant (or subtenant) or landlord
with respect to any Station as of the date of this Agreement, other
than any lease pursuant to which Sullivan or a Subsidiary (as lessor)
leases space on a tower on terms which were customary when such lease
was entered into. Neither Sullivan, any of its Subsidiaries, Sullivan
Two nor Sullivan Three is in material default under any of the Leases,
and Sullivan, any Sullivan Subsidiary, Sullivan Two or Sullivan Three
is the holder of the leaseholds purported to be granted to it under the
Leases under which it is a lessee. Each of the Leases (x) is valid as
to Sullivan,
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any Sullivan Subsidiary, Sullivan Two or Sullivan Three and, to the
knowledge of Sullivan, is valid as to any other party thereto, (y) is
in full force and effect and constitutes a legal and binding obligation
of, and is legally enforceable against, Sullivan, any Sullivan
Subsidiary, Sullivan Two or Sullivan Three and, to Sullivan's
knowledge, each other party thereto, subject to the effect of
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, arrangement, moratorium or similar laws affecting the
rights of creditors generally and the availability of equitable
remedies, and (z) grants substantially the leasehold interest it
purports to grant, including any rights to nondisturbance and peaceful
and quiet enjoyment that may be contained therein. To Sullivan's
knowledge, each party other than Sullivan, any Sullivan Subsidiary,
Sullivan Two or Sullivan Three is in compliance in all material
respects with the provisions of the Leases. The Owned Realty and the
real property subject to the Leases listed in the attached Schedule 4G
constitute all of the real property owned, leased or used by Sullivan,
any Sullivan Subsidiary, Sullivan Two or Sullivan Three in the business
and operations of the Stations which is material to the businesses and
operations of the Stations.
(2) COMPLIANCE. The Owned Realty and its present uses
comply in all material respects with all applicable zoning laws and
ordinances and no material exemption or waiver thereunder will expire
or be terminated by reason of the Merger. To the knowledge of Sullivan
and its Subsidiaries, there exists no notice of any material
uncorrected violations of housing, building, safety, or fire ordinances
with respect to the Owned Realty or the real property leased by
Sullivan or a Subsidiary pursuant to any Lease. Except as disclosed on
the attached Schedule 4G, the Owned Realty is currently serviced by a
community sewage system.
(3) CONDEMNATION OR DISPOSITION. Neither Sullivan, any of
its Subsidiaries, Sullivan Two nor Sullivan Three has received any
notice of, and none of them has knowledge of, any pending, threatened,
or contemplated condemnation proceeding affecting the Owned Realty or
the real property leased by Sullivan or a Subsidiary pursuant to any
Lease, or any part thereof, or of any sale or other disposition of the
Owned Realty or any portion thereof in lieu of condemnation.
(4) NON-REALTY. Taken together, Sullivan, its
Subsidiaries, Sullivan Two and Sullivan Three have good title to, or a
valid leasehold in, the tangible assets (other than the Realty) and
personal property included in the Station Assets, and all such assets
and personal property will on the Closing Date (after the repayment in
full of the Funded Indebtedness of Sullivan and its Subsidiaries and
all related interest and other obligations and the release of all
related Liens and the Mission Guarantees) be free and clear of all
Liens other than Permitted Encumbrances.
4.H CALL LETTERS, TRADEMARKS, ETC. Taken together, Sullivan,
its Subsidiaries, Sullivan Two and Sullivan Three possess (and immediately after
the Merger, will possess) adequate rights, licenses, or other authority to use
the call letters presently used by the Stations and all trademarks and trade
names relating to the Stations which are required for the operation of the
Stations or which are material to the conduct of the business of the Stations,
in each case as presently conducted by Sullivan and its Subsidiaries, and have
good title to such call letters, trademarks and
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trade names which they purport to own, and Sullivan's, its Subsidiaries',
Sullivan Two's and Sullivan's Three's respective rights thereto are free and
clear of all Liens other than Permitted Encumbrances. None of Sullivan, its
Subsidiaries, Sullivan Two and Sullivan Three has received any written 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.
4.I INSURANCE. The attached Schedule 4I is, in all material
respects, a correct and complete summary of the material terms of each material
policy of insurance which is in effect on the date of this Agreement insuring
Sullivan and its Subsidiaries against loss or damage to any Station Assets by
fire, casualty and other hazards and risks relating to their tangible assets,
and each such policy of insurance is in full force and effect in all material
respects.
4.J CONTRACTS. The attached Schedule 4J contains a list of
each of the following to which any of Sullivan or its Subsidiaries is a party on
the date of this Agreement (other than any Contract (i) which does not require
Sullivan and its Subsidiaries to furnish consideration in an aggregate amount
for such Contract of more than $25,000, (ii) which is terminable by Sullivan or
any of its Subsidiaries without penalty upon advance notice of thirty (30) days
or less, (iii) which is a barter programming contract pursuant to which the
remaining telecasting term as of December 31, 1997 was twelve months or less, or
(iv) which is a Time Sale Contract):
(1) television network affiliation agreements;
(2) Trades which could require the furnishing of
advertising time on any Station at any time after the Closing Date;
(3) sales agency or advertising representation contracts;
(4) employment contracts;
(5) licenses or other contracts under which Sullivan or
any of its Subsidiaries is authorized to broadcast on any Station
filmed or taped programming supplied by others;
(6) leases of personal property which have a term,
including renewal options exercisable by any party thereto other than
Sullivan or any of its Subsidiaries, ending more than one year after
the date of this Agreement; and
(7) any other contract which is material to the business
and operation of the Stations.
Neither Sullivan, any of its Subsidiaries, Sullivan Two nor Sullivan Three is in
material breach of any contract or agreement described on the attached Schedule
4J, nor is there any fact or circumstance which, with the giving of notice or
the passage of time, or both, would constitute such a breach. Each material
Contract described on the attached Schedule 4J (other than any such Contract
which expires or is terminated in the ordinary course of business after the date
of this
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Agreement) is in all material respects in full force and effect, valid and
binding and enforceable as to Sullivan, its Subsidiaries, Sullivan Two and/or
Sullivan Three, as applicable, and, to Sullivan's knowledge, each other party
thereto (subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, arrangement, moratorium or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies).
4.K EMPLOYEES. The attached Schedule 4K lists all employees of
Sullivan or any of its Subsidiaries as of December 31, 1997 and their respective
current budgeted annual base salary and bonus or annualized wages as of such
date and their respective dates of hire. Except as described on the attached
Schedule 4J or the attached Schedule 4K, on the date of this Agreement (a)
Sullivan and its Subsidiaries have no written or oral contract of employment
with any such employee (other than a Contract for employment at the will of the
employer), and (b) Sullivan and its Subsidiaries are not a party to or subject
to any collective bargaining agreement with respect to any such employee or any
contract with any labor union or other labor organization with respect to the
Stations. Sullivan and its Subsidiaries are not parties to any pending labor
dispute affecting the Stations, nor, to the knowledge of Sullivan, is any such
dispute threatened, on the date of this Agreement and, on the Closing Date, no
such pending or threatened dispute will be material. With respect to employees
of and service providers to Sullivan and its Subsidiaries, Sullivan and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including any such laws respecting
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and have not and are not engaged in any unfair labor practice. The
persons classified by Sullivan and the Subsidiaries as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
Sullivan and its Subsidiaries have in all material respects fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
4.L LITIGATION. Except as set forth on the attached Schedule
(1) on the date of this Agreement, Sullivan and its
Subsidiaries are not 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 arising out of a
proceeding to which it is or was a party, and on the Closing Date, no
such item will have or reasonably be expected to result in a Material
Adverse Change; and
(2) on the date of this Agreement, there is no litigation
pending by or against, or to the knowledge of Sullivan threatened
against, Sullivan or any of its Subsidiaries which interferes with, or
could reasonably be expected to interfere with, (a) the operations of
the Stations as presently conducted or (b) the ability of Sullivan to
carry out the transactions contemplated to be carried out by it
pursuant to this Agreement, and on the Closing Date, no such pending or
threatened litigation will have or will reasonably be expected to
result in a Material Adverse Change.
There are no attachments, executions, or assignments for the benefit of
creditors or voluntary or
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involuntary proceedings in bankruptcy initiated or contemplated by, or, to the
knowledge of Sullivan, threatened or pending against, Sullivan or any of its
Subsidiaries.
4.M COMPLIANCE WITH LAWS. Other than with respect to matters
disclosed in the attached Schedule 4E or the attached Schedule 4L, subject to
obtaining all applicable Consents: (a) Sullivan and its Subsidiaries, with
respect to the Station Assets, are in compliance in all material respects with
all applicable Legal Requirements, and (b) the present uses by Sullivan and its
Subsidiaries of the Station Assets which they own do not in any material respect
violate any such Legal Requirements.
4.N NO DEFAULTS. Except for (w) any item described on the
attached Schedule 4N, (x) the requisite approval of the FCC, (y) compliance with
the requirements of the Hart- Scott-Rodino Act, and (z) any Consent which may be
required under any Contract, on the Closing Date (after giving effect to all
Consents which have been obtained) neither the execution and delivery by
Sullivan of this Agreement, nor the consummation by Sullivan of the Merger or
the other transactions contemplated by this Agreement to be consummated by
Sullivan, requires any Consent under, will 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, or will result in the creation of any Lien
(other than any Permitted Encumbrance or any Lien in favor of one or more of the
Acquiring Parties) under, any of the terms, conditions, or provisions of any
Legal Requirement to which Sullivan or any of its Subsidiaries is subject, or of
the certificate of incorporation or by-laws of Sullivan or any of its
Subsidiaries. No Lease for the main studio site of any Station, no lease
pursuant to which Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan
Three leases (as lessee) space on a transmission tower for the location of any
transmission equipment of any Station, and neither Existing LMA, contains any
provision which expressly requires a Consent by reason of a merger or change of
control or ownership of Sullivan.
4.O SUBSIDIARIES.
(1) SUBSIDIARIES' STOCK. All of the issued and
outstanding capital stock of each of the corporations named on the
attached Schedule 4O (other than Sullivan, and other than Sullivan Two
and Sullivan Three, as of the Closing Date) is owned of record
(directly or indirectly through one or more of its Subsidiaries) by
Sullivan free and clear of all Liens other than Permitted Encumbrances.
All such capital stock has been validly issued and is fully paid and
nonassessable, there is not outstanding any right to acquire any
capital stock or other equity securities of any Subsidiary of Sullivan
(by exercise of any right or by conversion, exchange or otherwise), and
such capital stock is not subject to any option, warrant, voting trust,
outstanding proxy, registration rights agreement or other agreement
regarding voting rights, other than any Permitted Encumbrance.
(2) SUBSIDIARIES' STATUS. Each of Sullivan's Subsidiaries
named on the attached Schedule 4O is a corporation duly organized,
validly existing and in good standing (or having comparable active
status) under the laws of the jurisdiction indicated on such Schedule
under the heading "Organization" and has the power and authority to
carry on the business conducted by it and own the properties owned by
it under the laws of such
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jurisdiction and each other jurisdiction in which it is required to
have such authority. A true and correct copy of the certificate or
articles of incorporation and by-laws of each of such Subsidiary has
been provided to the Merger Sub. On the Closing Date, neither Sullivan
nor any other corporation named on the attached Schedule 4O will own
any shares of stock or other equity or debt securities of or any
interest in any Person other than another Person named on the attached
Schedule 4O, Sullivan Two or Sullivan Three.
4.P TAX MATTERS.
(1) TAX RETURNS. Except as set forth on the attached
Schedule 4P or as has not caused and is not reasonably expected to
cause a Material Adverse Change: (a) all federal, state, local and
foreign tax returns and tax reports required to be filed by Sullivan or
any of its Subsidiaries have been timely filed (taking into account any
extensions of which Sullivan or any of its Subsidiaries may have
availed itself) with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be
filed, and all of the foregoing (including any summary balance sheets
included therein) are true, correct, and complete; (b) all federal,
state, local and foreign income, profits, franchise, sales, use,
occupation, property, excise, and other taxes (including interest and
penalties) due and payable by Sullivan and its Subsidiaries have been
fully paid; (c) no issues have been raised in writing (or, to
Sullivan's knowledge, orally) and are currently pending by the Internal
Revenue Service or any other taxing authority in connection with any of
such returns and reports; (d) no waivers of statutes of limitations as
to tax matters have been given or requested with respect to Sullivan
and its Subsidiaries; (e) the federal, state, local, and foreign income
tax and franchise tax returns of or with respect to Sullivan and its
Subsidiaries have not been examined by the Internal Revenue Service or
by appropriate state, provincial, or departmental tax authorities; (f)
no issue has been raised in writing (or, to Sullivan's knowledge,
orally) with Sullivan or any of its Subsidiaries by any taxing
authority which can reasonably be expected to result in a deficiency
for any fiscal year or all deficiencies asserted or assessments
(including interest and penalties) made as a result of any examinations
have been fully paid, and no proposed (but unassessed) additional
taxes, interest, or penalties have been asserted; (g) neither Sullivan
nor any of its Subsidiaries is (or has ever been) a party to any Tax
sharing agreement with any Person who was not a member of an affiliated
group of corporations (as that term is defined in Section 1504(a) of
the Tax Code, or any analogous combined, consolidated or unitary group
defined under state, local or foreign Tax law) consisting in whole or
in part of the parties to such agreement, and neither Sullivan nor any
of its Subsidiaries has any liability for the Taxes of any other Person
(other than Sullivan and its Subsidiaries) pursuant to Reg. Section
1.1502-6 under the Tax Code (or any similar provision of state, local
or foreign Tax law) or as a transferee or successor or by contract; and
(h) Sullivan has provided Sinclair with copies of all federal and state
income or franchise tax returns that have been filed with respect to
Sullivan or any of its Subsidiaries since January 4, 1996.
(2) TAX ELECTIONS AND SPECIAL TAX STATUS. Except as set
forth on the attached Schedule 4P: (a) neither Sullivan nor any of its
Subsidiaries is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Tax Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Tax Code, and
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Sinclair is not required to withhold tax in respect of the Merger
Consideration for the Sullivan Share Equivalents by reason of Section
1445 of the Tax Code; (b) neither Sullivan nor any of its Subsidiaries
has made any election or filed any consent pursuant to Section 341(f)
of the Tax Code relating to collapsible corporations; (c) neither
Sullivan nor any of its Subsidiaries has entered into any compensatory
agreements with respect to the performance of services which payment
thereunder would result in a nondeductible expense to Sullivan or any
of its Subsidiaries pursuant to Section 280G of the Tax Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of
the Tax Code; and (d) Sullivan has not agreed to make, nor is it
required to make, any adjustment under Section 481(a) of the Tax Code
by reason of a change in accounting method or otherwise.
4.Q CAPITAL STOCK. As of the date of this Agreement, Sullivan
has authorized capital stock consisting of 90,000,000 shares of capital stock,
of which (a) 25,000,000 shares are designated Class A Common Stock, par value
$0.001 per share, of which no shares are issued and outstanding, (b) 25,000,000
shares are designated Class B-1 Common Stock, par value $0.001 per share, of
which 1,201,577 shares are issued and outstanding, (c) 25,000,000 shares are
designated Class B-2 Common Stock, par value $0.001 per share, of which
6,158,211 shares are issued and outstanding, (d) 5,000,000 shares are designated
Class C Common Stock, par value $0.001 per share, of which 1,021,872 shares are
issued and outstanding, and (e) 10,000,000 shares are designated Preferred
Stock, $0.001 par value per share, of which 1,150,000 shares are issued and
outstanding. All of the issued and outstanding capital stock of Sullivan is duly
authorized and validly issued, fully paid and nonassessable, and there are no
preemptive rights in respect thereof in favor of any Person (other than any
Person which holds Sullivan Share Equivalents). Except for warrants which are
presently exercisable for 2,406,307 shares of Class B-1 Common Stock, there are
no outstanding options, warrants or other rights to subscribe for or purchase
from Sullivan, no contracts or commitments providing for the issuance of, or the
granting of rights to acquire, and no securities convertible into or
exchangeable for, any shares of capital stock or any other ownership interest of
Sullivan.
4.R BOOKS AND RECORDS. The minute books of each of Sullivan
and its Subsidiaries contain records which are complete and accurate in all
material respects of all meetings and other corporate actions of its
stockholders, its board of directors and all committees, if any, appointed by
its board of directors. The books of accounts, ledgers, order books, records and
documents of each of Sullivan and its Subsidiaries, in all material respects,
accurately and completely reflect information relating to its business, the
nature, acquisitions, maintenance and location of its assets and the
transactions giving rise to its obligations and accounts receivable.
4.S ABSENCE OF SIGNIFICANT UNDISCLOSED LIABILITIES. Neither
Sullivan nor its Subsidiaries has any debt, liability or obligation of any kind,
whether accrued, absolute, contingent or otherwise, including any liability or
obligation on account of Taxes or any governmental charges or penalty, interest
or fines, which would be required to be reflected in Sullivan's consolidated
balance sheet prepared in accordance with GAAP and which would have, or which in
the case of contingent or inchoate liabilities, would have if accrued or
absolute, a material adverse effect on the financial condition of Sullivan and
its Subsidiaries, other than any liability or obligation (a) reflected in any
Financial Statement, (b) identified with particularity in any attached Schedule
or arising since September 30, 1997 under any Contract which is described, or
which is not required to be described,
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on any attached Schedule, (c) incurred in the ordinary course of business since
September 30, 1997, or (d) incurred in connection with the transactions
contemplated by this Agreement. Each of Sullivan and Sullivan Broadcasting has
filed with the Securities and Exchange Commission all material documents
required by the Securities Act or the Securities Exchange Act to be filed by it
since January 4, 1996 (the "Sullivan SEC Reports"). Neither Sullivan nor
Sullivan Broadcasting has any liability by reason of any Sullivan SEC Report not
complying in all material respects at the time of the filing thereof with the
requirements of the Securities Act, and the rules and regulations thereunder, or
the Securities Exchange Act, and the rules and regulations thereunder, as the
case may be, or containing any untrue statement of a material fact or omitting
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.T EMPLOYEE BENEFIT PLANS. Except as set forth on the
attached Schedule 4T, neither Sullivan nor its Subsidiaries maintains or is a
party to or makes contributions to any of the following: (a) any "employee
pension benefit plan," (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA")); or (b) any "employee welfare
benefit plan" (as such term is defined in Section 3(a) of ERISA), whether
written or oral. All employee benefit plans and other Benefit Arrangements now
or formerly maintained by Sullivan or its Subsidiaries or to which Sullivan or
its Subsidiaries is obligated to contribute, are, and have in the past been, in
all material respects maintained, funded and administered in compliance with
ERISA, and other applicable law. No such employee benefit plan holds any
securities issued by Sullivan. Neither Sullivan nor any of its ERISA Affiliates
has ever sponsored or maintained, had any obligation to sponsor or maintain, or
had any liability (whether actual or contingent, with respect to any of its
assets or otherwise) with respect to any employee pension benefit plan subject
to Section 302 of ERISA or Section 412 of the Tax Code or Title IV of ERISA
(including any multiemployer plan). Excluding routine claims for benefits, there
are no pending claims or lawsuits by, against, or relating to any employee
benefit plans or other Benefit Arrangements that would, if successful, result in
liability of Sullivan or any of its Subsidiaries. Neither Sullivan nor any
Subsidiary has maintained or contributed to any plan intended to qualify under
Section 401(a) of the Tax Code since January 4, 1996, other than the Sullivan
Broadcasting Company 401(k) Plan (the "401(k) Plan"). The 401(k) Plan has always
qualified in all material respects in form and operation under Section 401(a) of
the Tax Code and has a currently applicable determination letter from the
Internal Revenue Service, and its trust has always been exempt under Section 501
of the Tax Code, and nothing has occurred with respect to such plan and trust
that could cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Tax Code. The
employee benefit plans and Benefit Arrangements maintained by Sullivan are not
presently under audit or examination (and have not received notice of potential
audit or examination) by any governmental authority, and no matters are pending
with respect to the 401(k) Plan under any governmental compliance programs. No
employee benefit plan or Benefit Arrangement contains any provision or is
subject to any law that would give rise to any vesting of benefits, severance,
termination, or other payments or liabilities as a result of the transactions
this Agreement contemplates, and Sullivan has not declared or paid any bonus or
other incentive compensation or established any severance plan, program, or
arrangement in contemplation of the transactions contemplated by this Agreement,
in each case other than those which have been paid or which will be included as
part of the Current Liabilities. Sullivan has made or has recorded proper
accruals for all required contributions to its employee benefit plans as of the
last day of each
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plan's most recent fiscal year, and all benefits accrued under any unfunded
Sullivan employee benefit plan or Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with GAAP. All group
health plans of Sullivan and its ERISA Affiliates have been operated in material
compliance with the requirements of Section 4980B (and its predecessor) and 5000
of the Code. No employee or former employee of Sullivan or its Subsidiaries, and
no beneficiary of any such employee or former employee, is, by reason of such
employee's or former employee's employment by Sullivan or such ERISA Affiliate,
entitled to receive any benefits, including death or medical benefits (whether
or not insured) beyond retirement or other termination of employment as
described in Statement of Financial Accounting Standards No. 106, other than
continuation coverage mandated under Section 4980B of the Tax Code or comparable
state law.
4.U BROKERS. There is no broker or finder or other Person who
would have any valid claim against Sullivan, any Subsidiary thereof, or any
Acquiring Party 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 Sullivan or any of its Affiliates.
4.V DISCLOSURE. To the knowledge of Sullivan, no statement of
a material fact set forth in this Article IV contains any statement of any
material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article IV not misleading in any material respect.
4.W ENVIRONMENTAL. All of the operations of Sullivan and its
Subsidiaries at or from any Realty comply in all material respects with
applicable Environmental Laws. Neither Sullivan nor its Subsidiaries has engaged
in or permitted any operations or activities upon any of the Realty for the
purpose of or involving the treatment, storage, use, generation, release,
discharge, emission, or disposal of any Hazardous Materials at the Realty,
except in substantial compliance with applicable Environmental Laws. To the
knowledge of Sullivan, there are no conditions existing at the Realty that
require, or which with the giving of notice or the passage of time or both would
likely require remedial or corrective action, removal or closure pursuant to the
Environmental Laws. To the knowledge of Sullivan, Sullivan and its Subsidiaries
have all the material permits, authorizations, licenses, consents and approvals
necessary for the current operation of the Stations and for the operations on,
in or at the Realty which are required under applicable Environmental Laws and
are in substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
SINCLAIR AND THE MERGER SUB
Sinclair and the Merger Sub, jointly and severally, represent
and warrant as follows:
5.A INCORPORATION. Sinclair is a corporation duly organized,
validly existing, and in good standing (or has comparable active status) under
the laws of the State of Maryland, and Sinclair has the corporate power and
authority to enter into and consummate the transactions
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contemplated to be consummated by it pursuant to this Agreement. From and after
the time it is formed, the Merger Sub will be a corporation duly organized,
validly existing, and in good standing (or has comparable active status) under
the laws of the State of Delaware and will have the corporate power and
authority to enter into and consummate the transactions contemplated to be
consummated by it pursuant to this Agreement.
5.B CORPORATE ACTION. Each action necessary to be taken by or
on the part of either Sinclair or the Merger Sub in connection with the
execution and delivery of this Agreement and the consummation of transactions
contemplated hereby to be consummated by it and necessary to make the same
effective duly and validly taken by, and be effective at, the time by which such
action is required to be taken. This Agreement has been duly and validly
authorized, executed, and delivered by each of Sinclair and the Merger Sub and
constitutes a valid and binding agreement, enforceable against each of them in
accordance with and subject to its terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement,
moratorium or similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
5.C NO DEFAULTS. Except as set forth on the attached Schedule
4H, the requisite approval of the FCC and compliance with the requirements of
the Hart-Scott-Rodino Act, on the Closing Date (after giving effect to all
approvals and consents which have been obtained), neither the execution and
delivery by Sinclair or the Merger Sub of this Agreement, nor the consummation
by Sinclair or the Merger Sub of the Merger and the other transactions
contemplated by this Agreement to be consummated by it, will 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 Legal Requirement to which Sinclair or the
Merger Sub is subject, or of Sinclair's or the Merger Sub's certificate of
incorporation or by-laws or similar organizational documents, or of any material
contract, agreement, or instrument to which Sinclair or the Merger Sub is a
party or by which Sinclair or the Merger Sub is bound.
5.D BROKERS. There is no broker or finder or other Person who
would have any valid claim against Sullivan (except after the Effective Time) or
any Old Sullivan Stockholder 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 Sinclair, the Merger Sub or any
Affiliate of any of them.
5.E LITIGATION. There is no litigation pending by or against,
or to Sinclair's or the Merger Sub's knowledge (after due inquiry) threatened
against, Sinclair or the Merger Sub related to or affecting Sinclair's or the
Merger Sub's ability fully to carry out the transactions contemplated to be
consummated by them pursuant to this Agreement. There are no attachments,
executions, or assignments for the benefit of creditors or voluntary or
involuntary proceedings in bankruptcy contemplated by, or, to Sinclair's or the
Merger Sub's knowledge, threatened or pending against, Sinclair or the Merger
Sub.
5.F SINCLAIR COMMON STOCK. The Sinclair Common Stock, if any,
issued as part of the Merger Consideration will be duly authorized, validly
issued, fully-paid and nonassessable
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and will, upon issuance and registration under the Securities Act, be tradeable
on the NASDAQ National Market without further registration under the Securities
Act or any other federal or state securities law. Sinclair has filed with the
Securities and Exchange Commission all material documents required by the
Securities Act or the Securities Exchange Act to be filed by it since January 1,
1996 (the "Sinclair SEC Reports"). As of their respective filing dates, the
Sinclair SEC Reports complied in all material respects with the requirements of
the Securities Act, and the rules and regulations thereunder, or the Securities
Exchange Act, and the rules and regulations thereunder, as the case may be, and
at the time filed with the SEC none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Parties
acknowledge that no representation or warranty will be deemed to be made
pursuant to this Section 5.F if no Sinclair Common Stock is issued as part of
the Merger Consideration.
5.G DISCLOSURE. To Sinclair's and the Merger Sub's knowledge,
no statement of a material fact set forth in this Article V contains a statement
of any material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article V not misleading in any material respect.
ARTICLE VI
APPLICATIONS FOR REQUIRED FCC CONSENT
6.A FOR SPIN-OFFS. On or prior to March 2, 1998, Sullivan
will, and will cause its Subsidiaries to, complete the portions of the
applications for the Required FCC Consents and will file such applications with
the FCC. Sullivan will, and will cause its Subsidiaries to, diligently take or
cooperate in the taking of all steps which are reasonably within its ability to
take and which are necessary, proper, or desirable to expedite the prosecution
of such applications and to cause the Required FCC Consents expeditiously to be
Granted and expeditiously to become Final Orders, and will refrain from making
any filing or announcement or taking (or causing or assisting any other Person
to take) any other action which reasonably could be expected to delay in any
respect such Required FCC Consents being Granted or becoming Final Orders
without Sinclair's prior written consent. Sullivan will promptly provide
Sinclair with a copy of any pleading, order, or other document served on
Sullivan or any of its Subsidiaries relating to such applications (other than
any of the same which is addressed to or states that it is to be served upon or
delivered to Sinclair or its communications counsel).
ARTICLE VII
COVENANTS OF SULLIVAN
7.A MAINTENANCE OF BUSINESS UNTIL THE CLOSING.
(1) OPERATION IN ORDINARY COURSE . Until the Closing,
Sullivan will,
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and will cause its Subsidiaries to, (a) with respect to the Station
Assets, continue to carry on the business and operations of the
Stations, keep the books of account, records, and files of Sullivan and
its Subsidiaries, realize upon the accounts receivable of Sullivan and
its Subsidiaries, and satisfy their accounts payable, all of which will
be carried on by Sullivan and its Subsidiaries in the ordinary and
usual course, in a manner which is consistent with their respective
past practices, (b) without limiting the generality of the foregoing,
not utilize Sullivan's and its Subsidiaries' rights under any Program
Contract in a manner which will render exhibitions of programming
thereunder unavailable to Post- Merger Sullivan and its Subsidiaries
after the Adjustment Time, except in accordance with their past
practices, (c) promptly execute and timely file any applications
reasonably required for renewal of the FCC Authorizations, (d) timely
file (taking into account any extensions of which Sullivan or any of
its Subsidiaries may avail itself) true, correct and complete federal,
state, local and foreign tax returns and tax reports required to be
filed by Sullivan or any of its Subsidiaries, (e) fully pay all
federal, state, local and foreign income, profits, franchise, sales,
use, occupation, property, excise and other taxes (including interest
and penalties) due and payable by Sullivan and its Subsidiaries, and
(f) sell advertising time on the Stations only in the ordinary and
usual course in a manner consistent with their respective past
practices, and (g) to the extent necessary to the conduct of its
business, use reasonable efforts to (i) perform its obligations under
all Station Contracts to which it is a party, (ii) preserve the Station
Assets held by it, and (iii) maintain in full force and effect the FCC
Authorizations.
(2) MAINTENANCE OF INSURANCE. Sullivan will, and will
cause its Subsidiaries to, maintain in full force and effect through
the Closing property damage insurance with respect to the Station
Assets which is not materially less comprehensive, and in amounts which
are not materially less than, the insurance coverage described on the
attached Schedule 4I, including timely paying the premiums associated
therewith.
(3) ADDITIONAL PROGRAM CONTRACTS. Until the Closing,
Sullivan may, and may cause or permit its Subsidiaries to, enter into
any Program Contract, or effect any such amendment, termination or
modification, which is material only with the prior consent of
Sinclair, which consent may be withheld in Sinclair's sole discretion
and will be deemed given if not denied by written notice by Sinclair to
Sullivan within five (5) Business Days after it is requested in
writing; provided that such notice and consent will not be required as
to the entry into any such Program Contracts so long as (x) the
aggregate amount of the cash payment obligations under such Program
Contracts as to which such consent is not given and not deemed given
does not exceed $50,000 for any Station, and (y) if Sullivan or any of
its Subsidiaries is required to provide advertising time in
consideration for the use of any programming covered by such Program
Contract, then the term during which such advertising time may be
required to be provided commences prior to May 31, 1999 and does not
exceed one (1) year in duration.
(4) OTHER CONTRACTS. From the date of this Agreement to
and including the Closing, Sullivan will be entitled to, and will be
entitled to cause or permit its Subsidiaries to, renew or extend the
term of any Time Sale Contract or any other Contract which, by its
terms, has expired at the time of such renewal or extension or which
would expire prior to the sixtieth day after the effective date of such
renewal or extension, and, in
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connection therewith, to agree to increase the amounts payable or other
obligations thereunder during any such renewal or extended term in
accordance with Sullivan's and its Subsidiaries' past practice in the
operation of the Stations, and to enter into any new Contract (other
than a Program Contract or except as prohibited by Section 7.A(5)) in
the ordinary course of its business or which is reasonably required in
order to enable it to comply with its obligations under this Agreement
(5) RESTRICTIONS. Prior to the Closing, except (i) as
otherwise permitted by Section 7.A(3) or 7.A(4), (ii) as required as
part of a Spin-Off, (iii) the transfer of the Headquarters Assets to
ABRY Partners or an Affiliate thereof for value and/or to one or more
of the Corporate Personnel as compensation, or (iv) as disclosed on the
attached Schedule 4F, Sullivan will not, and will not cause or permit
any of its Subsidiaries to, without the prior written consent of
Sinclair (to the extent the following restrictions are permitted by the
FCC and all other applicable Legal Requirements):
(a) other than in the ordinary course of
business, sell, lease (as lessor), transfer, or agree to sell,
lease (as lessor), or transfer, or agree to sell, lease (as
lessor) or transfer, any Station Assets
(x) which are required for the
operation of any Station,
or
(y) which have individually or in the
aggregate (together with all other Station Assets
transferred by Sullivan or any of its Subsidiaries
since the date of this Agreement other than in the
ordinary course of business and not replaced with
functionally equivalent or superior assets of
substantially equal or greater value) a replacement
cost in excess of $130,000 (it being understood that
sales, leases and/or transfers of Station Assets
described in this clause (y) and having an aggregate
replacement cost of $130,000 or less ("Designated
Sales") will not be prohibited by this Agreement)
without replacement thereof with a functionally equivalent or
superior asset of substantially equal or greater value;
(b) enter into any contract of employment
(other than (x) any contract for employment at the will of the
employer, (y) any contract for employment entered into in the
ordinary course of business and providing for consideration
payable upon or after termination which is consistent with
that payable under employment contracts for present or former
employees of Sullivan and its Subsidiaries having similar
seniority or responsibilities, or (z) any contract or Benefit
Arrangement not described in clause (y) with respect to the
employment of any Person whose employment will be terminated
at the time of the Closing, it being understood that the costs
of severance and other payments to be made under any contract
or Benefit Arrangement described in this clause (z) in
connection with or after such termination will be reflected in
the Current Liabilities) or collective bargaining agreement
which will be binding on Post-Merger Sullivan after the
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Merger, or permit any increases in the compensation of the
employees of Sullivan or any of its Subsidiaries with respect
to the Stations (but excluding the Corporate Personnel), in
each case except to the extent consistent with Sullivan's and
its Subsidiaries' past practices; provided that Sullivan and
its Subsidiaries may pay bonuses to any of their employees,
grant raises in salary and wages which do not represent, in
the aggregate, an increase in the employees' aggregate
annualized base compensation of more than 4% of the employees'
present annualized base compensation, and enter into any
employment agreement with on-air talent under which the annual
salary payable does not exceed $50,000 during any twelve-month
period;
(c) enter into any new Trade arrangement
which will involves the furnishing of advertising time in
exchange for services or merchandise after the Adjustment Time
on any Station, other than any Trade arrangement which (i)
does not involve goods and services having an aggregate fair
value in excess of $25,000, (ii) together with all other Trade
arrangements for such Station entered into after the date of
this Agreement by Sullivan and its Subsidiaries does not
involve goods and services having an aggregate fair value in
excess of $50,000, and (iii) does not have a duration in
excess of twelve months (it being understood that Sullivan and
its Subsidiaries may perform their obligations and exercise
their rights under such Trade arrangements and all Trade
arrangements in effect on the date of this Agreement);
(d) apply to the FCC for any construction
permit that would materially restrict any Station's present
operations or make any material adverse change in the
buildings or leasehold improvements which constitute Station
Assets;
(e) merge or consolidate, or agree to merge
or consolidate, with or into any other Person, other than
Sullivan or a Subsidiary of Sullivan;
(f) enter into any Contract with any of its
Affiliates (other than Sullivan or any of its Subsidiaries)
which will not be performed in its entirety or by its terms
terminate at or prior to the time of the Closing;
(g) cause any of its assets or properties to
become subject to any Lien, other than any Permitted
Encumbrance;
(h) commit any material breach of any
Contract which is described on the attached Schedule 4J or any
material Contract entered into by it after the date of this
Agreement; or
(i) change any material tax election, or
make any material change in accounting practice or policy, if
such change could reasonably be expected to have an adverse
effect on Post-Merger Sullivan, except to the extent required
by any Legal Requirement, any Contract or GAAP.
(6) EFFORTS TO PURSUE CERTAIN REMEDIES. Without
limiting the
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foregoing, prior to the Closing, Sullivan will (and will cause its
Subsidiaries to), use reasonable efforts to assert and prosecute any
claims, and resolve any unresolved claims, for indemnity or other
payment which they may have pursuant to the Act III Purchase Agreement
and, upon request, will keep Sinclair reasonably informed of the status
of any such claim.
7.B ORGANIZATION/GOODWILL. Prior to the Closing, Sullivan
will, and will cause its Subsidiaries to, use reasonable efforts to preserve the
business organization of the Stations and preserve the goodwill of the Stations'
suppliers, customers, and others having business relations with Sullivan and its
Subsidiaries. This Section 7.B will not apply to the Corporate Personnel or any
Non-Continuing Station Manager, with respect to continued service by them after
the Closing (it being understood that the Corporate Personnel intend to resign
their respective positions with Sullivan and its Subsidiaries effective as of
the Effective Time).
7.C REPORTS; ACCESS TO FACILITIES, FILES, AND RECORDS.
(1) INTERIM REPORTS. On or prior to March 20, 1998,
Sullivan will provide to Sinclair copies of the audited consolidated
balance sheet of Sullivan and its Subsidiaries as of December 31, 1997
and the related audited statements of income and cash flows for the
twelve-month period then ended (the "12/31/97 Financial Statements)".
In addition, prior to the Closing, Sullivan will provide to Sinclair
(x) within twenty (20) days after the end of each calendar month, (i)
an income statement for such month, substantially in the form in which
Sullivan and its Subsidiaries have prepared such statements for
internal purposes prior to the date of this Agreement, and (ii) in the
case of the months of March, April, May, June, July and August 1998, a
report setting forth in reasonable detail Sullivan's good faith
determination of the Trailing Cash Flow and the Gross Revenues, each
determined as if the last day of the applicable month were the
Measurement Date (the "Cash Flow Report" for such month), and (z) on or
prior to the Wednesday of each week, a pacing report for the prior
week, substantially in the form furnished to Sinclair by Sullivan prior
to the date of this Agreement. The statements and reports described in
the preceding sentence will be prepared in good faith consistent with
past practices but will be furnished to the Acquiring Parties without
representation or warranty as to their contents or otherwise.
(2) ACCESS GENERALLY. From time to time at the request of
any Acquiring Party, Sullivan will give or cause to be given to the
officers, employees, accountants, counsel, and representatives of each
Acquiring Party
(a) access (in the presence of any
representative designated by Sullivan, at Sullivan's option),
upon reasonable prior notice, during normal business hours, to
all facilities, property, accounts, books, deeds, title
papers, insurance policies, licenses, agreements, contracts,
commitments, records, equipment, machinery, fixtures,
furniture, vehicles, accounts payable and receivable, and
inventories of Sullivan and its Subsidiaries (but, in any
event, not personnel, unless Sullivan otherwise consents)
related to the Stations, including for purposes of permitting
the Acquiring Parties to perform "Phase One" (and, after
consulting with Sullivan as to the scope thereof, "Phase Two")
environmental surveys with respect
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to the Station Assets,
(b) Sullivan will use its commercially
reasonable efforts to obtain the consent of its auditors to
permit inclusion of the Financial Statements in applicable
securities filings of Sinclair and, if Sinclair requests, it
shall have the right to have the access provided by Section
7.C(2)(a) to conduct an audit of each Station's financial
information, and, subject to the foregoing, Sullivan shall
cooperate with Sinclair's reasonable requests in connection
with such audit, including giving all reasonable consents in
connection therewith; and
(c) all such other information in Sullivan's
and its Subsidiaries' possession concerning the affairs of the
Stations as such Acquiring Party may reasonably request,
in each case at the Acquiring Parties' expense; provided that the
foregoing does not disrupt or interfere with the business and
operations of Sullivan, its Subsidiaries or any Station in any material
respect ("materiality," for purposes of this proviso, being determined
by reference to Sullivan, each of its Subsidiaries and each Station
individually, and not taken as a whole).
7.D HART-SCOTT-RODINO MATTERS. As soon as practicable, but in
any event not later than March 20, 1998, Sullivan will complete all documents
required to be filed with the Federal Trade Commission (the "FTC") and the
United States Department of Justice (the "DOJ") with respect to itself and/or
its Affiliate(s) and concerning the Merger in order to comply with the
Hart-Scott-Rodino Act and together with Sinclair and/or the appropriate
Affiliate(s) of Sinclair who are required to join in such filings, will file the
same with the FTC and the DOJ. Sullivan will reimburse Sinclair for one-half of
the filing fees associated with all such filings. Sullivan will promptly furnish
all materials thereafter required by the FTC, the DOJ or any other governmental
entity having jurisdiction over such filings, and will take all reasonable
actions and will file and use reasonable efforts to have declared effective or
approved all documents and notifications with any such governmental entity, as
may be required under the Hart-Scott-Rodino Act or other federal antitrust laws
for the consummation of the Merger.
7.E CONSENTS. Except as provided in Sections 6.A and 7.D, it
is agreed that (1) as between Sullivan and the Acquiring Parties, it will be the
sole responsibility of the Acquiring Parties to timely obtain all Acquiring
Party Consents, including with respect to the Stations' network affiliations and
Program Contracts and with respect to the Sullivan Indentures, (2) so long as
Sullivan complies with its obligations pursuant to the following sentence and
Sections 6.A and 7.D, Sullivan, the Old Sullivan Stockholders and the
Stockholder Representative will not be liable to any Person for any failure to
obtain or other absence of any effective Acquiring Party Consent, and (3) except
as provided in Sections 10.C and 10.D, the absence of any effective Consent will
not excuse any Acquiring Party from consummating the Merger. Sullivan will send
notices requesting all Consents required under Program Contracts, and will use
reasonable efforts (without being required to make any payment not specifically
required by the terms of any licenses, leases, and other contracts), including
executing any related agreement or undertaking which does not take effect until
the Effective Time, to obtain the Sullivan Consents and to assist the Acquiring
Parties (at the
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Acquiring Parties' request and expense) to (a) timely obtain prior all Acquiring
Party Consents or, in the absence of any Acquiring Party Consent (where
applicable), one or more replacement agreements, and (b) cause each Consent or
replacement agreement to become effective as of the time of the Sullivan Two
Spin-Off, the time of Sullivan Three Spin-Off or the Effective Time as
applicable.
7.F NOTICE OF PROCEEDINGS. Prior to the Closing, Sullivan will
promptly notify Sinclair 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 either Spin-Off, the Merger or any other transaction
contemplated by this Agreement, 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 either Spin-Off, the Merger or any such other
transaction, or to nullify or render ineffective this Agreement, either
Spin-Off, the Merger or any such other transaction if consummated.
7.G CONFIDENTIAL INFORMATION. If for any reason the
transactions contemplated in this Agreement are not consummated, Sullivan will
not use or disclose to any Person (except to its agents, representatives and
advisors, to its lenders and security holders and their respective agents,
representatives and advisors, or as may be required by any Legal Requirement)
any confidential information received from any Acquiring Party or any of their
respective agents, representatives and advisors (each a "disclosing party" for
purposes of this Section 7.G) in the course of investigating, negotiating, and
completing the transactions contemplated by this Agreement. Nothing will be
deemed to be confidential information for purposes of this Section 7.G that: (a)
is or was known to any Sullivan-Related Entity at the time of its initial
disclosure by a disclosing party to any Sullivan-Related Entity; (b) has become
or becomes publicly known or available other than through disclosure by any
Sullivan-Related Entity; (c) is or was rightfully received by any
Sullivan-Related Entity from any Person unrelated to any Sullivan-Related Entity
(other than any Person engaged by any Sullivan-Related Entity in connection with
the transactions contemplated by this Agreement); or (d) is or was independently
developed by any Sullivan- Related Entity.
7.H EFFORTS TO CONSUMMATE. Subject to the provisions of
Article IX and Section 12.A, Sullivan will use 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 conditions set forth in Articles IX and X
to be fulfilled and cause the Spin-Offs, the Merger and the other transactions
contemplated by this Agreement in connection with the Merger to be fully carried
out. Without limiting the foregoing, Sullivan will use, and will cause its
Subsidiaries to use, reasonable efforts to consummate the Merger in a manner to
avoid the increase in the Cash Flow Multiplier caused by any delay in the
Closing and the increase in the element of the Adjustment Amount described in
Section 3.D(1)(b). In addition, promptly after Sullivan becomes aware prior to
the Closing of a breach of any fact or circumstance which constitutes or would
constitute a breach of any other Party's representation or warranty set forth in
this Agreement, Sullivan will give such Party notice thereof so that such Party
may attempt to cure the same.
7.I NOTICE OF CERTAIN DEVELOPMENTS. Sullivan will give prompt
written notice to Sinclair if, prior to the Closing: (1) Sullivan or any of its
Subsidiaries receives a National Labor Relations Board union election petition
relating to employees of any Station, (2) Sullivan or any of
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its Subsidiaries receives notice from any Market Cable System currently carrying
a Station's signal of such Market Cable System's intention to delete such
Station from carriage or change such Station's channel position on such Market
Cable System, or (3) Sullivan becomes aware of any breach of any representation
or warranty of Sullivan set forth in Article IV.
7.J UPDATED INFORMATION. Sullivan agrees to provide to
Sinclair and the Merger Sub at or prior to the Closing, for informational
purposes only, copies of all Contracts in existence at the time of the Closing
which would have been required to be described on the attached Schedule 4J if
such Contracts had existed on the date of this Agreement and which are not so
disclosed.
7.K NON-SOLICITATION. From the date of this Agreement until
the Closing or the earlier termination of this Agreement, each of ABRY Partners
and Sullivan will not, and each of them will not cause (and will use reasonable
efforts not to permit) any of its Subsidiaries, affiliates, directors, officers,
employees, representatives or agents to, directly or indirectly solicit, or
initiate, entertain or enter into any discussions or transactions with, or
encourage or provide any information to, any Person (other than any Person
described in Section 7.C(2)), concerning any sale of any of the assets of
Sullivan or its Subsidiaries (other than any sale which is not prohibited by
Section 7.A(5)) or any merger, stock acquisition or similar transaction
involving Sullivan or its Subsidiaries (other than an issuance of capital stock
or capital stock equivalents by Sullivan and the Spin-Offs); provided that
nothing in this Section 7.K will prohibit ABRY Partners or Sullivan from
furnishing, or causing or permitting any other Person to furnish, information
concerning Sullivan or its Subsidiaries to any governmental authority or court
of competent jurisdiction or any other Person as may be required by any Legal
Requirement.
7.L INTERRUPTION OF BROADCAST TRANSMISSION.
(1) NOTICE OF LOSS OR DAMAGE. In the event of any loss,
damage, impairment, confiscation or condemnation of any of the Station
Assets prior to the Approval Date that interferes with the normal
operations of the Stations, Sullivan will notify Sinclair of the same
in writing promptly after Sullivan becomes aware thereof, specifying
with reasonable particularity the loss, damage or impairment,
confiscation or condemnation incurred, the cause thereof, if known or
reasonably ascertainable, and any applicable insurance coverage. To the
extent thereof, Sullivan will apply the proceeds of any insurance
policy, judgment or award with respect thereto as necessary to repair,
replace or restore such Station Assets to their prior condition as soon
as practicable after such loss, damage, impairment, confiscation or
condemnation.
(2) INTERRUPTION OF TRANSMISSION. If before the Approval
Date, due to damage or destruction of the assets of any Station, the
regular broadcast transmission of one (1) or more of the Stations in
the normal and usual manner is interrupted for a period of twelve (12)
continuous hours or more, Sullivan will give prompt written notice
thereof to Sinclair. If prior to the Approval Date, due to damage or
destruction of the assets of one (1) or more of the Stations, the
regular broadcast transmission of one (1) or more Stations in the
normal and usual manner is interrupted such that the regular broadcast
signal of any such Station (including its effective radiated power) is
diminished in any material respect, then
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(i) Sullivan will give written notice to Sinclair promptly after
Sullivan becomes aware thereof, and (ii) Sinclair shall have the right,
by giving prompt written notice to Sullivan to postpone the Closing for
a period up to sixty (60) days.
(3) FAILURE TO RESUME TRANSMISSION. In the event any one
(1) or more Stations' normal and usual transmission has not been
substantially resumed by the date scheduled for the Closing, as
postponed pursuant to Section 7.L(2) above, Sinclair may, pursuant to
Section 12.A(2)(c), terminate this Agreement by written notice to
Sullivan. Notwithstanding the foregoing, however, Sinclair may, at its
option, proceed to complete the Merger and complete the restoration and
replacement of any damaged assets of the Station in question after the
Closing Date, in which event: (a) all insurance or other proceeds
received in connection therewith, to the extent such proceeds are
received by Sullivan and have not therefore been used in the
restoration or replacement of such assets, will be excluded from the
Current Assets, and (b) the lesser of $5,000,000 and the excess (if
any) of the reasonable cost to complete such restoration or replacement
over the amount of such proceeds will be included in the computation of
the Current Liabilities (the exclusion of such proceeds and the
inclusion of such cost being in lieu and to the exclusion of any remedy
pursuant to the Indemnity Agreement in respect of the failure of such
restoration or replacement to be completed).
(4) INTERRUPTION NOTICE/TERMINATION. If before the
Approval Date, due to damage or destruction of the Station Assets, the
regular broadcast transmission of any Station in the normal and usual
manner is interrupted for a period of seven (7) continuous days or
more, Sullivan shall give prompt written notice thereof (the
"Interruption Notice") to Sinclair. During the two (2) Business Days
after the receipt of the Interruption Notice, Sinclair shall have the
right, in its sole and absolute discretion, by giving written notice
thereof to Sullivan to terminate this Agreement pursuant to Section
12.A(2)(c).
7.M NO PREMATURE ASSUMPTION OF CONTROL. Nothing contained in
this Agreement will give any Acquiring Party any right to control the
programming, operations, or any other matter relating to the Stations, and the
respective licensees thereof, will have complete control of the programming,
operations, and all other matters relating to the Stations (it being agreed that
in any event Sinclair will have the right to withhold its Consent to any Program
Contract to the extent provided in Section 7.A(3), if not deemed granted as
provided therein).
ARTICLE VIII
COVENANTS OF SINCLAIR AND THE MERGER SUB
8.A HART-SCOTT-RODINO MATTERS. On or prior to March 20, 1998,
Sinclair will complete all documents required to be filed with the FTC and the
DOJ with respect to itself and/or its Affiliate(s) and concerning the Merger in
order to comply with the Hart-Scott-Rodino Act and together with Sullivan and/or
the appropriate Affiliate(s) of Sullivan who are required to join in such
filings, will file the same with the FTC and the DOJ. Sinclair will pay the
filing fees associated with all such filings (subject to partial reimbursement
by Sullivan as provided in Section 7.D). Sinclair
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and the Merger Sub will promptly furnish all materials thereafter required by
the FTC, the DOJ or any other governmental entity having jurisdiction over such
filings, and will take all reasonable actions and will file and use reasonable
efforts to have declared effective or approved all documents and notifications
with any such governmental entity, as may be required under the
Hart-Scott-Rodino Act or other federal antitrust laws for the consummation of
the Merger.
8.B CONFIDENTIAL INFORMATION. If for any reason the
transactions contemplated in this Agreement are not consummated, each of
Sinclair and the Merger Sub will not use or disclose to any Person (except to
its agents, representatives and advisors, to its lenders and their respective
agents, representatives and advisors, or as may be required by any Legal
Requirement) any confidential information received from Sullivan, any of its
Subsidiaries, Sullivan Two or Sullivan Three or any of their respective agents,
representatives and advisors (each a "disclosing party" for purposes of this
Section 8.B) in the course of investigating, negotiating, and completing the
transactions contemplated by this Agreement. Nothing will be deemed to be
confidential information for purposes of this Section 8.B that: (a) is or was
known to any Sinclair-Related Entity at the time of its initial disclosure by a
disclosing party to any Sinclair-Related Entity; (b) has become or becomes
publicly known or available other than through disclosure by any
Sinclair-Related Entity; (c) is or was rightfully received by any
Sinclair-Related Entity from any Person unrelated to any Sinclair-Related Entity
(other than any Person engaged by any Sinclair- Related Entity in connection
with the transactions contemplated by this Agreement); or (d) is or was
independently developed by any Sinclair-Related Entity. In addition, the Merger
Sub agrees to be bound by the same obligations as Sinclair is bound pursuant to
the confidentiality agreement dated as of November 20, 1997 between Sinclair and
Sullivan Broadcasting, which confidentiality agreement will survive the
execution and delivery of this Agreement and will survive the execution and
termination of this Agreement, and no provision of this Section 8.B will be
deemed to supersede or in any way limit any obligation or right under such
confidentiality agreement.
8.C EFFORTS TO CONSUMMATE. Subject to the provisions of
Article X and Section 12.A, each of Sinclair and the Merger Sub will use
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
conditions set forth in Articles IX and X to be fulfilled and cause each
Spin-Off, the Merger and the transactions contemplated by this Agreement in
connection with the Merger to be fully carried out. In addition, promptly after
Sinclair or the Merger Sub becomes aware prior to the Closing of a breach of any
fact or circumstance which constitutes or would constitute a breach of any
representation or warranty of Sullivan set forth in this Agreement, Sinclair
will give Sullivan notice thereof so that Sullivan may attempt to cure the same.
8.D NOTICE OF PROCEEDINGS. Each of Sinclair and the Merger Sub
will promptly notify Sullivan (prior to the Closing) or the Stockholder
Representative (after the Closing) 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 either Spin-Off, the Merger or any other
transaction contemplated by this Agreement, 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 either Spin-Off, the Merger or any such other
transaction, or to nullify or render ineffective this Agreement, either
Spin-Off, the Merger or any such other transaction, if consummated. Sinclair
will give the Stockholder Representative prompt
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written notice if any Acquiring Party becomes aware of any breach of any
representation or warranty of any Acquiring Party set forth in Article V.
8.E CONTINUED EMPLOYMENT.
(1) GENERALLY. Except as provided in Section 8.E(2), the
Merger Sub, in its capacity as Post-Merger Sullivan after the Effective
Time, agrees to employ after the Closing, directly or indirectly
through one or more of its Subsidiaries, all of those Persons who are
common law employees of Sullivan and its Subsidiaries at the time of
the Closing at the same rates of base pay and the other terms and
conditions applicable to such employment at such time, and Sinclair and
the Merger Sub agree to indemnify and hold harmless the Old Sullivan
Stockholders, the Stockholder Representative and the present and former
officers, directors, employees and agents of each of the Old Sullivan
Stockholders, the Stockholder Representative, Sullivan and their
respective Subsidiaries in respect of any loss, liability, cost,
damage, claim or expense which may be incurred by or asserted against
any of them arising out of or relating to any failure or refusal to so
employ any such Person (including any change in any term or condition
of such employment), or the termination of the employment of any such
Person, at or after the Closing. Without limiting the foregoing
indemnity, it is acknowledged that except as provided in any agreement
referred to on the attached Schedule 4J, such employees will continue
to be at-will employees, and the respective employers may terminate
their employment or change their terms of employment at will, and/or
Post-Merger Sullivan or its Subsidiaries may cover such employees under
existing or new benefit plans, programs, and arrangements, and may
amend or terminate the terms of any such plans, programs, or
arrangements at any time (in each case, without reducing the indemnity
obligation set forth in the preceding sentence). No employee or
beneficiary of Post- Merger Sullivan or its Subsidiaries may sue to
enforce the terms of this Agreement, including specifically this
Section 8.E, and no such employee or beneficiary shall be treated as a
third party beneficiary of this Agreement.
(2) EXCLUDED EMPLOYEES. The provisions of Section 8.E(1)
will not apply to the Corporate Personnel, the Non-Continuing Station
Managers or any Person employed by Sullivan or any of its Subsidiaries
pursuant to an agreement of a type described in clause (z) of Section
7.A(5)(b). Sullivan will cause the employment of each Non-Continuing
Manager and the Corporate Personnel to be terminated, effective as of
the time of the Closing. The liabilities of Sullivan and its
Subsidiaries for amounts required to be paid in connection with or
after the termination of any such excluded Person whose employment is
terminated prior to or at the time of the Closing will be reflected in
the computation of the Current Liabilities.
8.F SECTION 338 ELECTION. Without the Stockholder
Representative's prior written consent, Sinclair will not, and will not cause or
permit any of its Subsidiaries to, make an election under Section 338 of the Tax
Code, or under any analogous provision of any other Legal Requirements relating
to Taxes, with respect to the Merger.
ARTICLE IX
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CONDITIONS TO THE OBLIGATIONS OF SULLIVANAT THE CLOSING
The obligation of Sullivan to consummate the Merger is, at
Sullivan's option, subject to the fulfillment of the following conditions at the
time of the Closing (Sullivan expressly acknowledging that the effectiveness of
the Sullivan Consents is not a condition to such obligation):
9.A REPRESENTATIONS, WARRANTIES, COVENANTS.
(1) Each of the representations and warranties of the
Acquiring Parties set forth in Article V, considered without regard to
any materiality qualifiers contained therein, will be deemed to be made
again at and as of the time of the Closing (other than any such
representation or warranty which is expressly made with reference to a
time prior to the time of the Closing, which will be deemed remade as
of such time only), and taken as a whole such representations and
warranties, as so remade, will have been true and accurate in all
material respects, except to the extent of deviations therefrom
permitted or contemplated by this Agreement; and
(2) each Acquiring Party will in all material respects
have performed and complied with the covenants and agreements required
by this Agreement to be performed or complied with by it prior to or at
the time of the Closing, taken as a whole (other than the delivery of
the Merger Consideration for the Sullivan Share Equivalents, which the
Merger Sub will have established to Sullivan's reasonable satisfaction
that it is prepared to deliver).
9.B PROCEEDINGS.
(1) No action or proceeding will have been instituted and
be pending before any court or governmental body to restrain or
prohibit, or to obtain a material amount of damages in respect of, the
consummation of the transactions contemplated by this Agreement that,
in the reasonable opinion of Sullivan, may reasonably be expected to
result in a preliminary or 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 any Sullivan- Related
Entity or any officer, director or stockholder of any Sullivan-Related
Entity of a material amount of damages; and
(2) no Party will have received written notice from any
governmental body of (a) such governmental body's intention to
institute any action or proceeding to restrain or enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including,
without limitation, a routine Civil Investigative Demand) into the
consummation of the transactions contemplated by this Agreement, or (b)
the actual commencement of such an investigation, in each case unless
the same has been withdrawn, resolved, concluded or abandoned.
9.C HART-SCOTT-RODINO. The requisite waiting period under the
Hart-Scott- Rodino Act for the consummation of the Merger will have expired or
been terminated.
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9.D SPIN-OFFS. The Required FCC Consent for each Spin-Off will
have been Granted and be in full force and effect and all Acquiring Party
Consents for the Spin-Offs will have been obtained and be in full force and
effect; provided that the Grant and effectiveness of such Required FCC Consent
and the effectiveness of such Acquiring Party Consents will not be conditions to
Sullivan's obligation to consummate the Merger so long as any Sullivan Consent
for the Spin-Offs is not in effect.
9.E SUFFICIENT FUNDS TO SATISFY OBLIGATIONS. Sullivan will
have received evidence which is reasonably satisfactory to Sullivan to the
effect that the Merger Sub and Post- Merger Sullivan and/or its Subsidiaries
have or will have the funds described in Section 11.E.
9.F SINCLAIR COMMON STOCK. If the Merger Sub has elected to
pay part of the Merger Consideration for the Sullivan Share Equivalents in the
form of shares of Sinclair Common Stock as provided in Section 3.A(3), then
Sinclair will have taken such actions as may be required, or are reasonably
requested by the Stockholder Representative, in order that the Sinclair Common
Stock be registered and tradeable as described in Section 3.C(3), including any
registration, notice of issuance or other action or notice to or by NASDAQ,
Nasdaq National Market or any relevant securities exchange in order that such
shares of Sinclair Common Stock be tradeable thereon.
9.G OTHER. The Merger Sub will have delivered, or will stand
ready to deliver, to Sullivan such instruments, documents, and certificates as
are contemplated by Section 3.I(3).
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF
THE MERGER SUB AT THE CLOSING
The obligations of the Merger Sub to pay the Merger
Consideration for the Sullivan Share Equivalents and consummate the Merger on
the Closing Date are, at the Merger Sub's option, subject to the fulfillment of
the following conditions at the time of the Closing (Sinclair and the Merger Sub
expressly acknowledging that neither the availability to the Merger Sub of funds
sufficient to pay such Merger Consideration and to fulfill the obligations under
Section 11.E, nor the effectiveness of the Acquiring Party Consents, is a
condition to such obligations):
10.A REPRESENTATIONS, WARRANTIES, COVENANTS.
(1) Each of the representations and warranties of
Sullivan and set forth in Article IV (other than any representation or
warranty which speaks as of a time after the Closing), considered
without regard to any materiality qualifiers contained therein, will be
deemed to be made again at and as of the time of the Closing (other
than any such representation or warranty which is expressly made with
reference to a time prior to the time of the Closing, which will be
deemed remade as of such time only), and taken as a whole such
representations and warranties, as so remade, will have been true and
accurate, except to the extent of deviations therefrom which are
permitted or contemplated by this Agreement or which, in the aggregate,
do not constitute and have not caused a Material Adverse Change;
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and
(2) Sullivan will in all material respects have performed
and complied with the covenants and agreements required by this
Agreement to be performed or complied with by it prior to or at the
time of the Closing, taken as a whole.
10.B PROCEEDINGS.
(1) No action or proceeding will have been instituted and
be pending before any court or governmental body to restrain or
prohibit, or to obtain a material amount of damages in respect of, the
consummation of the transactions contemplated by this Agreement that,
in the reasonable opinion of Sinclair, may reasonably be expected to
result in a preliminary or 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 any Sinclair- Related
Entity or any officer, director or stockholder of any Sinclair-Related
Entity of a material amount of damages; and
(2) no Party will have received written notice from any
governmental body of (a) such governmental body's intention to
institute any action or proceeding to restrain or enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including,
without limitation, a routine Civil Investigative Demand) into the
consummation of the transactions contemplated by this Agreement, or (b)
the actual commencement of such an investigation, in each case unless
the same has been withdrawn, resolved, concluded or abandoned.
10.C HART-SCOTT-RODINO AND OTHER CONSENTS. The requisite
waiting period under the Hart-Scott-Rodino Act for the consummation of the
Merger will have expired or been terminated and all Sullivan Consents will have
been obtained and be effective. If the representation and warranty set forth in
the final sentence of Section 4.N is untrue, then each Consent of a type
described therein will have been obtained and be effective.
10.D SPIN-OFFS. The Required FCC Consents for the Spin-Offs
will have been Granted and be in full force and effect and Sullivan will stand
ready to effect, or will have effected, the Spin-Offs, and each of Sullivan Two
and Sullivan Three will have entered into the New LMA applicable to it; provided
that the foregoing will not be conditions to the Merger Sub's obligation to
consummate the Merger so long as any Acquiring Party Consent to a Spin-Off or
the Merger is not in effect.
10.E MINIMUM GROSS REVENUES. The amount of the Gross Revenues
for the Measurement Period will have been determined in accordance with Section
3.J and will be not less than the amount set forth below:
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Last Day of
Measurement Period Gross Revenues
------------------ --------------
March 31, 1998 $32,042,000
April 30, 1998 $44,913,000
May 31, 1998 $58,693,000
June 30, 1998 $71,630,000
July 31, 1998 $82,729,000
August 31, 1998 $94,391,000
10.F LIMIT ON DISSENTERS. The holders of Sullivan Common Stock
who have demanded appraisal pursuant to Section 262 of the Delaware General
Corporation Act and who have not subsequently withdrawn or waived (or been
deemed to have withdrawn or waived) or who are not otherwise barred from
requiring any such appraisal, if there are any such holders at the time of the
Closing, will not hold Sullivan Common Stock which (absent such right of
appraisal) would be entitled to receive in excess of 6% of the aggregate Merger
Consideration for the Sullivan Share Equivalents (determined based on the
Estimated Annualized Trailing Cash Flow, or the Annualized Trailing Cash Flow,
if it has been finally determined in accordance with Section 3.J, and the
Estimated KOKH Amount and the Estimated Adjustment Amount determined pursuant to
Section 3.E) if the Merger were consummated.
10.G OTHER INSTRUMENTS. Sullivan will have delivered, or will
stand ready to deliver, to the Merger Sub such instruments, documents, and
certificates as are contemplated by Section 3.I(2).
ARTICLE XI
POST-CLOSING MATTERS
11.A SURVIVAL. The representations, warranties and
certifications of the Parties contained in or made pursuant to this Agreement
(including any certification contained in any certificate to be delivered
pursuant to Section 3.I) will survive the execution of this Agreement and the
Closing only to the extent expressly provided in the Indemnity Agreement. The
covenants and agreements of the Parties set forth in this Agreement will survive
until performed and discharged in full.
11.B LIMITATION OF RECOURSE. Except as provided in the
Indemnity Agreement, after the Closing, no claim may be brought or maintained
against any Party or any Old Sullivan Stockholder or any of their respective
present or former officers, directors, employees or other affiliates by any
Party or Old Sullivan Stockholder or any of its successors or assigns, and no
recourse may be sought or granted against any Person, by virtue of or based upon
any alleged misstatement, omission, inaccuracy in, or breach of any
representation, warranty or certification of any Party set forth in or made
pursuant to this Agreement, and in no event will Sinclair or Post-Merger
Sullivan be entitled to claim or seek any rescission of the Merger or any of the
other
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transactions consummated pursuant to the Transaction Documents, any such right
of rescission or rights to damages which any such Party might otherwise have
being hereby expressly waived and any claims or judgments being limited
accordingly; provided that nothing in this Agreement will constitute a waiver of
or limit any Old Sullivan Stockholder's recourse or remedy pursuant to any
federal or state securities laws arising out of or relating to the offering or
issuance of Sinclair Common Stock hereunder.
11.C ACKNOWLEDGMENT BY THE ACQUIRING PARTIES. Each of the
Acquiring Parties has conducted, to its satisfaction, an independent
investigation and verification of Sullivan, its Subsidiaries, the Stations and
the Station Assets and the financial condition, results of operations, assets,
liabilities, properties and projected operations of Sullivan, its Subsidiaries,
the Stations and the Station Assets. In determining to enter into this Agreement
and proceed with the transactions contemplated by this Agreement, each Acquiring
Person has relied on the covenants of Sullivan, the results of such independent
investigation and verification and the representations and warranties of
Sullivan (in conjunction with the Schedules hereto) set forth in this Agreement
(including the certifications to be made in any certificate to be delivered
pursuant to Section 3.I), all of which each Acquiring Party acknowledges and
agrees will survive for a limited duration. SUCH REPRESENTATIONS, WARRANTIES AND
CERTIFICATIONS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS, WARRANTIES AND
CERTIFICATIONS WITH RESPECT TO SULLIVAN, ITS SUBSIDIARIES, THE STATIONS AND THE
STATION ASSETS TO THE ACQUIRING PARTIES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND EACH ACQUIRING PARTY UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT ALL OTHER REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS OF ANY KIND
OR NATURE AND WHETHER ORAL OR CONTAINED IN ANY WRITING OTHER THAN THIS AGREEMENT
OR ANY SUCH CERTIFICATE (INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION,
WARRANTY OR CERTIFICATION RELATING TO THE PROJECTED, FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OR OPERATIONS, ASSETS OR LIABILITIES RELATING TO
THE STATIONS) ARE SPECIFICALLY DISCLAIMED BY SULLIVAN, THE STOCKHOLDER
REPRESENTATIVE, THE OFFICERS OF SULLIVAN AND ITS SUBSIDIARIES AND THE OLD
SULLIVAN STOCKHOLDERS.
11.D CORPORATE NAMES. After the Merger (but on the Closing
Date), Post- Merger Sullivan will take and will cause its Subsidiaries to take
such action as is necessary to change its corporate name in its certificate or
articles of incorporation filed with the Secretary of State or similar official
of the jurisdiction of its incorporation to a name which does not include, and
is not confusingly similar to, the name "Sullivan" and will cease the use of all
Sullivan Broadcasting logos or any similar mark. Notwithstanding anything in
this Agreement to the contrary, Post-Merger Sullivan and its Subsidiaries will
be entitled to continue to use its present corporate name until such time as
such name change is effective and to the extent necessary to accomplish such
name change, and may endorse checks and other instruments in such name.
11.E SATISFACTION OF CERTAIN OBLIGATIONS. On the Closing Date,
immediately after the Effective Time, the Merger Sub will, and Sinclair will
cause Post-Merger Sullivan and each of Post-Merger Sullivan's Subsidiaries to,
pay in full all Funded Indebtedness of Sullivan and its Subsidiaries pursuant
to, and otherwise satisfy all obligations of Sullivan and its
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Subsidiaries under, the Sullivan Senior Debt Arrangements and the Mission
Guarantees (other than Funded Indebtedness incurred pursuant to any Sullivan
Indenture, to the extent any Consent necessary to permit the same to remain
outstanding after the Closing) . Without limiting the foregoing, Sinclair will
cause Post-Merger Sullivan and/or one or more of its Subsidiaries to have on the
Closing Date funds which are sufficient to permit Post-Merger Sullivan and/or
its Subsidiaries to take the actions contemplated by this Section 11.E and will
cause the Merger Sub to have funds necessary to permit the Merger Sub to pay the
Merger Consideration for the Sullivan Share Equivalents and make the deposit (if
any) in the Estimate Fund pursuant to Section 3.A(3)(d).
ARTICLE XII
TERMINATION
12.A TERMINATION OF AGREEMENT PRIOR TO CLOSING. Subject to
Section 12.A(3), this Agreement may be terminated at any time prior to the
Closing as follows:
(1) BY SULLIVAN. By Sullivan, by written notice (a
"Sullivan Termination Notice") to Sinclair:
(a) at any time when any material breach by
any Acquiring Party of its obligations pursuant to this
Agreement has occurred and is continuing, if both
(i) such breach materially and
adversely affects the likelihood that any of the
conditions set forth in any of Article IX or Article
X which has not been satisfied or waived will be
satisfied or materially and adversely affects any
Party's ability to comply with its obligations
pursuant to this Agreement, and
(ii) at least thirty days have
elapsed since Sullivan gave Sinclair written notice
requesting that such Acquiring Party cure such
breach,
unless prior to the giving of the Sullivan Termination Notice
each such breaching Acquiring Party has cured such breach;
(b) at any time after the Merger Sub has
failed to make the Mandatory Payment when required by Section
3.K(1), if the Merger Sub has not made the Mandatory Payment
prior to the giving of such Sullivan Termination Notice (in
which event the termination of this Agreement pursuant to the
delivery of such Sullivan Termination Notice will be effective
at 5:00 p.m., Boston, Massachusetts, time, on the second
Business Day after such Notice is given, unless the Mandatory
Payment is made prior to such time);
(c) at any time after the Expiration Date,
if
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(i) as of the Expiration Date, each
of Sullivan's and the Merger Sub's conditions to
closing set forth in Articles IX and X was satisfied
or waived in writing,
(ii) as of the Expiration Date, (x)
each of Sullivan's and the Merger Sub's conditions to
closing set forth in Articles IX and X (other than
any set forth in Sections 9.D and 10.D) was satisfied
or waived in writing, (y) the Required FCC Consent
has been Granted and each Sullivan Consent for the
Spin-Offs had been obtained, and (z) any Acquiring
Party Consent for a Spin-Off was not obtained,
(iii) the absence of satisfaction of
each of Sullivan's and the Merger Sub's conditions to
closing set forth in Articles IX and X which was not
waived in writing or satisfied as of the Expiration
Date was caused by a breach by one or more of the
Acquiring Parties of any of its or their
representations, warranties and/or obligations under
this Agreement and/or the failure of any Acquiring
Party Consent to have been obtained,
(iv) the Approval Date had not
occurred on or prior to the Expiration Date as a
result of any breach by one or more of the Acquiring
Parties of any provision of this Agreement, or
(v) one or more of the Acquiring
Parties and the Affiliates thereof refused, failed or
declined to take any action (other than divesting
itself of a broadcast television or radio station of
which it or one of its Subsidiaries is the licensee
or terminating any time brokerage or similar
arrangement) which the FCC, the FTC, the DOJ or the
staff of any of them indicates to any Acquiring Party
or agent thereof is a condition to the grant of the
Required FCC Consent or the expiration or termination
of the requisite waiting period under the Hart-Scott-
Rodino Act for the Merger; or
(d) at any time after the Expiration Date,
in any circumstance which is not described in Section
12.A(1)(c), unless the absence of satisfaction of each of
Sullivan's and the Merger Sub's closing conditions set forth
in Articles IX and X which has not been satisfied or waived in
writing has been caused by a breach by Sullivan of its
obligations under this Agreement.
(2) BY SINCLAIR. By Sinclair, by written notice (a
"Sinclair Termination Notice") to Sullivan:
(a) at any time when any material breach by
Sullivan of its obligations pursuant to this Agreement has
occurred and is continuing, if both
(i) such breach materially and
adversely affects the likelihood that any of the
conditions set forth in Article IX or Article X will
be satisfied or materially and adversely affects any
Party's ability to comply
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with its obligations pursuant to this Agreement and
(ii) at least thirty days have
elapsed since Sinclair gave Sullivan written notice
requesting that Sullivan cure such breach,
unless prior to the giving of such Sinclair Termination Notice
Sullivan has cured such breach;
(b) at any time on or prior to the fifth
(5th) Business Day after Sullivan delivers to Sinclair any
amendment and restatement or modification of any attached
Schedule pursuant to Section 13.P, if such amendment and
restatement or modification reflects any fact or circumstance
which (alone or in the aggregate with all other facts and
circumstances reflected in the attached Schedules as so
amended and restated or modified and not reflected in the
attached Schedules as initially attached to this Agreement)
represents or has caused a Material Adverse Change;
(c) (i) at any time when there has occurred
a Material Adverse Change and at least 30 days have elapsed
since Sinclair gave Sullivan notice of the occurrence of such
Material Adverse Change, unless the facts or circumstances
causing or constituting such Material Adverse Change have been
cured or otherwise no longer exist, or (ii) under the
circumstances described in Section 7.L(3) or 7.L(4);
(d) at any time during the five (5) Business
Days after the amount of the Gross Revenues (as if the
Measurement Date were June 30, 1998) is finally determined
pursuant to Section 3.J, if such amount is less than
$71,630,000;
(e) at any time after the Expiration Date,
under any circumstances described in Section 12.A(1)(c); or
(f) at any time after the Expiration Date,
in any case not described in Section 12.A(2)(e).
(3) WHEN TERMINATION NOT PERMITTED. Sullivan may not
terminate this Agreement pursuant to Section 12.A(1) at any time when
Sullivan is in material breach of a material obligation under this
Agreement. Sinclair may not terminate this Agreement pursuant to
Section 12.A(2) (other than pursuant to Section 12.A(2)(e)) at any time
when any Acquiring Party is in material breach of a material obligation
under this Agreement.
12.B SURVIVAL OF CERTAIN PROVISIONS; REMEDIES.
(1) GENERAL. No Party will have any liability to any
other Party for costs, expenses, damages (consequential or otherwise),
loss of anticipated profits, or otherwise as a result of a termination
pursuant to Section 12.A, except as provided in Section 12.B(2),
12.B(3) or 12.B(4). The Parties agree that time is of the essence with
respect to the provisions of Sections 3.H., 3.K and 12.A. Sections 7.G
and 7.B, this Article XII and Article XIII will survive the termination
of this Agreement pursuant to Section 12.A.
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(2) DISPOSITION OF EARNEST MONEY FUND AND INCOME. If this
Agreement is terminated pursuant to any of Sections 12.A(1)(a),
12.A(1)(b), 12.A(1)(c) or 12.A(2)(e), then the Earnest Money Fund will
be paid to Sullivan (unless the Mandatory Payment has theretofore been
made to Sullivan), and all Earnest Money Income will be paid to
Sinclair. If this Agreement is terminated pursuant to any of Sections
12.A(1)(d), 12.A(2)(a), 12.A(2)(b), 12.A(2)(c), 12.A(2)(d) or
12.A(2)(f), then the Earnest Money Fund and all Earnest Money Income
will be paid to Sinclair (unless the Mandatory Payment is due and
payable and has not been paid, in which case the Mandatory Payment will
be made from the Earnest Money Fund and the Earnest Money Income, and
the remainder thereof will be paid to Sinclair). Any payment to be made
pursuant to this Section 12.B(2) may be requested, and will be made, in
accordance with the Earnest Money Escrow Agreement.
(3) FOR SULLIVAN. Sullivan's sole and exclusive remedy
for any termination of this Agreement or any failure of performance or
compliance by any Acquiring Party with any covenant or agreement
contained in this Agreement prior to the Closing will be Sullivan's
right (if any) to receive the Earnest Money Fund as provided in the
Earnest Money Escrow Agreement (or its right, if any, to receive or
retain the Mandatory Payment, unless otherwise expressly provided in
Section 12.B(4)(d), as liquidated damages and not as a penalty).
(4) FOR THE ACQUIRING PARTIES. The Acquiring Parties'
sole and exclusive remedies for the termination of this Agreement or
any failure of performance or compliance by Sullivan with any covenant
or agreement contained in this Agreement prior to the Closing will be
(a) in the case of any such termination
pursuant to Section 12.A, Sinclair's right (if any) to receive
the Earnest Money Fund and the Earnest Money Income (including
the right to any Earnest Money Income not yet received by the
Earnest Money Escrow Agent) as provided in Section 12.B(2) and
the Earnest Money Escrow Agreement;
(b) in the case of any such failure, their
respective rights (if any) under applicable law or equitable
principles to seek damages in respect of their direct
out-of-pocket losses or expenses (but not any damages in
respect of lost profits or other similar or consequential or
incidental damages) occasioned by and as a consequence of such
breach;
(c) their respective rights (if any) under
applicable law or equitable principles to seek specific
enforcement of this Agreement against Sullivan, including
specific enforecement of Sullivan's obligation to consummate
the Merger (subject to FCC approval and other required
Consents being obtained), it being acknowledged by Sullivan
that the Acquiring Parties would not have an adequate remedy
at law in the event of any such failure, provided that no
Acquiring Party will be entitled to such specific performance
unless (i) each Acquiring Party has complied in all material
respects with its material obligations under this Agreement
and (ii) either (A) each condition to closing of Sullivan set
forth in Article IX has been
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satisfied or waived in writing or (B) the absence of
satisfaction of each such condition to closing which has not
been satisfied or waived in writing is caused solely by a
breach by Sullivan of its obligations under this Agreement;
(d) in the case of any such failure after
the Approval Date, the release of the Merger Sub from the
obligation to pay, or the return of, as the case may be, the
Mandatory Payment, if (i) Sinclair has terminated this
Agreement pursuant to Section 12.A(2)(a) or Section
12.A(2)(d), (ii) each Acquiring Party complied in all material
respects with its material obligations under this Agreement
prior to such termination, and (iii) if Sinclair terminated
this Agreement pursuant to Section 12.A(2)(a), then either (A)
each condition to closing set forth in Articles IX was
satisfied or waived in writing as of the Expiration Date or
(B) the absence of satisfaction of each such condition which
was not satisfied or waived in writing as of the Expiration
Date was caused solely by a breach by Sullivan of its
obligations under this Agreement (it being agreed that, except
as expressly provided in this Section 12.B(4)(d), if the
Approval Date occurs and this Agreement is terminated prior to
the Closing, then the Merger Sub will nonetheless be required
to make the Mandatory Payment and, if the Mandatory Payment
has been made prior to such termination, then Sullivan will be
entitled to retain the Mandatory Payment); and
(e) if (i) Sinclair has terminated this
Agreement pursuant to Section 12.A(2)(a) based on a willful
breach of this Agreement by Sullivan, (ii) the circumstances
described in clauses (ii) and (iii) of Section 12.B(4)(d)
apply, and (iii) Sinclair has disclaimed in writing its right
to seek specific performance as described in Section
12.B(4)(c) or Sinclair has asserted such right and such remedy
has been denied in a final, nonappealable judgment on the
grounds that the obligation of Sullivan to consummate the
Merger hereunder is not of a type for which specific
enforcement is an available remedy, then in addition to
Sinclair's right to receive the Earnest Money Fund as the
Earnest Money Income as provided in Section 12.B(4)(a), upon
the occurrence of the event described in clause (iii) above,
Sullivan will pay to Sinclair the amount of Seventy Five
Million Dollars ($75,000,000) in cash as liquidated damages.
ARTICLE XIII
MISCELLANEOUS
13.A EXPENSES. Except as otherwise expressly provided in this
Agreement, Sullivan will bear all of the expenses incurred prior to the Closing
by Sullivan and the Stockholder Representative in connection with the
transactions contemplated by this Agreemen, and each of the Acquiring Parties
will bear all of its expenses incurred in connection with the transactions
contemplated by this Agreement, in each case including, without limitation,
account ing and legal fees incurred in connection herewith.
13.B ASSIGNMENTS.
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(1) BY SULLIVAN. This Agreement may not be assigned by
Sullivan without the prior written consent of the Acquiring Parties.
(2) BY SINCLAIR OR THE MERGER SUB. Prior to the Closing,
this Agreement may be assigned by Sinclair or the Merger Sub (or the
Merger Sub may cease to be a wholly-owned Subsidiary of Sinclair prior
to the Closing) only with the prior written consent of Sullivan, except
that at any time Sinclair or the Merger Sub may assign its rights and
interests hereunder absolutely to one or more directly or indirectly
wholly-owned Subsidiaries of Sinclair without obtaining such consent;
provided in each case, that the assigning Person gives Sullivan, prior
to the Closing, or the Stockholder Representative, after the Closing,
prior written notice of such assignment and that such assignment will
not delay the satisfaction of any condition to closing set forth in
this Agreement, and provided further that any such assignment will not
relieve the assigning Person of any of its obligations or liabilities
hereunder.
(3) EXCEPTIONS. Notwithstanding the foregoing, any Party
may assign its rights under this Agreement for collateral purposes only
to any lender to it, or any agent for any such lender(s), without the
consent of any other Party, and any such lender or agent may transfer
such rights pursuant to the exercise of remedies with respect to such
collateral security to any other Person (it being understood that any
such lender or agent will be a third-party beneficiary of the agreement
constituted by this Section 13.B(3)).
(4) GENERAL RULES. Any attempt to assign this
Agreement or any rights or obligations hereunder without first
obtaining any consent which is required by this Section 13.B will be
void. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. Each Old Sullivan Stockholder is an express third-party
beneficiary of this Agreement.
13.C FURTHER ASSURANCES. From time to time prior to, at, and
after the Closing, each Party will execute all such instruments and take all
such actions as any other of them, being advised by counsel, may reasonably
request in connection with carrying out and effectuating the intent and purpose
hereof, and all transactions and things contemplated by this Agreement,
including the execution and delivery of any and all consents, confirmatory and
other instruments, in addition to those to be delivered at the Closing, and any
and all actions which may reasonably be necessary to complete the transactions
contemplated hereby.
13.D NOTICES. All notices, demands, and other communications
which may or are required to be given under or with respect to this Agreement
will be in writing, will be delivered personally or sent by nationally
recognized overnight delivery service, charges prepaid, or by registered or
certified mail, return-receipt requested, and will be deemed to have been given
or made when personally delivered, or on the next Business Day after delivery to
such overnight delivery service, or on the fifth day after it is deposited in
the mail, registered or certified, first class postage prepaid, as the case may
be, if addressed as follows:
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(1) If to Sullivan (prior to the Closing) or the
Stockholder Representative:
c/o ABRY Partners, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attn: Royce Yudkoff, President
with a copy (which will not constitute notice to Sullivan
or the Stockholder Representative) to:
John L. Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
or to such other address and/or with such other copies as the
Person to whom such notice is to be given may from time to
time designate by notice to the Acquiring Parties given in
accordance with this Section 13.D.
(2) If to Sinclair, the Merger Sub or Post-Merger
Sullivan:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
with a copy (which will not constitute notice to
Sinclair, the Merger Sub or Post-Merger Sullivan) to:
Steven A. Thomas, Esq.
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
and
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
and
George Stamas, Esq.
Wilmer, Cutler & Pickering
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100 Light Street
Baltimore, Maryland 21202
or to such other address and/or with such other copies as
the Person to whom such notice is to be given may from
time to time designate by notice to Sullivan (if prior to
the Closing) and the Stockholder Representative given in
accordance with this Section 13.D.
13.E CAPTIONS. The captions of Articles and Sections of this
Agreement are for convenience only, and will not control or affect the meaning
or construction of any of the provisions of this Agreement.
13.F LAW GOVERNING. THIS AGREEMENT WILL BE GOVERNED BY,
CONSTRUED, AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCES TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE
TRANSACTIONS CONTEMPLATED HEREBY.
13.G WAIVER OF PROVISIONS. The terms, covenants,
representations, warranties, and conditions of this Agreement may be waived as
to any Party only by a written instrument executed by such Party. The terms,
covenants, representations, warranties, and conditions of this Agreement may be
waived as to any Old Sullivan Stockholder only by a written instrument executed
by Sullivan, prior to the Closing, or the Stockholder Representative, after the
Closing. The failure of any Party or any Old Sullivan Stockholder at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right at a later date to enforce the same. No waiver by or on
behalf of any Party to this Agreement or any Old Sullivan Stockholder 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, will 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.
13.H COUNTERPARTS. This Agreement may be executed in two (2)
or more counterparts, and all counterparts so executed will constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties hereto are not signatory to the same counterpart.
13.I ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits hereto) and the confidentiality agreement referred to in Section
8.C (including the Acquiring Parties' obligations with respect thereto, as
provided in Section 8.C), constitute the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersede any and all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, between them relating to the subject matter hereof.
13.J ACCESS TO BOOKS AND RECORDS.
(1) Post-Merger Sullivan will, and will cause its
Subsidiaries to, preserve for not less than five (5) years after the
Closing Date all books and records included in the
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Station Assets. After such five-year period, Post-Merger Sullivan will
not, and will not cause or permit its Subsidiaries to, destroy any
books or records relating to the conduct of business of the Stations
prior to the Effective Time unless Post-Merger Sullivan first offers to
transfer such books and records to the Stockholder Representative at no
cost to the Stockholder Representative, and if Post-Merger Sullivan is
requested to do so, Post-Merger Sullivan will transfer, or cause a
Subsidiary of Post-Merger Sullivan to transfer, such books or records
to the Stockholder Representative.
(2) At the request of the Stockholder Representative,
Post-Merger Sullivan will, and will cause each of its Subsidiaries to,
permit the Stockholder Representative (including its officers,
employees, accountants, and counsel) any access, upon reasonable prior
written notice during normal business hours, to all of its property,
accounts, books, contracts, records, accounts payable and receivable,
records of employees, FCC logs and other information concerning the
affairs or operation of the Stations as the Stockholder Representative
may reasonably request for any reasonable purpose relating to the
transactions contemplated by this Agreement or the ownership or
operation of any Station prior to the Effective Time, and to make
extracts or copies from the foregoing at the Stockholder
Representative's expense. At Post-Merger Sullivan's request, prior to
receiving any such requested information, the Stockholder
Representative will execute a confidentiality agreement with respect
thereto which is reasonably acceptable to Post-Merger Sullivan.
13.K PUBLIC ANNOUNCEMENTS. Prior to the Closing, no Party
will, except by mutual agreement of Sullivan and Sinclair (including agreement
as to content, text and method of distribution or release), make any press
release or other public announcement or disclosure concerning the transactions
contemplated by this Agreement, except as may be required by any Legal
Requirement (including filings and reports required to be made with or pursuant
to the rules of the Securities and Exchange Commission); provided that, prior to
making any such announcement or disclosure required by any Legal Requirement, to
the extent practicable, the disclosing Party gives each Person named above prior
written notice of the context, text and content of, the method of distribution
or release of, and all other material facts concerning, such disclosure.
13.L DISCLOSURE. If and to the extent that any information
required to be furnished by Sullivan in any attached Schedule is contained in
this Agreement or in any attached Schedule, such information will be deemed to
have been included in each other attached Schedule in which such information is
required to be included to the extent its relevance to such latter Schedule is
reasonably apparent. By including any information in any attached Schedule,
Sullivan will not be deemed to have admitted or acknowledged that such
information is material to or outside the ordinary course of the business of
Sullivan or any Station.
13.M DEFINITIONAL PROVISIONS.
(1) TERMS DEFINED IN APPENDIX. Each capitalized term
which is used and not otherwise defined in this Agreement or any
attached Schedule has the meaning which is specified for such term in
the Appendix which is attached to this Agreement.
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(2) MATERIALITY. For purposes of Sections 9.A(2), and
10.A(2), materiality (as embodied in the phrase "in all material
respects" will be measured by reference to the business or operations
of the Stations, taken as a whole, the value of the Station Assets,
taken as a whole, or the ability of Sullivan or Sinclair and the Merger
Sub, taken as a whole, as the case may be, to perform or carry out the
transactions contemplated by this Agreement, as the context requires.
(3) KNOWLEDGE. As used in this Agreement, the term
"knowledge" of Sullivan will refer only to the actual knowledge,
without any particular inquiry (except as specified in this Agreement),
of the Corporate Personnel, Andrew Banks and Royce Yudkoff, after
inquiry of the general managers of the Stations; and the "knowledge" of
Sinclair or the Merger Sub will refer only to the actual knowledge,
without any particular inquiry (except as specified in this Agreement)
of David Smith and David Amy.
(4) INTERPRETATION. Words used in this Agreement,
regardless of the gender and number specifically used, will be deemed
and construed to include any other gender, masculine, feminine or
neuter, and any other number, singular or plural, as the context
requires. Whether or not used in conjunction with the words "without
limitation" or words of similar import, the term "including" as used in
this Agreement imports that the items referred to are illustrative only
and do not purport to be a complete listing of the items of the type in
question. The wording of the provisions of this Agreement is the result
of arms-length negotiations among the parties to this Agreement and was
selected by them to reflect their mutual intentions; therefore, no
party will be deemed the "drafter" of this Agreement and no rule of
strict construction will be applied against or in favor of any party to
this Agreement.
13.N ARBITRATION.
(1) GENERALLY. Except as expressly provided in the
Estimate Escrow Agreement or the Indemnity Escrow Agreement or for
purposes of pursuing any remedy pursuant to Section 12.B(3)(b), the
arbitration procedures described in this Section 13.N will be the sole
and exclusive method of resolving and remedying claims arising under
this Agreement and the other Transaction Documents ("Disputes");
provided that nothing in this Section 13.N will prohibit a Party from
instituting litigation to enforce any Final Arbitration Award. Except
as otherwise provided in the Commercial Arbitration Rules of the
American Arbitration Association as in effect from time to time (the
"AAA Rules"), the arbitration procedures described in this Section 13.N
and any Final Arbitration Award will be governed by, and will be
enforceable pursuant to, the Uniform Arbitration Act as in effect in
the State of New York from time to time. No Person will be entitled to
claim or recover punitive damages in any such proceeding.
(2) NOTICE OF ARBITRATION. If a Party asserts that there
exists a Dispute, then such Person (the "Disputing Person") will give
each other Person involved in such Dispute a written notice setting
forth the nature of the asserted Dispute. If all such Persons do not
resolve any such asserted Dispute prior to the tenth Business Day after
such notice is given, then the Disputing Person may commence
arbitration pursuant to this Section 13.N
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by giving each other Person involved in such Dispute a written notice
to that effect (an "Arbitration Notice"), setting forth any matters
which are required to be set forth therein in accordance with the AAA
Rules. Unless otherwise notified, the Acquiring Parties are entitled to
assume that the Stockholder Representative is authorized to act on
behalf of each Old Sullivan Stockholder with respect to any Dispute.
(3) SELECTION OF ARBITRATOR. The Persons involved in such
Dispute will attempt to select a single arbitrator by mutual agreement.
If no such arbitrator is selected prior to the twentieth Business Day
after the related Arbitration Notice is given, then an arbitrator which
is experienced in matters of the type which are the subject matter of
the Dispute will be selected in accordance with the AAA Rules.
(4) CONDUCT OF ARBITRATION. The arbitration will be
conducted under the AAA Rules, as modified by any written agreement
among the Persons involved in such Dispute. The arbitrator will conduct
the arbitration in a manner so that the final result, determination,
finding, judgment or award determined by the arbitrator (the "Final
Arbitration Award") is made or rendered as soon as practicable, and the
Persons involved in such Dispute will use reasonable efforts to cause a
Final Arbitration Award to occur not later than the sixtieth day after
the arbitrator is selected. Any Final Arbitration Award will be final
and binding upon the Persons involved in such Dispute, and there will
be no appeal from or reexamination of any Final Arbitration Award,
except as provided in the Uniform Arbitration Act, as in effect in the
State of New York from time to time.
(5) ENFORCEMENT. A Final Arbitration Award may be
enforced in any state or federal court having jurisdiction over the
subject matter of the related Dispute.
(6) EXPENSES. The prevailing Person(s) in any arbitration
proceeding in connection with this Agreement will be entitled to
recover from the non-prevailing Person(s) their reasonable attorneys'
fees and disbursements in addition to any damages or other remedies
awarded to such prevailing Person(s), and the non-prevailing Person(s)
will be required to pay all other costs and expenses associated with
the arbitration; provided that (i) if an arbitrator is unable to
determine that a Person is a prevailing Person in any such arbitration
proceeding, then such costs and expenses will be equitably allocated by
such arbitrator upon the basis of the outcome of such arbitration
proceeding, and (ii) if such arbitrator is unable to allocate such
costs and expenses in such a manner, then the costs and expenses of
such arbitration will be paid one-half by Sullivan and one-half by
Sinclair, and each Party will pay the out-of-pocket expenses incurred
by it. As part of any Final Arbitration Award, the arbitrator may
designate the prevailing Person(s) for purposes of this Section
13.N(6). Except as provided in the preceding sentences, each Person
involved in a Dispute will bear its own costs and expenses (including
legal fees and disbursements) in connection with any such proceeding or
submission.
13.O STOCKHOLDER REPRESENTATIVE.
(1) APPOINTMENT; AUTHORITY GENERALLY. On behalf of the
Old Sullivan Stockholders, Sullivan hereby appoints ABRY Partners as
the initial Stockholder
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Representative under this Agreement, to serve in accordance with the
terms, conditions and provisions of this Agreement, and ABRY Partners,
by its execution of this Agreement, hereby agrees to act as such, upon
the terms, conditions and provisions of this Agreement. From and after
the Closing, the Stockholder Representative will be authorized to act
on behalf of the Old Sullivan Stockholders in accordance with this
Agreement.
(2) AUTHORIZATION. The Stockholder Representative, in
such capacity, will be entitled to take all actions on behalf of the
holders of Sullivan Shares or the Old Sullivan Stockholders, as the
case may be, with respect to this Agreement and the other agreements
contemplated hereby, and omit to take any action, each as directed by
(a) prior to the Effective Time, the holders
of capital stock of Sullivan having a majority of the voting
power represented by the outstanding capital stock of Sullivan
at the time in question, and
(b) after the Effective Time, Persons who
immediately prior to the Effective Time held Sullivan Shares
which represented a majority of the voting power of the
Sullivan Shares,
(in either case, the "Majority Sullivan Stockholders"). The Stockholder
Representative may be removed and replaced from time to time as the
representative of the holders of the Sullivan Shares or the Old
Sullivan Stockholders by written notice given by the Majority Sullivan
Stockholders to Sullivan (prior to the Effective Time) and the
Acquiring Parties.
(3) RESPONSIBILITY. The Stockholder Representative will
have no duties or responsibilities except those expressly set forth in
this Agreement or any other agreement which may be entered into by it
hereunder. The Stockholder Representative will have no responsibility
for the validity of this Agreement or any agreement referred to in this
Agreement or for the performance of any such agreements by any party
thereto or for the interpretation of any of the provisions of any such
agreements. The Stockholder Representative's liability in fulfilling
its duties will be limited to bad faith, willful misconduct or gross
negligence on its part. The Stockholder Representative will be
protected in acting upon any certificate, notice or other instrument
whatsoever received by the Stockholder Representative as to its due
execution, the validity and effectiveness of its provisions, and the
truth and accuracy of any information therein contained that the
Stockholder Representative in good faith believes to be genuine and to
have been signed or presented by a proper Person or Persons. The
Stockholder Representative may, in its sole discretion, consult with
and obtain advice from legal counsel and any other Person in the event
of any question as to any of the provisions of this Agreement, any
other agreement entered into in connection herewith or its duties
hereunder or thereunder. The reasonable cost of such services, to the
extent not borne by Sullivan, will be borne among the Old Sullivan
Stockholders who held Sullivan Shares immediately prior to the Merger
Effective Time, pro rata in accordance with the respective amounts of
the Merger Consideration to be received by them in respect of the
Sullivan Shares.
(4) RESIGNATION; REPLACEMENT. The Stockholder
Representative will
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have the right, in its sole discretion, to resign as the Stockholder
Representative (in its capacity as the representative of the holders of
Sullivan Shares or the Old Sullivan Stockholders) at any time by giving
at least 30 days prior written notice to Sullivan (prior to the
Effective Time) and the Acquiring Parties. In such event, Sullivan
(prior to the Effective Time) or the Majority Sullivan Stockholders
(after the Effective Time) will promptly appoint another Stockholder
Representative to represent the holders of Sullivan Shares and the Old
Sullivan Stockholders and give notice of such selection to the
Acquiring Parties and the Old Sullivan Stockholders (after the
Effective Time). Such resignation of the Stockholder Representative
will be effective upon such notice being given and such new Stockholder
Representative's acceptance of such appointment and will relieve the
resigning Stockholder Representative of all duties and responsibilities
of the Stockholder Representative in such capacity thereafter arising.
13.P COMPLETION OF SULLIVAN'S SCHEDULES. The Acquiring Parties
acknowledge that Sullivan has executed this Agreement without having the
opportunity to request of personnel of the Stations information which may be
material to the preparation of the attached Schedules referred to in Article IV
(and that, therefore, some or all of such attached Schedules may not be correct
and complete and, as a result, some or all of the representations and warranties
set forth in Article IV which refer to such attached Schedules may not be true
and correct). On or prior to March 9, 1998, Sullivan may deliver to Sinclair an
amendment and restatement of any such attached Schedule, or any portion thereof,
or a supplement to any such attached Schedule or any portion thereof, which may
be required in order to accurately depict facts and circumstances which exist on
the date of this Agreement (or any other applicable date referred to in any such
representation or warranty), and the attached Schedule or portion thereof in
question will be deemed to have been so amended and restated or modified, as the
case may be, as of the time of the execution and delivery of this Agreement. The
Acquiring Parties' sole and exclusive remedy under this Agreement with respect
to any matter which may be disclosed by any such amendment and restatement or
supplement will be Sinclair's right (if any) to terminate this Agreement as
described in Section 12.A(2)(b).
13.Q TREATMENT OF STATION KOKH. Each Acquiring Party
acknowledges that, notwithstanding any language to the contrary in this
Agreement, Sullivan has not made and will not make any representation, warranty
or certification of any kind with respect to Station KOKH (including with
respect to the assets, liabilities and operations related to Station KOKH), and
no representation or warranty set forth in Article IV, and no certification
relating thereto delivered pursuant to Sections 3.I, will be deemed to apply to
Station KOKH (including to any related asset, liability or operations). The
Annualized Trailing Cash Flow, the Gross Revenues, the Current Assets, the
Current Liabilities and the Sullivan Receivables will be determined without
regard to the results of operations and assets of Station KOKH.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be duly executed by their duly authorized officers, all as of
the day and year first above written.
SULLIVAN BROADCAST HOLDINGS, INC.
By:
----------------------------------------------
Its:
---------------------------------------------
SINCLAIR BROADCAST GROUP, INC.,
in its own right and on behalf of a Subsidiary
to be formed by it
By:
----------------------------------------------
Its:
---------------------------------------------
ABRY PARTNERS, INC.
By:
----------------------------------------------
Its:
---------------------------------------------
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APPENDIX
ADDITIONAL DEFINED TERMS. The following capitalized terms have
the following meanings when used in this Agreement and the Schedules attached to
this Agreement:
"ABRY FUND" means ABRY Broadcast Partners II, L.P., a Delaware
limited partnership and a stockholder of Sullivan.
"ACQUIRING PARTIES" means Sinclair, the Merger Sub and
Post-Merger Sullivan.
"ACQUIRING PARTY CONSENTS" means all Consents other than the
Required FCC Consent, any Consent required under the Hart-Scott-Rodino
Act, or any Sullivan Consent.
"ACT III" means Act III Broadcasting, Inc., a predecessor by
merger to Sullivan Broadcasting.
"ACT III PURCHASE AGREEMENT" means the Stock Purchase
Agreement dated as of June 19, 1995, among A-3 Acquisition, Inc., Act
III and certain of the stockholders of Act III, as amended and in
effect from time to time.
"ADJUSTMENT TIME" means, with respect to each Station, 12:01
a.m., local time, on the Closing Date.
"AFFILIATE" of any Person means any other Person which is
controlled by, controls, or is under common control with, such first
Person.
"AFFILIATED GROUP" means an affiliated group of corporations,
as that term is defined in Section 1504(a) of the Tax Code (or in any
analogous combined, consolidated or unitary group defined under state,
local or foreign income Tax law).
"APPROVAL DATE" means the first day upon which the Required
FCC Consent has been Granted and the requisite waiting period under the
Hart-Scott-Rodino Act for the consummation of such Merger has expired
or been terminated.
"AVERAGE TRADING PRICE" means the average of the Closing
Trading Prices for the third Business Day prior to the Closing Date and
the nine (9) preceding Business Days. The "CLOSING TRADING PRICE" for
any day means the closing price of Sinclair Common Stock on the Nasdaq
National Market as of 4:00 P.M., New York time, on such day.
"BENEFIT ARRANGEMENT" means any benefit arrangement,
obligation, custom, or practice to provide benefits, other than salary,
as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors (other than any
obligation, arrangement, custom or practice that is an employee benefit
plan under ERISA), including employment agreements, severance
agreements, executive compensation arrangements, stock options,
restricted stock rights and performance unit awards, incentive
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programs or arrangements, sick leave, vacation pay, severance pay
policies, plant closing benefits, salary continuation for disability,
consulting, or other compensation arrangements, workers' compensation,
retirement, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee
loans, employee banking privileges, any plans subject to Section 125 of
the Tax Code, and any plans providing benefits or payments in the event
of a change of control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present
or former employees, directors, or agents.
A "BUSINESS DAY" means any day other than a Saturday, a Sunday
or another day upon which banks in New York, New York generally are not
open for business.
"CLOSING DATE" means the date upon which the Closing occurs.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended and as in effect from time to time.
"CONSENT" means any consent, order, approval, authorization or
other action of, or any filing with or notice to or other action by or
with respect to, any Person which is required for any of the execution,
delivery or performance of this Agreement, the consummation of either
Spin-Off, the Merger, or the conduct of the business of Sullivan Two,
Sullivan Three or Post-Merger Sullivan or any of its Subsidiaries or
the holding or utilization of any Station Asset thereafter, whether
such requirement arises pursuant to any Legal Requirement, Contract, a
Person's organizational documents or otherwise, including any of the
foregoing which is required in order to prevent a breach of or a
default under or a termination or modification of any Contract.
"CONTRACT" means any agreement, lease, arrangement,
commitment, or understanding to which Sullivan or any of its
Subsidiaries, with respect to the Stations, is a party.
"CORPORATE PERSONNEL" means J. Daniel Sullivan, David Pulido,
Patrick Bratton, Richard Montgomery, Barry Charbonneau and any
successor to any of them in his capacity as an employee of Sullivan and
its Subsidiaries, Sullivan Two or Sullivan Three.
"EARNEST MONEY ESCROW AGENT" means the "Escrow Agent" to which
the Earnest Money Escrow Agreement refers.
"EARNEST MONEY ESCROW AGREEMENT" means the Escrow Agreement
entered into among Sullivan, Sinclair (on behalf of the Merger Sub) and
The Chase Manhattan Bank (as Escrow Agent) dated as of the date of this
Agreement, as such agreement is in effect from time to time.
"EARNEST MONEY FUND" means the "Escrow Fund" to which the
Earnest Money Escrow Agreement refers.
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"EARNEST MONEY INCOME" means the "Escrow Income" to which the
Earnest Money Escrow Agreement refers.
"EARNEST MONEY LETTER OF CREDIT" means a stand-by letter of
credit delivered to the Earnest Money Escrow Agent on the date of this
Agreement issued by The Chase Manhattan Bank in the face amount of
$75,000,000 and otherwise substantially in the form of the attached
Exhibit E, or any replacement stand-by letter of credit delivered to
the Earnest Money Escrow Agent in accordance with the Earnest Money
Escrow Agreement.
"ENVIRONMENTAL LAWS" means the rules and regulations of the
FCC, the United States Environmental Protection Agency and any other
federal, state or local government authority pertaining to human
exposure to RF radiation and all applicable rules and regulations of
federal, state and local laws, including statutes, regulations,
ordinances, codes, and rules, as amended, relating to the discharge of
air pollutants, water pollutants or process waste water or hazardous or
toxic substances, including the Federal Solid Waste Disposal Act, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Occupational Safety and Health Act of 1970, each as amended,
regulations of the Occupational Safety and Health Administration and
regulations of any state department of natural resources or state
environmental protection agency now in effect.
"EFFECTIVE TIME" means the time of the filing of the
Certificate of Merger described in Article II.
"ERISA AFFILIATE" means any Person that, together with
Sullivan, would be or was at any time treated as a single employer
under Section 414 of the Code or 4001 of ERISA and any general
partnership of which Sullivan or any Subsidiary of Sullivan is or has
been a general partner.
"ESTIMATE ESCROW AGENT" means the "Escrow Agent" to which the
Estimate Escrow Agreement refers.
"ESTIMATE ESCROW AGREEMENT" means the Estimate Escrow
Agreement entered into among the Stockholder Representative, Sinclair
(on behalf of the Merger Sub) and The Chase Manhattan Bank (as Escrow
Agent) dated as of the date of this Agreement, as such agreement is in
effect from time to time.
"ESTIMATE FUND" means the "Escrow Fund" to which the Estimate
Escrow Agreement refers.
"EXISTING LMAS" means the time brokerage and local marketing
agreements pursuant to which Sullivan and its Subsidiaries conduct
their operations with respect to the LMA Stations.
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"EXPIRATION DATE" means May 16, 1999.
"FCC" means the Federal Communications Commission or any
successor thereto.
"FCC AUTHORIZATIONS" means the authorizations issued by the
FCC and described on the attached Schedule 4E.
"FILM OBLIGATIONS" means all cash payment obligations of
Sullivan or any of its Subsidiaries under any Program Contract.
A "FINAL ORDER" means the Required FCC Consent if (a) the
Required FCC Consent has been Granted and has not been reversed,
stayed, set aside, enjoined, annulled or suspended (whether under
Section 402 or 405 of the Communications Act or otherwise) and (b) (i)
no request has been filed for administrative or judicial review,
reconsideration, appeal, certiorari or stay and the time for filing any
such request and for the FCC to review the Required FCC Consent on its
own motion has expired, or (2) if such a review, reconsideration or
appeal has occurred, such review, reconsideration or appeal has been
denied and the time for further review, reconsideration or appeal has
expired.
"FUNDED INDEBTEDNESS" means the indebtedness for borrowed
money of Sullivan and its Subsidiaries under the Sullivan Senior Debt
Arrangements, the indebtedness for borrowed money of Sullivan and its
Subsidiaries represented by the Sullivan Notes, and all other
indebtedness of Sullivan and its Subsidiaries for money borrowed by
them. As used herein, the term "money borrowed" does not refer to the
receipt or benefit of trade credit for the purchase of goods or
services.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time, as applied by Sullivan and
its Subsidiaries from time to time.
The Required FCC Consent is "GRANTED" on the effective date,
as determined under the FCC's rules, regulations and policies, of the
grant thereof by the FCC or its staff.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as in effect from time to time.
"HAZARDOUS MATERIAL" means any substance or waste containing
any hazardous substance, pollutant or contaminant, as those terms are
defined, in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq., and any
other substance similarly defined or identified in any applicable
Environmental Laws, including toxic materials or harmful physical
agents, as defined in the Occupational Safety and Health Act of 1979,
as amended, 29 U.S.C. ss.651 et seq. "Hazardous Materials" includes
asbestos, asbestos-containing materials, petroleum and petroleum-based
products, polycholorinated biphenyls (PCBs), infectious wastes and
radioactive materials and wastes.
"HEADQUARTERS ASSETS" means the assets of Sullivan and its
Subsidiaries located in the offices of Sullivan and its Subsidiaries
located in Franklin, Tennessee, and Boston, Massachusetts, and any
so-called "personal seat license" or other right of Sullivan or any of
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its Subsidiaries to subscribe for tickets to events at the stadium
presently being constructed or proposed to be constructed in the
Nashville, Tennessee, metropolitan area.
"INDEMNITY AGREEMENT" means the Indemnity Agreement entered
into among Sullivan, Sinclair and certain other Persons dated as of the
date of this Agreement, as such agreement is in effect from time to
time.
"INDEMNITY ESCROW AGENT" means the "Escrow Agent" to which the
Indemnity Escrow Agreement refers.
"INDEMNITY ESCROW AGREEMENT" means the Escrow Agreement
entered into among the Stockholder Representative, Sinclair and certain
other Persons and The Chase Manhattan Bank (as Escrow Agent) dated as
of the date of this Agreement, as such agreement is in effect from time
to time.
"INDEMNITY FUND" means the "Escrow Fund" to which the
Indemnity Escrow Agreement refers.
"KOKH PURCHASE AGREEMENT" means the Asset Purchase Agreement
dated as of January 6, 1998 among Sinclair, SBOC and SBLH, as in effect
from time to time.
"LEGAL REQUIREMENTS" means the Communications Act, the rules,
regulations and published policies of the FCC, and all other federal,
state and local laws, rules, regulations, ordinances, judgments, orders
and decrees.
"LIEN" means any mortgage, pledge, hypothecation, encumbrance,
lien (statutory or otherwise), preference, priority or other security
agreement of any kind or nature whatsoever (including any conditional
sale or other title retention agreement and any lease having
substantially the same effect as any of the foregoing and any
assignment or deposit arrangement in the nature of a security device).
"LMA STATIONS" means broadcast television station WUXP,
Nashville, Tennessee; and broadcast television station WUPN-TV,
Greensboro, North Carolina; in each case together with all related
translator stations (if any).
"MARKET CABLE SYSTEM" means, with respect to any Station, any
cable television system located within such Station's television
market, as that term is defined in Section 76.55(e) of the rules of the
FCC.
"MATERIAL ADVERSE CHANGE" means a material adverse change
after the date of this Agreement in the operations, business, financial
condition or results of operations of the Stations, taken as a whole,
or in the condition of the Station Assets, taken as a whole (as
compared with the operations, business, financial condition and results
of operations of the Stations, taken as a whole, and the condition of
the Station Assets, taken as a whole, on the date of this Agreement)
which occurs on or prior to the Approval Date; provided that none of
the following (or any combination thereof) will be a Material Adverse
Change: (i) a
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change in the financial performance of the Stations; (ii) any change
caused in whole or in part by (A) any change in employees, suppliers or
customers of the Stations, (B) a change in general economic, financial
or capital market conditions on a national, state, regional or local
basis, (C) a change in conditions (including legislation, regulations
or competitive activities) applicable to the broadcast television
industry generally on a national, state, regional or local basis, (D)
any matter disclosed on the attached Schedules to this Agreement, (E)
the establishment of a union or collective bargaining arrangement, or
actual or threatened union organizing activity, involving employees of
Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three, (F)
the departure of any employees of Sullivan, any of its Subsidiaries,
Sullivan Two or Sullivan Three after the date of this Agreement,
whether or not in anticipation of the Merger, or (G) the loss of cable
system carriage of any Station.
"MISSION GUARANTEES" means the (i) Guaranty of Sullivan dated
as of July 11, 1996 in favor of NationsBank of Texas, N.A., and any
other lenders referred to therein relating to certain indebtedness of
Mission Broadcasting I, Inc., a Delaware corporation, and (ii) the
Guaranty of Sullivan dated as of July 29, 1996 in favor of NationsBank
of Texas, N.A., and any other lenders referred to therein relating to
certain indebtedness of Mission Broadcasting II, Inc., a Delaware
corporation, in each case as in effect from time to time.
"9-5/8% INDENTURE" means the Indenture dated as of December
15, 1993 among Sullivan Broadcasting (as the successor by merger to Act
III), its Subsidiaries and The State Street Bank and Trust Company, as
successor trustee, as in effect from time to time.
"9-5/8% NOTES" means the 9-5/8% Notes due 2003 of Sullivan
Broadcasting (as the successor by merger to Act III) issued pursuant to
the 9-5/8% Indenture, as such Notes are in effect from time to time.
"NEW LMAS" means the Sullivan Two LMA and the Sullivan Three
LMA.
"NON-CONTINUING STATION MANAGER" means any general manager or
general sales manager of a Station, if Sinclair notifies Sullivan in
writing not fewer than 10 days prior to the Closing Date that Sinclair
desires that the employment of such general manager or general sales
manager be terminated effective as of the Closing Date and Sinclair
does not withdraw such notice by contrary written notice to Sullivan on
or prior to the Closing Date.
"OLD SULLIVAN STOCKHOLDER" means any holder of record of any
Sullivan Share Equivalent immediately prior to the Effective Time.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of the
conduct of business by Sullivan and is Subsidiaries, substantially
consistent with their respective past practices.
"OWNED STATIONS" means broadcast television station WZTV,
Nashville, TN; broadcast television station WUTV, Buffalo, New York;
broadcast television station WXLV-TV, Winston-Salem, North Carolina;
broadcast television station WRGT-TV, Dayton, Ohio; broadcast
television station WRLH-TV, Richmond, Virginia; broadcast television
station
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WVAH-TV, Charleston, West Virginia; broadcast television station WUHF,
Rochester, New York; broadcast television station WTAT-TV, Charleston,
South Carolina; broadcast television station WFXV, Utica, New York;
low-power television station WPNY-LP, Rome, New York; broadcast
television station WMSN-TV, Madison, Wisconsin; and Station KOKH; in
each case together with all associated translator stations (if any)
owned by Sullivan or any of its Subsidiaries immediately prior to the
Spin-Offs.
"PARTIES" means the parties to this Agreement.
"PERMITTED ENCUMBRANCES" means (i) Liens arising by operation
of law and securing the payment of Taxes which are not yet due and
payable, (ii) with respect to any property leased by Sullivan, any of
its Subsidiaries, Sullivan Two or Sullivan Three as lessee, the
interest of the lessor in such property, (iii) easements,
rights-of-way, reservations of rights, conditions or covenants, zoning,
building or similar restrictions or other non-monetary Liens or defects
that do not, individually or in the aggregate, materially interfere
with the use of the affected property in the operation of the Stations
as currently conducted or as presently proposed by Sullivan and its
Subsidiaries to be conducted, (iv) restrictions on transfer imposed
under state or federal securities laws or pursuant to the
Communications Act or the FCC Regulations, (v) Liens disclosed on the
attached Schedule 4G, including those described in the title policies
which are a part of such Schedule, and (vi) Liens securing indebtedness
under the Sullivan Senior Debt Arrangements, other Funded Indebtedness
and the Mission Guarantees.
A "PERSON" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
association or government or department thereof.
"PROGRAM CONTRACTS" means all program licenses and other
Contracts which authorize the broadcast of film product or programs on
any Station, including those described under the heading "Program
Contracts" on the attached Schedule 4J and any of the same entered into
after the date of this Agreement and prior to the Closing in accordance
with this Agreement, and any of the same which are not required to be
described on any Schedule to this Agreement by reason of the
dollar-amount or term thresholds set forth in Section 4.J, in each case
to the extent existing and as in effect from time to time.
"REALTY" means all real property interests described on the
attached Schedule 4G.
"REQUIRED FCC CONSENT" means the action(s) or order(s) by the
FCC granting its Consent to the transfer of the FCC Authorizations in
the Spin-Offs, in each case without any condition which in the
reasonable judgment of Sullivan and the Acquiring Parties is adverse to
such Person (or, in Sullivan's or the Stockholder Representative's
reasonable judgment, adverse to any of the Old Sullivan Stockholders or
the stockholders of Sullivan Two or Sullivan Three), as the case may
be, in any material respect.
"SALE OF SULLIVAN" means any transfer, or transfer of control,
of all or substantially all of the assets of Sullivan, its
Subsidiaries, Sullivan Two and Sullivan Three, taken as a whole,
whether by means of a sale of assets, merger, stock acquisition or
similar transaction,
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other than to the ABRY Fund or an Affiliate of the ABRY Fund.
"SECURITIES ACT" means the Securities Act of 1933, as amended
and in effect from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended and in effect from time to time.
"SINCLAIR COMMON STOCK" means the Class A Common Stock of
Sinclair, par value $0.01 per share.
"SINCLAIR-RELATED ENTITY" means Sinclair, the Merger Sub, any
direct or indirect assignee or proposed assignee (by operation of law
or otherwise) of any of the rights of any of them pursuant to this
Agreement or any other agreement contemplated hereby, any direct or
indirect successor or proposed successor to Post-Merger Sullivan's and
its Subsidiaries' or Sullivan Two's business or operation with respect
to any Station, or any Affiliate or any of them.
"STATION ASSETS" means all of Sullivan's and its Subsidiaries'
rights in, to and under the assets and properties of the Stations, real
and personal, tangible and intangible, of every kind and description
which are owned and used by Sullivan or its Subsidiaries in connection
with the business and operations of the Stations, including rights
under con tracts and leases, real and personal property, plant and
equipment, inventories, intangibles, licenses and goodwill, and all
other assets and properties of Sullivan and its Subsidiaries used
solely in connection with the operation of any Station; provided that
the Station Assets will not include the Headquarters Assets.
"STATION KOKH" means broadcast television station KOKH-TV,
Oklahoma City, Oklahoma, together with all related translator stations
(if any) owned by Sullivan and its Subsidiaries immediately prior to
the Spin-Offs.
"STATIONS" means the Owned Stations and the LMA Stations.
"STOCKHOLDER REPRESENTATIVE" means ABRY Partners, Inc., a
Delaware corporation, or any successor thereto as the Stockholder
Representative designated pursuant to Section 13.O.
"STRADDLE PERIOD" means any Taxable period beginning before
and ending on or after the Closing Date.
With respect to any Person, a "SUBSIDIARY" means any
corporation, partnership, limited liability company, association or
other business entity of which, at the time of such reference, (i) if a
corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof, or a
majority economic interest, is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that
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Person or a combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority of
the partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by any Person or one
or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons will be deemed to have a majority
ownership interest in a partnership, limited liability company,
association or other business entity if such Person or Persons will be
allocated a majority of partnership, company, association or other
business entity gains or losses or will be or control the managing
director or general partner of such partnership, company, association
or other business entity.
"SULLIVAN BROADCASTING" means Sullivan Broadcasting Company,
Inc., a Delaware corporation.
"SULLIVAN COMMON STOCK" means Sullivan Shares which are common
stock.
"SULLIVAN CONSENTS" means all Consents of the board of
directors or stockholders of Sullivan or any of its Subsidiaries and
all Consents (if any) for a Spin-Off required under any lease under
which Sullivan or a Subsidiary (as lessee) leases space on a tower for
the location of any assets described on the attached Exhibit A or the
attached Exhibit B.
"SULLIVAN INDENTURES" means the 9-5/8% Indenture, the 10-1/4%
Indenture and the 13-1/4% Indenture.
"SULLIVAN NOTES" means the 9-5/8% Notes, the 10-1/4% Notes and
the 13-1/4% Notes.
"SULLIVAN PREFERRED STOCK" means the Series A Preferred Stock
of Sullivan, par value $0.001 per share.
"SULLIVAN-RELATED ENTITY" means any Affiliate of ABRY Partners
Inc. or ABRY Broadcast Partners II, L.P., including Sullivan and each
of its Subsidiaries, prior to the Effective Time.
"SULLIVAN RIGHT" means any security or right issued by
Sullivan which is not a Sullivan Share, which is outstanding
immediately prior to the Effective Time and which is directly or
indirectly convertible into or exercisable or exchangeable for any
capital stock of Sullivan at such time.
"SULLIVAN SENIOR DEBT ARRANGEMENTS" means the Credit Agreement
dated as of January 4, 1996 among Sullivan, Sullivan Broadcasting, the
various Agents and co-Agents referred to therein, and the several
Lenders from time to time parties thereto, together with all "Loan
Documents" and other documents and instruments relating to the
"Obligations" referred to therein, in each case as in effect from time
to time.
"SULLIVAN SHARE" means any share of capital stock of Sullivan
which is outstanding immediately prior to the Effective Time.
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"SULLIVAN SHARE EQUIVALENT" means any Sullivan Right or
Sullivan Share.
"SULLIVAN THREE" means Sullivan Broadcasting Company III,
Inc., a Delaware corporation.
"SULLIVAN THREE LMA" means a local marketing or time brokerage
agreement to be entered into at the time of the Closing pursuant to
which Sinclair or a Subsidiary of Sinclair will have the right to sell
all or substantially all of the advertising time on the Sullivan Three
Stations and having such other terms and conditions as Sinclair may
propose and which are reasonably acceptable to Sullivan Three.
"SULLIVAN THREE STATIONS" means broadcast television station
WRGT-TV, Dayton, Ohio; broadcast television station WVAH-TV,
Charleston, West Virginia; broadcast television station WTAT-TV,
Charleston, South Carolina; broadcast television station WFXV-TV,
Utica, New York; low-power television station WPNY-LP, Rome, New York;
and Station KOKH; in each case together with all associated translator
stations (if any) owned by Sullivan or any of its Subsidiaries
immediately prior to the Spin-Offs.
"SULLIVAN TWO" means Sullivan Broadcasting Company II, Inc., a
Delaware corporation.
"SULLIVAN TWO LMA" means a local marketing or time brokerage
agreement to be entered into at the time of the Closing pursuant to
which Sinclair or a Subsidiary of Sinclair will have the right to sell
all or substantially all of the advertising time on the Sullivan Two
Stations and having such other terms and conditions as Sinclair may
propose and which are reasonably acceptable to Sullivan Two.
"SULLIVAN TWO STATIONS" means the Stations which are not
Sullivan Three Stations.
"TAX" (and, with correlative meaning, "Taxes", "Taxable" and
"Taxing") means any (A) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profits,
environmental (including under Section 59A of the Tax Code), customs,
duties, real property, real property gains, personal property, capital
stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax of any kind whatsoever,
including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; (B) liability of any corporation
for the payment of any amounts of the type described in clause (A)
arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included in any Tax Return relating
thereto); and (C) liability for the payment of any amounts of the type
described in clause (A) or (B) as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability
of any other Person.
"TAX CODE" means the Internal Revenue Code of 1986, as amended
(including, where applicable, the Internal Revenue Code of 1954, as
amended).
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"10-1/4% INDENTURE" means the Indenture dated as of December
21, 1995 among Sullivan Broadcasting, its Subsidiaries and The State
Street Bank and Trust Company, as trustee, as in effect from time to
time.
"10-1/4% NOTES" means the 10-1/4% Senior Subordinated Notes
due 2005 of Sullivan Broadcasting issued pursuant to the
10-1/4%Indenture, as such Notes are in effect from time to time.
"13-1/4% INDENTURE" means the Indenture dated as of December
21, 1995 among Sullivan and the Bank of New York, as trustee, as in
effect from time to time.
"13-1/4% NOTES" means the 13-1/4% Senior Accrual Debentures
due 2006 of Sullivan issued pursuant to the 13-1/4% Indenture, as such
Debentures are in effect from time to time.
"TIME SALE CONTRACTS" means all orders, agreements and other
Contracts existing on the date of this Agreement, or entered into in
the ordinary course of business of any Stations, or as otherwise
permitted by this Agreement, between the date of this Agreement and the
Closing, for the sale of advertising time (other than any Trades) on
any Station; provided that any so-called barter Program Contract will
be deemed to constitute a "Program Contract," and not a "Time Sale
Contract," for purposes of this Agreement.
"TRADE" means any trade, barter or similar arrangement for the
sale of advertising time other than for cash (other than any film or
program barter arrangements and radio barter arrangements) on any
Station; provided that any so-called barter Program Contract will be
deemed to constitute a "Program Contract," and not a "Trade," for
purposes of this Agreement.
"TRADE-OUT PAYABLES" means all obligations of Sullivan or any
of its Subsidiaries to provide advertising time arising under any Trade
arrangement, whenever made.
"TRADE-OUT RECEIVABLES" means all current assets of Sullivan
or any of its Subsidiaries which are goods or services receivable by
Sullivan or any of its Subsidiaries arising under any Trade
arrangement, whenever made, and all other accounts receivable of
Sullivan or any of its Subsidiaries which at the option of the obligor
thereof may be satisfied or discharged other than in money.
"TRANSACTION DOCUMENTS" means this Agreement and all
agreements between or among any or all of the Sullivan-Related Entities
and the Sinclair-Related Entities relating thereto, in each case as in
effect from time to time.
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LIST OF SCHEDULES
Schedule 4C Financial Statements
Schedule 4D Certain Developments
Schedule 4E FCC Matters
Schedule 4F Certain Asset-Related Matters
Schedule 4G Ownership and Other Matters
Schedule 4I Insurance
Schedule 4J Contracts
Schedule 4K Employees
Schedule 4L Litigation
Schedule 4N Conflicts
Schedule 4O Subsidiaries, Organization and Qualification
Schedule 4P Tax Matters
Schedule 4T Employee Benefit Matters
Schedule 5E Sinclair's FCC-Related Disclosures
LIST OF EXHIBITS
Exhibit A Sullivan Two Spin-Off Assets
Exhibit B Sullivan Three Spin-Off Assets
Exhibit C Opinions of Sullivan's Counsel
Exhibit D Opinions of Sinclair's and the Merger Sub's Counsel
Exhibit E Form of Earnest Money Letter of Credit
79
AGREEMENT AND PLAN OF MERGER
AMONG
SULLIVAN BROADCASTING COMPANY II, INC.
SINCLAIR BROADCAST GROUP, INC.,
and
ABRY PARTNERS, INC.
(as Stockholder Representative)
EFFECTIVE AS OF
FEBRUARY 23, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into on March 16,
1998, but is effective as of March 16, 1998, among Sullivan Broadcasting Company
II, Inc., a Delaware corporation ("Sullivan"), Sinclair Broadcast Group, Inc., a
Maryland corporation ("Sinclair"), on behalf of itself and a subsidiary to be
formed by it pursuant to Article I below, and ABRY Partners, Inc., a Delaware
corporation ("ABRY Partners"), solely in its capacity as the Stockholder
Representative referred to in this Agreement.
WHEREAS, the parties to this Agreement are among the parties
to an Agreement and Plan of Merger dated as of February 23, 1998 (the "Prior
Agreement"), and the parties to the Prior Agreement have agreed to restate the
Prior Agreement by entering into this Agreement and certain other agreements;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows, effective as of the date of the Prior Agreement:
ARTICLE I
FORMATION OF SUBSIDIARY
On or prior to March 20, 1998, Sinclair will form a wholly-owned Subsidiary
which will be a Delaware corporation. Such Subsidiary will be the "Merger Sub"
referred to in this Agreement.
Sinclair will cause such Subsidiary to become a party to this Agreement and the
Indemnity Escrow Agreement by executing and delivering to Sullivan a counterpart
thereof.
ARTICLE II
MERGER
2.A GENERAL. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date, effective as of the Effective
Time, the Merger Sub will merge with and into Sullivan in accordance with the
terms and conditions of this Agreement. Sullivan will be the corporation which
survives such merger (the "Merger") and in such capacity is sometimes referred
to in this Agreement as "Post-Merger Sullivan."
2.B EFFECT ON SULLIVAN SHARES. Immediately after the Closing,
effective at the Effective Time, subject to the terms and conditions of this
Agreement (1) the Merger will be effected by the filing with the Secretary of
the State of Delaware of a Certificate of Merger; (2) each Sullivan Share
outstanding at the Effective Time, by said occurrence and with no further action
on the part of the holder thereof, will be canceled without consideration; (3)
each share of common stock of the
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Merger Sub outstanding immediately prior to the Effective Time will, by said
occurrence and with no further action on the part of the holder thereof, be
transformed and converted into one share of common stock of Post-Merger
Sullivan, so that immediately thereafter Sinclair will be the sole and exclusive
owner of all equity securities of Post-Merger Sullivan; and (4) Post-Merger
Sullivan will be the owner of the business, assets, rights, privileges,
immunities, powers, franchises and other attributes of Sullivan and the Merger
Sub.
2.C CERTIFICATE OF INCORPORATION. Immediately after the
Effective Time, the certificate of incorporation of Post-Merger Sullivan will be
the certificate of incorporation of the Merger Sub as in effect immediately
prior to the Effective Time.
2.D BYLAWS. Immediately after theEffective Time, the bylaws of
Post-Merger Sullivan will be the bylaws of the Merger Sub as in effect
immediately prior to the Effective Time.
2.E BOARD OF DIRECTORS AND OFFICERS. The board of directors
and officers of the Merger Sub immediately prior to the Effective Time will be
the board of directors and the officers, respectively, of Post-Merger Sullivan
immediately after the Effective Time, and such individuals will serve in such
positions for the respective terms provided by applicable Legal Requirements or
in the bylaws of Post-Merger Sullivan until their respective successors are
elected and qualified.
2.F NAME. The name of Post-Merger Sullivan will be designated
by Sinclair.
2.G TRANSFER OF SULLIVAN STOCK. At the Effective Time, the
stock transfer books of Sullivan will be closed and no transfer of Sullivan
Shares will thereafter be made.
ARTICLE III
MERGER CONSIDERATION AND CLOSING
3.A MERGER CONSIDERATION. No consideration will be payable to
the holders of Sullivan Shares by reason of or in connection with the Merger.
3.B CLOSING TIME AND PLACE. Subject to Section 12.A, the
consummation of the Merger (the "Closing") will be held in the offices of
Kirkland & Ellis, in New York, New York, at 10:00 a.m., local time, on the date
determined pursuant to the following two sentences, or at such other place
and/or at such other time and date as the Merger Sub and Sullivan may agree in
writing. The Merger Closing will occur on a date designated by the Merger Sub by
written notice to Sullivan not less than ten Business Days in advance of such
date (which designated date will be not later than the Expiration Date).
Notwithstanding the foregoing, but subject to Section 12.A, if on a date for the
Closing described in the preceding sentence or specified pursuant to this
sentence any condition of the Merger Sub or Sullivan specified in Article IX or
X has not been satisfied (and will not be satisfied by the delivery of documents
at the Closing) or waived in writing, then the date for the
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Closing will be extended to any date specified by the Merger Sub to Sullivan
with not less than 10 Business Days' notice to the other (subject to the Merger
Sub's and Sullivan's respective conditions to the Closing set forth in Articles
IX and X being satisfied or waived in writing on such specified date); provided
that any such specified date will be on or prior to the Expiration Date.
3.C DELIVERIES AT THE CLOSING. All actions on the Closing Date
(including those described in Section 11.D) will be deemed to occur
simultaneously, and no document or payment to be delivered or made on the
Closing Date will be deemed to be delivered or made until all such documents and
payments are delivered or made to the reasonable satisfaction of Sullivan, the
Merger Sub, the Stockholder Representative and their respective legal counsel.
(1) DELIVERIES BY SULLIVAN. At the Closing, Sullivan
will deliver to the Merger Sub the following:
(a) the minute book, stock transfer book and
other records relating to the internal corporate affairs of
Sullivan which are in Sullivan's possession, and resignations
of the officers and directors of Sullivan, which resignations
will be effective as of the Effective Time;
(b) all mortgage discharges or releases of
Liens, if any, that will be sufficient to cause the Station
Assets held by Sullivan to be as described in Section 4.E;
(c) a certificate of the President or Chief
Executive Officer of Sullivan dated the Closing Date to the
effect that, except as specified in such certificate, to the
best of such officer's knowledge, the conditions set forth in
Sections 10.A(1) and 10.A(2) have been fulfilled;
(d) a certificate of Sullivan dated the
Closing Date to the effect that, except as specified in such
certificate, the conditions set forth in Sections 10.A(1) and
10.A(2) have been fulfilled;
(e) a certified copy of the resolutions or
action by written consent of the board of directors and
stockholders of Sullivan authorizing the Merger and Sullivan's
execution, delivery and performance of this Agreement;
(f) certificates as to the existence and/or
good standing of Sullivan, in each case issued by the
Secretary of State or a comparable official of Delaware and
each other jurisdiction (if any) in which it is then required
to be qualified to do business, certifying as to the existence
and/or good standing of such corporation in such
jurisdictions;
(g) one or more opinions of counsel or
special counsel to Sullivan, each dated the Closing Date, as
to the matters set forth in the attached Exhibit A; and
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(h) such other documents, instruments and
receipts as the Merger Sub may reasonably request in order to
effectuate the Merger and the other transactions contemplated
by this Agreement to be consummated at the Closing.
Each of the foregoing will be reasonably satisfactory in form to the
Merger Sub and its legal counsel.
(2) DELIVERIES BY THE MERGER SUB. At the Closing, the
Merger Sub will deliver to the Stockholder Representative the
following:
(a) a certificate of an officer or similar
official of the Merger Sub dated the Closing Date to the
effect that, except as specified in such certificate, to the
best of such officer's or official's knowledge, the conditions
set forth in Sections 9.A(1) and 9.A(2) have been fulfilled;
(b) a certificate of an officer or similar
official of Sinclair dated the Closing Date to the effect
that, except as specified in such certificate, to the best of
such officer's or official's knowledge, the conditions set
forth in Sections 9.A(1) and 9.A(2) have been fulfilled;
(c) a certificate of the Merger Sub dated
the Closing Date to the effect that, except as specified in
such certificate, the conditions set forth in Sections 9.A(1)
and 9.A(2) have been fulfilled;
(d) a certificate of Sinclair dated the
Closing Date to the effect that, except as specified in such
certificate, the conditions set forth in Sections 9.A(1) and
9.A(2) have been fulfilled;
(e) a certified copy of the resolutions or
action by written consent of the board of directors and
stockholders of the Merger Sub authorizing the Merger and the
Merger Sub's execution, delivery and performance of this
Agreement;
(f) a certified copy of the resolutions or
action by written consent of the board of directors of
Sinclair authorizing Sinclair's execution, delivery and
performance of this Agreement;
(g) certificates as to the existence and/or
good standing of Sinclair and the Merger Sub, in each case
issued by the Secretary of State or a comparable official of
such jurisdictions as Sullivan may reasonably request and
dated on or after the fifth Business Day prior to the Closing
Date, certifying as to the existence and/or good standing of
such corporation in such jurisdictions;
(h) one or more opinions of counsel or
special counsel to Sinclair and the Merger Sub, each dated the
Closing Date, as to the matters set forth in the
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attached Exhibit B; and
(i) such other documents, instruments and
receipts as Sullivan may reasonably request in order to
effectuate the Merger and the other transactions contemplated
by this Agreement to be consummated at the Closing.
Each of the foregoing will be reasonably satisfactory in form to
Sullivan and its legal counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SULLIVAN
Subject to Section 13.Q, Sullivan makes the following
representations and warranties:
4.A ORGANIZATION. Sullivan is a corporation which is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. From and after the Spin- Off, Sullivan will be qualified to do
business or have similar status under the laws of each jurisdiction in which
such qualification is required by applicable Legal Requirements. Sullivan has
the power and authority to carry on the business being conducted by it, to own
and operate the Station Assets owned and operated by it, and to enter into and
consummate the transactions contemplated to be consummated by it pursuant to
this Agreement.
4.B ACTION. Each action necessary to be taken by or on the
part of Sullivan in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated to be consummated by
Sullivan pursuant to this Agreement and necessary to make the same effective
will be duly and validly taken by, and be effective at, the time by which such
action is required to be taken. This Agreement has been duly and validly
authorized, executed, and delivered by Sullivan and constitutes its valid and
binding agreement, enforceable against Sullivan in accordance with and subject
to its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, arrangement, moratorium or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies.
4.C FCC AUTHORIZATIONS. As of the time of the Closing,
Sullivan will be the holder of the FCC Authorizations. As of the time of the
Closing, except as set forth on the attached Schedule 4C, (i) the Authorizations
will constitute all of the licenses and authorizations required under the
Communications Act, or the current rules, regulations, and policies of the FCC,
for the operation of the Stations as now conducted; (ii) the FCC Authorizations
will be in full force and effect and are subject to or scheduled for renewal on
the respective dates specified
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on the attached Schedule 4C (unless theretofore renewed after the date of this
Agreement); (iii) the FCC Authorizations will be valid for the full respective
terms thereof; (iv) Sullivan will have no reason to believe that the FCC
Authorizations will not be renewed for a full and customary term in the ordinary
course with no materially adverse conditions (except with respect to general
rule-making and similar matters relating generally to television broadcast
stations by reason of any action or omission of Sinclair or any of its
Subsidiaries); (v) there will not be not pending, or, to the knowledge of
Sullivan, 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 there will not be pending, or, to the knowledge of any such
Person, 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 Sullivan with respect to
any Station, in each case other than by reason of any actual or alleged action
or omission of Sinclair or any of its Subsidiaries; (vi) Sullivan will have
complied in all material respects with the FCC Authorizations, the
Communications Act, and the current rules, regulations and policies of the FCC;
and (vii) all documents required by 47 C.F.R. Section 73.3526 to be kept in each
Station's public inspection file are in such file and such file will be
maintained in proper order and complete up to and through the Closing Date.
4.D CONDITION OF ASSETS. Except as set forth on the attached
Schedule 4D, the material tangible assets of Sullivan and the improvements on
any real property which are used by it (a) at the time of the Spin-Off and on
the Closing Date will in all material respects be in good and technically sound
operating condition (ordinary wear and tear excepted) and are not in need of
repair and in a condition which would be sufficient to permit the owner thereof
to operate the Stations (in the manner in which the Stations are operated or
programmed by Sullivan Holdings and its Subsidiaries as of the date of this
Agreement) in compliance with the terms of the FCC Authorizations, the
Communications Act and current FCC rules and regulations (if such owner had the
right to use the Station Assets not owned by Sullivan and such Station Assets
were in at least such condition), and (b) have in all material respects been
maintained in a manner consistent with generally accepted standards of good
engineering practice and to the knowledge of Sullivan, all applicable federal,
state and local statutes, ordinances, rules and regulations, including, without
limitation, all applicable tower painting and lighting requirements.
4.E TITLE, ETC. Immediately after the Spin-Off, Sullivan will
have good title to, or a valid leasehold in, the tangible assets and personal
property included in the Station Assets, and all such assets and personal
property will on the Closing Date (after the repayment in full of the
indebtedness of Sullivan and all related interest and other obligations and the
release of all related Liens and the Mission Guarantees) be free and clear of
all Liens other than Permitted Encumbrances. Sullivan possesses (and immediately
after the Merger, will possess) adequate rights, licenses, or other authority to
use the call letters presently used by the Stations, free and clear of all Liens
other than Permitted Encumbrances.
4.F LITIGATION. Except as set forth on the attached Schedule
4F:
(1) on the date of this Agreement, Sullivan is not
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 arising out of a proceeding to which it is or was a
party, and on the Closing Date, no such item will have or reasonably be
expected to result in a Material Adverse
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Change; and
(2) on the date of this Agreement, there is no
litigation pending by or against, or to the knowledge of Sullivan
threatened against, Sullivan which interferes with, or could reasonably
be expected to interfere with, (a) the operations of the Stations as
presently conducted or (b) the ability of Sullivan to carry out the
transactions contemplated to be carried out by it pursuant to this
Agreement, and on the Closing Date, no such pending or threatened
litigation will have or will reasonably be expected to result in a
Material Adverse Change.
There are no attachments, executions, or assignments for the benefit of
creditors or voluntary or involuntary proceedings in bankruptcy initiated or
contemplated by, or, to the knowledge of Sullivan, threatened or pending
against, Sullivan.
4.G COMPLIANCE WITH LAWS. Other than with respect to matters
disclosed in the attached Schedule 4C or the attached Schedule 4F, subject to
obtaining all applicable Consents: (a) Sullivan, with respect to the Station
Assets, is in compliance in all material respects with all applicable Legal
Requirements, and (b) the present uses by Sullivan of the Station Assets which
it owns do not in any material respect violate any such Legal Requirements.
4.H NO DEFAULTS. Except for (w) any item on the attached
Schedule 4H, (x) the requisite approval of the FCC, (y) compliance with the
requirements of the Hart-Scott-Rodino Act, and (z) any Consent which may be
required under any Contract, on the Closing Date (after giving effect to all
Consents which have been obtained) neither the execution and delivery by
Sullivan of this Agreement, nor the consummation by Sullivan of the Merger or
the other transactions contemplated by this Agreement to be consummated by
Sullivan, requires any Consent under, will 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, or will result in the creation of any Lien
(other than any Permitted Encumbrance or any Lien in favor of one or more of the
Acquiring Parties) under, any of the terms, conditions, or provisions of any
Legal Requirement to which Sullivan is subject, or of the certificate of
incorporation or by-laws of Sullivan.
4.I SUBSIDIARIES. Sullivan does not own any shares of stock or
other equity or debt securities of or any interest in any Person.
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4.J TAX MATTERS.
(1) TAX RETURNS. Except as set forth on the attached
Schedule 4J or as has not caused and is not reasonably expected to
cause a Material Adverse Change: (a) all federal, state, local and
foreign tax returns and tax reports required to be filed by Sullivan
have been timely filed (taking into account any extensions of which
Sullivan may have availed itself) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are
required to be filed, and all of the foregoing (including any summary
balance sheets included therein) are true, correct, and complete; (b)
all federal, state, local and foreign income, profits, franchise,
sales, use, occupation, property, excise, and other taxes (including
interest and penalties) due and payable by Sullivan have been fully
paid; (c) no issues have been raised in writing (or, to Sullivan's
knowledge, orally) and are currently pending by the Internal Revenue
Service or any other taxing authority in connection with any of such
returns and reports; (d) no waivers of statutes of limitations as to
tax matters have been given or requested with respect to Sullivan; (e)
the federal, state, local, and foreign income tax and franchise tax
returns of or with respect to Sullivan have not been examined by the
Internal Revenue Service or by appropriate state, provincial, or
departmental tax authorities; (f) no issue has been raised in writing
(or, to Sullivan's knowledge, orally) with Sullivan by any taxing
authority which can reasonably be expected to result in a deficiency
for any fiscal year or all deficiencies asserted or assessments
(including interest and penalties) made as a result of any examinations
have been fully paid, and no proposed (but unassessed) additional
taxes, interest, or penalties have been asserted; (h) Sullivan is not
(and has never been) a party to any Tax sharing agreement with any
Person who was not a member of an Affiliated Group consisting in whole
or in part of the parties to such agreement, and Sullivan has no
liability for the Taxes of any other Person (other than Sullivan
Holdings and its Subsidiaries) pursuant to Reg. Section 1.1502-6 under
the Tax Code (or any similar provision of state, local or foreign Tax
law) or as a transferee or successor or by contract.
(2) TAX ELECTIONS AND SPECIAL TAX STATUS. Except as
set forth on the attached Schedule 4J: (a) Sullivan is not and has
never been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Tax Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Tax Code; (b)
Sullivan has not made any election or filed any consent pursuant to
Section 341(f) of the Tax Code relating to collapsible corporations;
(c) Sullivan has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder would
result in a nondeductible expense to Sullivan pursuant to Section 280G
of the Tax Code or an excise tax to the recipient of such payment
pursuant to Section 4999 of the Tax Code; and (d) Sullivan has not
agreed to make, nor is it required to make, any adjustment under
Section 481(a) of the Tax Code by reason of a change in accounting
method or otherwise.
4.K CAPITAL STOCK. As of the date of this Agreement, Sullivan
has authorized capital stock consisting of 80,000,000 shares of capital stock,
of which (a) 25,000,000 shares will be designated Class A One Common Stock, par
value $0.001 per share, (b) 25,000,000 shares will
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be designated Class B-1 Common Stock, par value $0.001 per share, (c) 25,000,000
shares will be designated Class B-2 Common Stock, par value $0.001 per share,
and (d) 5,000,000 shares will be designated Class C Common Stock, par value
$0.001 per share. As of the Closing Date, all of the issued and outstanding
capital stock of Sullivan will be duly authorized and validly issued, fully paid
and nonassessable, and there will be no preemptive rights in respect thereof in
favor of any Person (other than any Person which holds Sullivan Shares). There
are no outstanding options, warrants or other rights to subscribe for or
purchase from Sullivan, no contracts or commitments providing for the issuance
of, or the granting of rights to acquire, and no securities convertible into or
exchangeable for, any shares of capital stock or any other ownership interest of
Sullivan.
4.L BOOKS AND RECORDS. The minute books of Sullivan contain
records which are complete and accurate in all material respects of all meetings
and other corporate actions of its stockholders, its board of directors and all
committees, if any, appointed by its board of directors. The books of accounts,
ledgers, order books, records and documents of Sullivan, in all material
respects, accurately and completely reflect information relating to its
business, the nature, acquisitions, maintenance and location of its assets and
the transactions giving rise to its obligations and accounts receivable.
4.M ABSENCE OF SIGNIFICANT UNDISCLOSED LIABILITIES. Sullivan
has no debt, liability or obligation of any kind, whether accrued, absolute,
contingent or otherwise, including any liability or obligation on account of
Taxes or any governmental charges or penalty, interest or fines, which would be
required to be reflected in its balance sheet prepared in accordance with GAAP
and which would have, or which in the case of contingent or inchoate
liabilities, would have if accrued or absolute, a material adverse effect on the
financial condition of Sullivan, viewed as a whole with Sullivan Holdings, its
Subsidiaries and Sullivan Three as of the Closing Date, other than any liability
or obligation (a) reflected in any Sullivan Holdings Financial Statement, (b)
identified with particularity in any attached Schedule or arising under any
Contract which is described, or which is not required to be described, on any
attached Schedule or the Contracts Schedule, (c) incurred in the ordinary course
of business since September 30, 1997, (d) incurred in connection with the
transactions contemplated by this Agreement, or (e) pursuant to the promissory
note issued to Sullivan Holdings and its Subsidiaries in connection with the
Spin-Off.
4.N EMPLOYEE BENEFIT PLANS. Other than any plan described on
the attached Schedule 4N, (a) Sullivan does not maintain, is not a party to and
make no contributions to any of the following: (i) any "employee pension benefit
plan," (as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")); or (ii) any "employee welfare benefit
plan" (as such term is defined in Section 3(a) of ERISA), whether written or
oral; and (b) Sullivan has never sponsored or maintained, had any obligation to
sponsor or maintain, or had any liability (whether actual or contingent, with
respect to any of its assets or otherwise) with respect to any employee pension
benefit plan subject to Section 302 of ERISA or Section 412 of the Tax Code or
Title IV of ERISA (including any multiemployer plan). No employee or former
employee of Sullivan, and no beneficiary of any such employee or former employee
is, by reason of such employee's or former employee's employment, entitled to
receive any benefits, including death or medical benefits (whether or not
insured) beyond retirement or other termination of employment as
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described in Statement of Financial Accounting Standards No. 106, other than
continuation coverage mandated under Section 4980B of the Tax Code or comparable
state law.
4.O BROKERS. There is no broker or finder or other Person who
would have any valid claim against Sullivan or any Acquiring Party 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 Sullivan or any of its Affiliates.
4.P DISCLOSURE. To the knowledge of Sullivan, no statement of
a material fact set forth in this Article IV contains any statement of any
material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article IV not misleading in any material respect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
SINCLAIR AND THE MERGER SUB
Sinclair and the Merger Sub, jointly and severally, represent
and warrant as follows:
5.A INCORPORATION. Sinclair is a corporation duly organized,
validly existing, and in good standing (or has comparable active status) under
the laws of the State of Maryland, and Sinclair has the corporate power and
authority to enter into and consummate the transactions contemplated to be
consummated by it pursuant to this Agreement. From and after the time it is
formed, the Merger Sub will be a corporation duly organized, validly existing,
and in good standing (or has comparable active status) under the laws of the
State of Delaware and will have the corporate power and authority to enter into
and consummate the transactions contemplated to be consummated by it pursuant to
this Agreement.
5.B CORPORATE ACTION. Each action necessary to be taken by or
on the part of either Sinclair or the Merger Sub in connection with the
execution and delivery of this Agreement and the consummation of transactions
contemplated hereby to be consummated by it and necessary to make the same
effective duly and validly taken by, and be effective at, the time by which such
action is required to be taken. This Agreement has been duly and validly
authorized, executed, and delivered by each of Sinclair and the Merger Sub and
constitutes a valid and binding agreement, enforceable against each of them in
accordance with and subject to its terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement,
moratorium or similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
5.C NO DEFAULTS. Except as set forth on the attached Schedule
4H, the requisite approval of the FCC and compliance with the requirements of
the Hart-Scott-Rodino Act, on the Closing Date (after giving effect to all
approvals and consents which have been obtained), neither
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the execution and delivery by Sinclair or the Merger Sub of this Agreement, nor
the consummation by Sinclair or the Merger Sub of the Merger and the other
transactions contemplated by this Agreement to be consummated by it, will
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 Legal Requirement to which Sinclair
or the Merger Sub is subject, or of Sinclair's or the Merger Sub's certificate
of incorporation or by-laws or similar organizational documents, or of any
material contract, agreement, or instrument to which Sinclair or the Merger Sub
is a party or by which Sinclair or the Merger Sub is bound.
5.D BROKERS. There is no broker or finder or other Person who
would have any valid claim against Sullivan (except after the Effective Time) or
any Old Sullivan Stockholder 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 Sinclair, the Merger Sub or any
Affiliate of any of them.
5.E QUALIFICATION AS A BROADCAST LICENSEE. Sinclair and the
Merger Sub will, at the time of the filing of the applications for the Required
FCC Consent described in Section 6.A, be legally and financially qualified under
the Communications Act, and the rules and regulations promulgated by the FCC
thereunder, to control Sullivan (in the case of Sinclair) or be the successor by
merger to Sullivan and the holder of the FCC Authorizations (in the case of the
Merger Sub). To Sinclair's and the Merger Sub's knowledge, no fact exists as of
the date of this Agreement that would, under the Communications Act, the
existing rules, regulations, policies, and practices of the FCC or any other
Legal Requirement, disqualify either Sinclair or the Merger Sub as the direct or
indirect holder of any FCC Authorization or as owner and operator of the related
Station Assets or any related Station.
5.F LITIGATION. There is no litigation pending by or against,
or to Sinclair's or the Merger Sub's knowledge (after due inquiry) threatened
against, Sinclair or the Merger Sub related to or affecting Sinclair's or the
Merger Sub's ability fully to carry out the transactions contemplated to be
consummated by them pursuant to this Agreement. There are no attachments,
executions, or assignments for the benefit of creditors or voluntary or
involuntary proceedings in bankruptcy contemplated by, or, to Sinclair's or the
Merger Sub's knowledge, threatened or pending against, Sinclair or the Merger
Sub.
5.G DISCLOSURE. To Sinclair's and the Merger Sub's knowledge,
no statement of a material fact set forth in this Article V contains a statement
of any material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article V not misleading in any material respect.
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ARTICLE VI
APPLICATIONS FOR REQUIRED FCC CONSENT
6.A PREPARATION AND FILING. Within 30 Business Days after
Sinclair's or its own written request after the Spin-Off, each of Sullivan and
Sinclair will, and will cause its Subsidiaries to, complete the portions of the
applications for the Required FCC Consent which pertain to it and jointly file
such applications with the FCC. Each of Sullivan and Sinclair will, and will
cause its Subsidiaries to, diligently take or cooperate in the taking of all
steps which are reasonably within its ability to take and which are necessary,
proper, or desirable to expedite the prosecution of such applications and to
cause the Required FCC Consent expeditiously to become Granted and expeditiously
to become a Final Order.
6.B CERTAIN ACTIONS. Sullivan will refrain from making any
filing or announcement or taking (or causing or assisting any other Person to
take) any other action which reasonably could be expected to delay the Required
FCC Consent being Granted or becoming a Final Order in any respect without
Sinclair's prior written consent. Without limiting Section 6.D, Sinclair will,
and will cause its Subsidiaries to, refrain from making any filing or
announcement or taking (or causing or assisting any other Person to take) any
other action which reasonably could be expected to delay the Required FCC
Consent being Granted or becoming a Final Order in any respect without the prior
written consent of Sullivan (or, after the Closing, the Stockholder
Representative).
6.C NOTICE OF OBJECTIONS, ETC. Sullivan will promptly provide
Sinclair (or, after the Closing, the Stockholder Representative) with a copy of
any pleading, order, or other document served on Sullivan relating to such
applications (other than any of the same which is addressed to or states that it
is to be served upon or delivered to the Person to whom such copy is to be
provided or such Person's communications counsel). Sinclair will promptly
provide Sullivan (or, after the Closing, the Stockholder Representative) with a
copy of any pleading, order, or other document served on Sinclair or any of its
Subsidiaries relating to such applications (other than any of the same which is
addressed to or states that it is to be served upon or delivered to the Person
to whom such copy is to be provided or such Person's communications counsel).
6.D PROHIBITED ACTIONS. Sinclair will not, and will not cause
or permit any of its Subsidiaries to, make any "major amendment" (as that term
is used in Section 73.3578(b) of the rules of the FCC (Ch. 47 C.F.R.)) in
respect of any such application other than (i) with prior written consent of
Sullivan (prior to the Closing) or the Stockholder Representative (after the
Closing), (ii) in order to reflect any change in the proposed operating or
ownership structure of the Merger Sub or any Station which the FCC or its staff
has indicated to Sinclair or any Affiliate or agent of Sinclair is a condition
to the Required FCC Consent to be Granted, or (iii) if required by a change in
the rules, regulations or policies of the FCC to disclose any attributable
interest which Sinclair or any of its Subsidiaries may be deemed to have by
virtue of any local marketing, time brokerage or similar arrangement in effect
on the date of this Agreement.
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ARTICLE VII
COVENANTS OF SULLIVAN
7.A ACTIONS AFTER SPIN-OFF AND PRIOR TO MERGER.
(1) OPERATION GENERALLY. After the Spin-Off and until
the Closing, Sullivan will (a) with respect to Station Assets, keep
books of account, records, and files substantially in accordance with
the practices of Sullivan Holdings and its Subsidiaries with respect to
such assets of such type prior to the Spin-Off, (b) promptly execute
and timely file any applications reasonably required for renewal of the
FCC Authorizations, (c) timely file (taking into account any extensions
of which Sullivan may avail itself) true, correct and complete federal,
state, local and foreign tax returns and tax reports required to be
filed by Sullivan, (d) fully pay all federal, state, local and foreign
income, profits, franchise, sales, use, occupation, property, excise
and other taxes (including interest and penalties) due and payable by
Sullivan, (e) to the extent necessary to the conduct of its business:
use reasonable efforts to (i) perform its obligations under all Station
Contracts to which it is a party, (ii) preserve the Station Assets held
by it, and (iii) maintain in full force and effect the FCC
Authorizations, and (f) maintain property damage insurance in such
amounts, and insuring against such risks, as Sinclair may reasonably
request.
(2) CONTRACTS. After the Spin-Off and until to the
Closing, Sullivan will be entitled to renew or extend the term of any
Contract which, by its terms, has expired at the time of such renewal
or extension or which would expire prior to the sixtieth day after the
effective date of such renewal or extension, and, in connection
therewith, to agree to increase the amounts payable thereunder during
any such renewal or extended term in accordance with Sullivan Holdings'
and its Subsidiaries' past practice in the operation of the Stations,
or enter into any other Contract which is reasonably required in order
to enable it to comply with its obligations under this Agreement.
(3) RESTRICTIONS. After the Spin-Off and until to the
Merger Closing, Sullivan will not without the prior written consent of
Sinclair (to the extent the following restrictions are permitted by the
FCC and all other applicable Legal Requirements):
(a) other than in the ordinary course of
business, sell, lease (as lessor), transfer, or agree to sell,
lease (as lessor), or transfer any Station Assets which are
required for the operation of any Station without replacement
thereof with a functionally equivalent or superior asset of
substantially equal or greater value;
(b) apply to the FCC for any construction
permit that would materially restrict any Station's present
operations or make any material adverse change in the
buildings or leasehold improvements which constitute Station
Assets;
(c) merge or consolidate, or agree to merge
or consolidate, with
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or into any Person;
(d) enter into any Contract with any of its
Affiliates which will not be performed in its entirety or by
its terms terminate at or prior to the time of the Closing;
(e) cause any of its assets or properties to
become subject to any Lien, other than any Permitted
Encumbrance;
(f) commit any material breach of any
material Contract to which it is a party; or
(g) change any material tax election if such
change could reasonably be expected to adversely affect
Post-Merger Sullivan, except to the extent required by any
Legal Requirement, any Contract or GAAP.
(4) NO PREMATURE ASSUMPTION OF CONTROL. Nothing
contained in this Agreement will give any Acquiring Party any right to
control the programming, operations, or any other matter relating to
the Stations prior to the Closing, and Sullivan will have complete
control of the programming, operations, and all other matters relating
to the Stations up to the time of the Closing.
7.B ORGANIZATION/GOODWILL. After the Spin-Off and until to the
Closing, Sullivan will use reasonable efforts to preserve the business
organization of Sullivan with respect to the Stations and preserve the goodwill
of the Stations' suppliers, customers, and others, to the extent such Persons
have business relations with Sullivan. This Section 7.B will not apply to the
Corporate Personnel, with respect to continued service by them after the Closing
(it being understood that the Corporate Personnel intend to resign their
respective positions with Sullivan effective as of the Effective Time).
7.C ACCESS TO FACILITIES, FILES, AND RECORDS. From time to
time at the request of Sinclair after the Spin-Off and prior to the Closing,
Sullivan will give or cause to be given to the officers, employees, accountants,
counsel, and representatives of Sinclair and the Merger Sub
(a) access (in the presence of any
representative designated by Sullivan, at Sullivan's option),
upon reasonable prior notice, during normal business hours, to
all facilities, property, accounts, books, deeds, title
papers, insurance policies, licenses, agreements, contracts,
commitments, records, equipment, machinery, fixtures,
furniture, vehicles, accounts payable and receivable, and
inventories of Sullivan (but, in any event, not personnel,
unless Sullivan otherwise consents) related to the Stations,
including for purposes of permitting Sinclair to perform
"Phase One" (and, after consulting with Sullivan as to the
scope thereof, "Phase Two") environmental surveys with respect
to the Station Assets, and
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(b) all such other information in Sullivan's
possession con cerning the affairs of the Stations as Sinclair
may reasonably request,
in each case at Sinclair's expense; provided that the foregoing does
not disrupt or interfere with the business and operations of Sullivan
or any Station in any material respect ("materiality," for purposes of
this proviso, being determined by reference to each Station
individually, and not taken as a whole).
7.D HART-SCOTT-RODINO MATTERS. Within thirty (30) days after
Sinclair's or its own request after the Spin-Off, Sullivan will complete all
documents (if any) required to be filed with the Federal Trade Commission (the
"FTC") and the United States Department of Justice (the "DOJ") with respect to
itself and/or its Affiliate(s) and concerning the Merger in order to comply with
the Hart-Scott-Rodino Act and together with Sinclair and/or the appropriate
Affiliate(s) of Sinclair who are required to join in such filings, will file the
same with the FTC and the DOJ. Sullivan will promptly furnish all materials
thereafter required by the FTC, the DOJ or any other governmental entity having
jurisdiction over such filings, and will take all reasonable actions and will
file and use reasonable efforts to have declared effective or approved all
documents and notifications with any such governmental entity, as may be
required under the Hart-Scott-Rodino Act or other federal antitrust laws for the
consummation of the Merger.
7.E CONSENTS. Except as provided in Article VI and Section
7.D, it is agreed that (1) as among Sullivan and the Acquiring Parties, it will
be the sole responsibility of the Acquiring Parties to timely obtain all
Acquiring Party Consents, (2) so long as Sullivan complies with its obligations
pursuant to the following sentence and Article VI and Section 7.D, Sullivan, the
Old Sullivan Stockholders and the Stockholder Representative will not be liable
to any Person for any failure to obtain or other absence of any effective
Acquiring Party Consent, and (3) except as provided in Sections 10.C and 10.D,
the absence of any effective Consent will not excuse any Acquiring Party from
consummating the Merger. Sullivan will use reasonable efforts (without being
required to make any payment not specifically required by the terms of any
licenses, leases, and other contracts), including executing any related
agreement or undertaking which does not take effect until the Effective Time, to
obtain the Sullivan Consents and to assist the Acquiring Parties (at the
Acquiring Parties' request and expense) to (a) timely obtain all Acquiring Party
Consents or, in the absence of any Acquiring Party Consent (where applicable),
one or more replacement agreements, and (b) cause each Consent or replacement
agreement to become effective as of the time of the Spin-Off or the Effective
Time, as applicable.
7.F NOTICE OF PROCEEDINGS. After the Spin-Off and prior to the
Closing, Sullivan will promptly notify Sinclair 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 the Merger or any other transaction
contemplated by this Agreement to be consummated by Sullivan, 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 the Merger or any such other
transaction, or to nullify or render ineffective this Agreement, the Merger or
any such other transaction if consummated.
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7.G CONFIDENTIAL INFORMATION. If for any reason the
transactions contemplated in this Agreement are not consummated, Sullivan will
not use or disclose to any Person (except to its agents, representatives and
advisors, to its lenders and securityholders and their respective agents,
representatives and advisors, or as may be required by any Legal Requirement)
any confidential information received from any Acquiring Party or any of their
respective agents, representatives and advisors (each a "disclosing party" for
purposes of this Section 7.G) in the course of investigating, negotiating, and
completing the transactions contemplated by this Agreement. Nothing will be
deemed to be confidential information for purposes of this Section 7.G that: (a)
is or was known to any Sullivan-Related Entity at the time of its initial
disclosure by a disclosing party to any Sullivan-Related Entity; (b) has become
or becomes publicly known or available other than through disclosure by any
Sullivan-Related Entity; (c) is or was rightfully received by any
Sullivan-Related Entity from any Person unrelated to any Sullivan-Related Entity
(other than any Person engaged by any Sullivan-Related Entity in connection with
the transactions contemplated by this Agreement); or (d) is or was independently
developed by any Sullivan- Related Entity.
7.H EFFORTS TO CONSUMMATE. Subject to the provisions of
Article IX and Section 12.A, Sullivan will use 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 conditions set forth in Articles IX and X
to be fulfilled and cause the Merger and the other transactions contemplated by
this Agreement in connection with the Closing to be fully carried out. In
addition, promptly after Sullivan becomes aware prior to the Closing of a breach
of any fact or circumstance which constitutes or would constitute a breach of
any other Party's representation or warranty set forth in this Agreement,
Sullivan will give such Party notice thereof so that such Party may attempt to
cure the same.
7.I NOTICE OF CERTAIN DEVELOPMENTS. Sullivan will give prompt
written notice to Sinclair if, after the Spin-Off and prior to the Closing: (1)
Sullivan receives notice from any Market Cable System currently carrying a
Station's signal of such Market Cable System's intention to delete such Station
from carriage or change such Station's channel position on such Market Cable
System, or (2) Sullivan becomes aware of any breach of any representation or
warranty of Sullivan set forth in Article IV.
7.J UPDATED INFORMATION. Sullivan agrees to provide to
Sinclair and the Merger Sub at or prior to the Closing, for informational
purposes only, copies of all material Contracts in existence at the time of the
Closing and which are entered into after the Spin-Off and prior to the Closing.
7.K NON-SOLICITATION. After the Spin-Off and prior to the
Closing or the earlier termination of this Agreement, each of ABRY Partners and
Sullivan will not, and each of them will not cause (and will use reasonable
efforts not to permit) any of its Subsidiaries, affiliates, directors, officers,
employees, representatives or agents to, directly or indirectly solicit, or
initiate, entertain or enter into any discussions or transactions with, or
encourage or provide any information to, any Person (other than any Person
described in Section 7.C), concerning any sale of any of the assets of Sullivan
(other than any sale which is not prohibited by Section 7.A(3)) or any merger,
stock
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acquisition or similar transaction involving Sullivan (other than an issuance of
capital stock or capital stock equivalents by Sullivan); provided that nothing
in this Section 7.K will prohibit ABRY Partners or Sullivan from furnishing, or
causing or permitting any other Person to furnish, information concerning
Sullivan to any governmental authority or court of competent jurisdiction or any
other Person as may be required by any Legal Requirement.
ARTICLE VIII
COVENANTS OF SINCLAIR AND THE MERGER SUB
8.A HART-SCOTT-RODINO MATTERS. Within 30 days after Sullivan's
or its own request after the Spin-Off, Sinclair will complete all documents (if
any) required to be filed with the FTC and the DOJ with respect to itself and/or
its Affiliate(s) and concerning Merger in order to comply with the
Hart-Scott-Rodino Act and together with Sullivan and/or the appropriate
Affiliate(s) of Sullivan who are required to join in such filings, will file the
same with the FTC and the DOJ. Sinclair will pay the filing fees associated with
all such filings and the filings described in Section 6.A. Sinclair and the
Merger Sub will promptly furnish all materials thereafter required by the FTC,
the DOJ or any other governmental entity having jurisdiction over such filings,
and will take all reasonable actions and will file and use reasonable efforts to
have declared effective or approved all documents and notifications with any
such governmental entity, as may be required under the Hart-Scott-Rodino Act or
other federal antitrust laws for the consummation of the Merger.
8.B CONFIDENTIAL INFORMATION. If for any reason the
transactions contemplated in this Agreement are not consummated, each of
Sinclair and the Merger Sub will not use or disclose to any Person (except to
its agents, representatives and advisors, to its lenders and their respective
agents, representatives and advisors, or as may be required by any Legal
Requirement) any confidential information received from Sullivan Holdings, any
of its Subsidiaries, Sullivan or any of their respective agents, representatives
and advisors (each a "disclosing party" for purposes of this Section 8.B) in the
course of investigating, negotiating, and completing the transactions
contemplated by this Agreement. Nothing will be deemed to be confidential
information for purposes of this Section 8.B that: (a) is or was known to any
Sinclair-Related Entity at the time of its initial disclosure by a disclosing
party to any Sinclair-Related Entity; (b) has become or becomes publicly known
or available other than through disclosure by any Sinclair-Related Entity; (c)
is or was rightfully received by any Sinclair-Related Entity from any Person
unrelated to any Sinclair-Related Entity (other than any Person engaged by any
Sinclair- Related Entity in connection with the transactions contemplated by
this Agreement); or (d) is or was independently developed by any
Sinclair-Related Entity. In addition, the Merger Sub agrees to be bound by the
same obligations as Sinclair is bound pursuant to the confidentiality agreement
dated as of November 20, 1997 between Sinclair and Sullivan Broadcasting, which
confidentiality agreement will survive the execution and delivery of this
Agreement and will survive the execution and termination of this Agreement, and
no provision of this Section 8.B will be deemed to supersede or in any way limit
any obligation or right under such confidentiality agreement.
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8.C EFFORTS TO CONSUMMATE. Subject to the provisions of
Article X and Section 12.A, each of Sinclair and the Merger Sub will use
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
conditions set forth in Articles IX and X to be fulfilled and cause the Merger
and the transactions contemplated by this Agreement in connection with the
Merger to be fully carried out. In addition, promptly after Sinclair or the
Merger Sub becomes aware prior to the Closing of a breach of any fact or
circumstance which constitutes or would constitute a breach of any
representation or warranty of Sullivan set forth in this Agreement, Sinclair
will give Sullivan notice thereof so that Sullivan may attempt to cure the same.
8.D NOTICE OF PROCEEDINGS. Each of Sinclair and the Merger Sub
will promptly notify Sullivan (prior to the Closing) or the Stockholder
Representative (after the Closing) 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 the Merger or any other transaction contemplated
by this Agreement, 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 the Merger or any such other transaction, or to nullify or
render ineffective this Agreement, the Merger or any such other transaction, if
consummated. Sinclair will give the Stockholder Representative prompt written
notice if any Acquiring Party becomes aware of any breach of any representation
or warranty of any Acquiring Party set forth in Article V.
8.E SECTION 338 ELECTION. Without the Stockholder
Representative's prior written consent, Sinclair will not, and will not cause or
permit any of its Subsidiaries to, make an election under Section 338 of the Tax
Code, or under any analogous provision of any other Legal Requirements relating
to Taxes, with respect to the Merger.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SULLIVAN AT THE CLOSING
The obligation of Sullivan to consummate the Merger is, at
Sullivan's option, subject to the fulfillment of the following conditions at the
time of the Closing (Sullivan expressly acknowledging that the effectiveness of
the Sullivan Consents is not a condition to such obligation):
9.A REPRESENTATIONS, WARRANTIES, COVENANTS.
(1) Each of the representations and warranties of
Sinclair and the Merger Sub set forth in Article V, considered without
regard to any materiality qualifiers contained therein, will be deemed
to be made again at and as of the time of the Closing (other than any
such representation or warranty which is expressly made with reference
to a time prior to the time of the Closing, which will be deemed remade
as of such time only), and taken as a whole such representations and
warranties, as so remade, will have been true and accurate
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in all material respects, except to the extent of deviations therefrom
permitted or contemplated by this Agreement; and
(2) each of Sinclair and the Merger Sub will in all
material respects have performed and complied with the covenants and
agreements required by this Agreement to be performed or complied with
by it prior to or at the time of the Closing, taken as a whole.
9.B PROCEEDINGS.
(1) No action or proceeding will have been instituted
and be pending before any court or governmental body to restrain or
prohibit, or to obtain a material amount of damages in respect of, the
consummation of the transactions contemplated by this Agreement that,
in the reasonable opinion of Sullivan, may reasonably be expected to
result in a preliminary or 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 any Sullivan- Related
Entity or any officer, director or stockholder of any Sullivan-Related
Entity of a material amount of damages; and
(2) no Party will have received written notice from
any governmental body of (a) such governmental body's intention to
institute any action or proceeding to restrain or enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including,
without limitation, a routine Civil Investigative Demand) into the
consummation of the transactions contemplated by this Agreement, or (b)
the actual commencement of such an investigation, in each case unless
the same has been withdrawn, resolved, concluded or abandoned.
9.C HART-SCOTT-RODINO AND FCC MATTERS. The Approval Date will
have occurred and the Required FCC Consent will be in full force and effect.
9.D SPIN-OFF. The Spin-Off will have been consummated.
9.E OTHER DELIVERIES. The Merger Sub will have delivered, or
will stand ready to deliver, to Sullivan such instruments, documents, and
certificates as are contemplated by Section 3.B(1).
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF THE MERGER SUB AT THE CLOSING
The obligations of the Merger Sub to consummate the Merger on
the Closing Date are, at the Merger Sub's option, subject to the fulfillment of
the following conditions at the time of the Closing (Sinclair and the Merger Sub
expressly acknowledging that the effectiveness of the
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Acquiring Party Consents is not a condition to such obligations):
10.A REPRESENTATIONS, WARRANTIES, COVENANTS.
(1) Each of the representations and warranties of
Sullivan set forth in Article IV, considered without regard to any
materiality qualifiers contained therein, will be deemed to be made
again at and as of the time of the Closing (other than any such
representation or warranty which is expressly made with reference to a
time prior to the time of the Closing, which will be deemed remade as
of such time only), and taken as a whole such representations and
warranties, as so remade, will have been true and accurate, except to
the extent of deviations therefrom which are permitted or contemplated
by this Agreement or which, in the aggregate, do not constitute and
have not caused a Material Adverse Change; and
(2) Sullivan will in all material respects have
performed and complied with the covenants agreements required by this
Agreement to be performed or complied with by it prior to or at the
time of the Closing, taken as a whole, and Sullivan will in all
material respects have performed and complied with the covenants and
agreements required by this Agreement to be performed or complied with
by it prior to or at the time of the Closing, taken as a whole.
10.B PROCEEDINGS.
(1) No action or proceeding will have been instituted
and be pending before any court or governmental body to restrain or
prohibit, or to obtain a material amount of damages in respect of, the
consummation of the transactions contemplated by this Agreement that,
in the reasonable opinion of Sinclair, may reasonably be expected to
result in a preliminary or 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 any Sinclair- Related
Entity or any officer, director or stockholder of any Sinclair-Related
Entity of a material amount of damages; and
(2) no Party will have received written notice from
any governmental body of (a) such governmental body's intention to
institute any action or proceeding to restrain or enjoin or nullify
this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including,
without limitation, a routine Civil Investigative Demand) into the
consummation of the transactions contemplated by this Agreement, or (b)
the actual commencement of such an investigation, in each case unless
the same has been withdrawn, resolved, concluded or abandoned.
10.C HART-SCOTT-RODINO AND FCC MATTERS. The Approval Date will
have occurred and the Required FCC Consent will be in full force and effect.
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10.D OTHER INSTRUMENTS. Sullivan will have delivered, or will
stand ready to deliver, to the Merger Sub such instruments, documents, and
certificates as are contemplated by Section 3.C(1).
ARTICLE XI
POST-CLOSING MATTERS
11.A SURVIVAL. The representations, warranties and
certifications of the Parties contained in or made pursuant to this Agreement
(including any certification contained in any certificate to be delivered
pursuant to Section 3.C) will survive the execution of this Agreement and the
Closing only to the extent expressly provided in the Indemnity Agreement. The
covenants and agreements of the Parties set forth in this Agreement will survive
until performed and discharged in full.
11.I LIMITATION OF RECOURSE. Except as provided in the
Indemnity Agreement, after the Closing, no claim may be brought or maintained
against any Party or any Old Sullivan Stockholder or any of their respective
present or former officers, directors, employees or other affiliates by any
Party or Old Sullivan Stockholder or any of its successors or assigns, and no
recourse may be sought or granted against any Person, by virtue of or based upon
any alleged misstatement, omission, inaccuracy in, or breach of any
representation, warranty or certification of any Party set forth in or made
pursuant to this Agreement, and in no event will Sinclair or Post-Merger
Sullivan be entitled to claim or seek any rescission of the Merger or any of the
other transactions consummated pursuant to the Transaction Documents, any such
right of rescission or rights to damages which any such Party might otherwise
have being hereby expressly waived and any claims or judgments being limited
accordingly.
11.C ACKNOWLEDGMENT BY THE ACQUIRING PARTIES. Each of the
Acquiring Parties has conducted, to its satisfaction, an independent
investigation and verification of Sullivan, its Subsidiaries, the Stations and
the Station Assets and the financial condition, results of operations, assets,
liabilities, properties and projected operations of Sullivan, its Subsidiaries,
the Stations and the Station Assets. In determining to enter into this Agreement
and proceed with the transactions contemplated by this Agreement, each Acquiring
Person has relied on the covenants of Sullivan, the results of such independent
investigation and verification and the representations and warranties of
Sullivan (in conjunction with the Schedules hereto) set forth in this Agreement
(including the certifications to be made in any certificate to be delivered
pursuant to Section 3.C), all of which each Acquiring Party acknowledges and
agrees will survive for a limited duration. SUCH REPRESENTATIONS, WARRANTIES AND
CERTIFICATIONS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS, WARRANTIES AND
CERTIFICATIONS WITH RESPECT TO SULLIVAN, ITS SUBSIDIARIES, THE STATIONS AND THE
STATION ASSETS TO THE ACQUIRING PARTIES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND EACH ACQUIRING PARTY UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT ALL OTHER
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REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS OF ANY KIND OR NATURE AND WHETHER
ORAL OR CONTAINED IN ANY WRITING OTHER THAN THIS AGREEMENT OR ANY SUCH
CERTIFICATE (INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION, WARRANTY OR
CERTIFICATION RELATING TO THE PROJECTED, FUTURE OR HISTORICAL FINANCIAL
CONDITION, RESULTS OR OPERATIONS, ASSETS OR LIABILITIES RELATING TO THE
STATIONS) ARE SPECIFICALLY DISCLAIMED BY SULLIVAN, THE STOCKHOLDER
REPRESENTATIVE, THE OFFICERS OF SULLIVAN AND ITS SUBSIDIARIES AND THE OLD
SULLIVAN STOCKHOLDERS.
11.D CORPORATE NAME. After the Merger (but on the Closing
Date), Post- Merger Sullivan will take and will cause its Subsidiaries to take
such action as is necessary to change its corporate name in its certificate or
articles of incorporation filed with the Secretary of State or similar official
of the jurisdiction of its incorporation to a name which does not include, and
is not confusingly similar to, the name "Sullivan" and will cease the use of all
Sullivan Broadcasting logos or any similar mark. Notwithstanding anything in
this Agreement to the contrary, Post-Merger Sullivan will be entitled to
continue to use its present corporate name until such time as such name change
is effective and to the extent necessary to accomplish such name change, and may
endorse checks and other instruments in such name.
ARTICLE XII
TERMINATION
12.A TERMINATION OF AGREEMENT PRIOR TO CLOSING. Subject to
Section 12.A(3), this Agreement may be terminated at any time prior to the
Closing as follows:
(1) BY SULLIVAN. By Sullivan, by written notice (a
"Sullivan Termination Notice") to Sinclair:
(a) at any time when any material breach by
any Acquiring Party of its obligations pursuant to this
Agreement has occurred and is continuing, if both
(i) such breach materially and
adversely affects the likelihood that any of the
conditions set forth in Article IX or X which has not
been satisfied or waived will be satisfied or
materially and adversely affects any Party's ability
to comply with its obligations pursuant to this
Agreement, and
(ii) at least thirty days have
elapsed since Sullivan gave Sinclair written notice
requesting that such Person cure such breach,
unless prior to the giving of the Sullivan gave each such
breaching Acquiring Party
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has cured such breach;
(b) at any time after the Expiration Date,
if
(i) as of the Expiration Date, each
of Sullivan's and the Merger Sub's conditions to
closing set forth in Articles IX and X was satisfied
or waived in writing,
(ii) the absence of satisfaction of
each of Sullivan's and the Merger Sub's conditions to
closing set forth in Articles IX and X which was not
waived in writing or satisfied as of the Expiration
Date was caused by a breach by one or more of the
Acquiring Parties of any of its or their
representations, warranties and/or obligations under
this Agreement and/or the failure of any Acquiring
Party Consent to have been obtained,
(iii) the Approval Date had not
occurred on or prior to the Expiration Date as a
result of any breach by one or more of the Acquiring
Parties of any provision of this Agreement, or
(iv) one or more of the Acquiring
Parties and the Affiliates thereof refused, failed or
declined to take any action (other than divesting
itself of an broadcast television or radio station of
which it or one of its Subsidiaries is the licensee
or terminating any time brokerage or similar
arrangement) which the FCC, the FTC, the DOJ or the
staff of any of them indicates to any Acquiring Party
or agent thereof is a condition to the grant of the
Required FCC Consent or the expiration or termination
of the requisite waiting period under the
Hart-Scott-Rodino Act for the Merger; or
(c) at any time after the Expiration Date,
in any circumstance which is not described in Section
12.A(1)(b), unless the absence of satisfaction of each of
Sullivan's and the Merger Sub's closing conditions set forth
in Articles IX and X which has not been satisfied or waived in
writing has been caused by a breach by Sullivan of its
obligations under this Agreement.
(2) BY SINCLAIR. By Sinclair, by written notice (a
"Sinclair Termination Notice") to Sullivan:
(a) at any time when any material breach by
Sullivan of its obligations pursuant to this Agreement has
occurred and is continuing, if both
(i) such breach materially and
adversely affects the likelihood that any of the
conditions set forth in Article IX or X will be
satisfied or materially and adversely affects any
Party's ability to comply with its obligations
pursuant to this Agreement and
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(ii) at least thirty days have
elapsed since Sinclair gave Sullivan written notice
requesting that Sullivan cure such breach,
unless prior to the giving of such Sinclair Termination Notice
Sullivan has cured such breach; or
(b) at any time after the Expiration Date,
under any circumstances described in Section 12.A(1)(b) or
Section 12.A(1)(c).
(3) WHEN TERMINATION NOT PERMITTED. Sullivan may not
terminate this Agreement pursuant to Section 12.A(1) at any time when
Sullivan is in material breach of a material obligation under this
Agreement. Sinclair may not terminate this Agreement pursuant to
Section 12.A(2) at any time when any Acquiring Party is in material
breach of a material obligation under this Agreement.
12.B SURVIVAL OF CERTAIN PROVISIONS; REMEDIES.
(1) GENERAL. No Party will have any liability to any
other Party for costs, expenses, damages (consequential or otherwise),
loss of anticipated profits, or otherwise as a result of a termination
pursuant to Section 12.A except as provided in Section 12.B(2) or
12.B(3). The Parties agree that time is of the essence with respect to
the provisions of Sections 3.B and 12.A. Sections 7.G and 8.G, this
Article XII and Article XIII will survive the termination of this
Agreement pursuant to Section 12.A.
(2) FOR SULLIVAN. Sullivan will have such remedies as
it may have at law or in equity in the event of a termination of this
Agreement pursuant to Section 12.A.
(3) FOR THE ACQUIRING PARTIES. The Acquiring Parties'
sole and exclusive remedies for the termination of this Agreement or
any failure of performance or compliance by Sullivan with any covenant
or agreement contained in this Agreement prior to the Closing, or by
Sullivan with any covenant or agreement contained in this Agreement
prior to the Closing, will be
(a) their respective rights (if any) under
applicable law or equitable principles to seek damages in
respect of their direct out-of-pocket losses or expenses (but
not any damages in respect of lost profits or other similar or
consequential or incidental damages) occasioned by and as a
consequence of such breach;
(b) their respective rights (if any) under
applicable law or equitable principles to seek specific
enforcement of this Agreement against Sullivan, including
specific enforcement of Sullivan's obligation to consummate
the Merger (subject to FCC approval and other required
Consents being obtained), it being acknowledged by Sullivan
that the Acquiring Parties would not have an adequate
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remedy at law in the event of any such failure, provided that
no Acquiring Party will be entitled to such specific
performance unless (i) each Acquiring Party has complied in
all material respects with its material obligations under this
Agreement and (ii) either (A) each condition to closing of
Sullivan set forth in Article IX has been satisfied or waived
in writing or (B) the absence of satisfaction of each such
condition to closing which has not been satisfied or waived in
writing is caused solely by a breach by Sullivan of its
obligations under this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.A EXPENSES. Except as otherwise expressly provided in this
Agreement, Sullivan will bear all of the expenses incurred prior to the Closing
by Sullivan and the Stockholder Representative in connection with the
transactions contemplated by this Agreement, and each of the Acquiring Parties
will bear all of its expenses incurred in connection with the transactions
contemplated by this Agreement, in each case including, without limitation,
account ing and legal fees incurred in connection herewith.
13.B ASSIGNMENTS.
(1) BY SULLIVAN. This Agreement may not be assigned
by Sullivan without the prior written consent of the Acquiring Parties.
Notwithstanding the foregoing, Sullivan may assign its rights under
this Agreement for collateral purposes only to any lender to it, or any
agent for any such lender(s), without the consent of any other Party,
and any such lender or agent may transfer such rights pursuant to the
exercise of remedies with respect to such collateral security to any
other Person (it being understood that any such lender or agent will be
a third-party beneficiary of the agreement constituted by this Section
13.B(1)).
(2) BY SINCLAIR. Sinclair or the Merger Sub may
assign its rights under this Agreement without the consent of Sullivan
or the Stockholder Representative.
(3) GENERAL RULES. Any attempt to assign this
Agreement or any rights or obligations hereunder without first
obtaining any consent which is required by this Section 13.B will be
void. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. Each Old Sullivan Stockholder is an express third-party
beneficiary of this Agreement.
13.C FURTHER ASSURANCES. From time to time prior to, at, and
after the Closing, each Party will execute all such instruments and take all
such actions as any other of them, being advised by counsel, may reasonably
request in connection with carrying out and effectuating the intent and purpose
hereof, and all transactions and things contemplated by this Agreement,
including the execution and delivery of any and all consents, confirmatory and
other instruments, in addition
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to those to be delivered at the Closing, and any and all actions which may
reasonablybe necessary to complete the transactions contemplated hereby.
13.D NOTICES. All notices, demands, and other communications
which may or are required to be given under or with respect to this Agreement
will be in writing, will be delivered personally or sent by nationally
recognized overnight delivery service, charges prepaid, or by registered or
certified mail, return-receipt requested, and will be deemed to have been given
or made when personally delivered, or on the next Business Day after delivery to
such overnight delivery service, or on the fifth day after it is deposited in
the mail, registered or certified, first class postage prepaid, as the case may
be, if addressed as follows:
(1) If to Sullivan (prior to the Closing) or the
Stockholder Representative:
c/o ABRY Partners, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attn: Royce Yudkoff, President
with a copy (which will not constitute notice to
Sullivan or the Stockholder Representative) to:
John L. Kuehn, Esq.
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
or to such other address and/or with such other copies as the
Person to whom such notice is to be given may from time to
time designate by notice to the Acquiring Parties given in
accordance with this Section 13.D.
(2) If to Sinclair, the Merger Sub or Post-Merger
Sullivan:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
with a copy (which will not constitute notice to
Sinclair, the Merger Sub or Post-Merger Sullivan) to:
Steven A. Thomas, Esq.
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
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and
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
or to such other address and/or with such other copies as the
Person to whom such notice is to be given may from time to
time designate by notice to Sullivan (if prior to the Closing)
and the Stockholder Representative given in accordance with
this Section 13.D.
13.E CAPTIONS. The captions of Articles and Sections of this
Agreement are for convenience only, and will not control or affect the meaning
or construction of any of the provisions of this Agreement.
13.F LAW GOVERNING. THIS AGREEMENT WILL BE GOVERNED BY,
CONSTRUED, AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCES TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE
TRANSACTIONS CONTEMPLATED HEREBY.
13.G WAIVER OF PROVISIONS. The terms, covenants,
representations, warranties, and conditions of this Agreement may be waived as
to any Party only by a written instrument executed by such Party. The terms,
covenants, representations, warranties, and conditions of this Agreement may be
waived as to any Old Sullivan Stockholder only by a written instrument executed
by Sullivan, prior to the Closing, or the Stockholder Representative, after the
Closing. The failure of any Party or any Old Sullivan Stockholder at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right at a later date to enforce the same. No waiver by or on
behalf of any Party to this Agreement or any Old Sullivan Stockholder 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, will 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.
13.H COUNTERPARTS. This Agreement may be executed in two (2)
or more counterparts, and all counterparts so executed will constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties hereto are not signatory to the same counterpart.
13.I ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits hereto) and the confidentiality agreement referred to in Section
8.C (including the Acquiring Parties' obligations with respect thereto, as
provided in Section 8.C), constitute the entire agreement among
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the parties hereto pertaining to the subject matter hereof and supersede any and
all prior agreements, understandings, negotiations, and discussions, whether
oral or written, between them relating to the subject matter hereof.
13.J ACCESS TO BOOKS AND RECORDS.
(1) Post-Merger Sullivan will, and will cause its
Subsidiaries to, preserve for not less than five (5) years after the
Closing Date all books and records included in the Station Assets.
After such five-year period, Post-Merger Sullivan will not, and will
not cause or permit its Subsidiaries to, destroy any books or records
relating to the conduct of business of the Stations prior to the
Effective Time unless Post-Merger Sullivan first offers to transfer
such books and records to the Stockholder Representative at no cost to
the Stockholder Representative, and if Post-Merger Sullivan is
requested to do so, Post-Merger Sullivan will transfer, or cause a
Subsidiary of Post-Merger Sullivan to transfer, such books or records
to the Stockholder Representative.
(2) At the request of the Stockholder Representative,
Post-Merger Sullivan will, and will cause each of its Subsidiaries to,
permit the Stockholder Representative (including its officers,
employees, accountants, and counsel) any access, upon reasonable prior
written notice during normal business hours, to all of its property,
accounts, books, contracts, records, accounts payable and receivable,
records of employees, FCC logs and other information concerning the
affairs or operation of the Stations as the Stockholder Representative
may reasonably request for any reasonable purpose relating to the
transactions contemplated by this Agreement or the ownership or
operation of any Station prior to the Effective Time, and to make
extracts or copies from the foregoing at the Stockholder
Representative's expense. At Post-Merger Sullivan's request, prior to
receiving any such requested information, the Stockholder
Representative will execute a confidentiality agreement with respect
thereto which is reasonably acceptable to Post-Merger Sullivan.
13.K PUBLIC ANNOUNCEMENTS. Prior to the Closing, no Party
will, except by mutual agreement of Sullivan and Sinclair (including agreement
as to content, text and method of distribution or release), make any press
release or other public announcement or disclosure concerning the transactions
contemplated by this Agreement, except as may be required by any Legal
Requirement (including filings and reports required to be made with or pursuant
to the rules of the Securities and Exchange Commission); provided that, prior to
making any such announcement or disclosure required by any Legal Requirement, to
the extent practicable, the disclosing Party gives each Person named above prior
written notice of the context, text and content of, the method of distribution
or release of, and all other material facts concerning, such disclosure.
13.L DISCLOSURE. If and to the extent that any information
required to be furnished by Sullivan in any attached Schedule is contained in
this Agreement or in any attached Schedule, such information will be deemed to
have been included in each other attached Schedule in which such information is
required to be included to the extent its relevance to such latter Schedule is
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reasonably apparent. By including any information in any attached Schedule,
Sullivan will not be deemed to have admitted or acknowledged that such
information is material to or outside the ordinary course of the business of
Sullivan or any Station.
13.M DEFINITIONAL PROVISIONS.
(1) TERMS DEFINED IN APPENDIX. Each capitalized term
which is used and not otherwise defined in this Agreement or any
attached Schedule has the meaning which is specified for such term in
the Appendix which is attached to this Agreement.
(2) KNOWLEDGE. As used in this Agreement, the term
"knowledge" of Sullivan will refer only to the actual knowledge,
without any particular inquiry (except as specified in this Agreement),
of the Corporate Personnel, Andrew Banks and Royce Yudkoff, after
inquiry of the general managers of the Stations; and the "knowledge" of
Sinclair or the Merger Sub will refer only to the actual knowledge,
without any particular inquiry (except as specified in this Agreement)
of David Smith and David Amy.
(3) INTERPRETATION. Words used in this Agreement,
regardless of the gender and number specifically used, will be deemed
and construed to include any other gender, masculine, feminine or
neuter, and any other number, singular or plural, as the context
requires. Whether or not used in conjunction with the words "without
limitation" or words of similar import, the term "including" as used in
this Agreement imports that the items referred to are illustrative only
and do not purport to be a complete listing of the items of the type in
question. The wording of the provisions of this Agreement is the result
of arms-length negotiations among the parties to this Agreement and was
selected by them to reflect their mutual intentions; therefore, no
party will be deemed the "drafter" of this Agreement and no rule of
strict construction will be applied against or in favor of any party to
this Agreement.
13.N ARBITRATION.
(1) GENERALLY. Except as expressly provided in the
Indemnity Escrow Agreement or for purposes of pursuing any remedy
pursuant to Section 12.B(3)(b), the arbitration procedures described in
this Section 13.N will be the sole and exclusive method of resolving
and remedying claims arising under this Agreement and the other
Transaction Documents ("Disputes"); provided that nothing in this
Section 13.N will prohibit a Party from instituting litigation to
enforce any Final Arbitration Award. Except as otherwise provided in
the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time (the "AAA Rules"), the
arbitration procedures described in this Section 13.N and any Final
Arbitration Award will be governed by, and will be enforceable pursuant
to, the Uniform Arbitration Act as in effect in the State of New York
from time to time. No Person will be entitled to claim or recover
punitive damages in any such proceeding.
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(2) NOTICE OF ARBITRATION. If a Party asserts that
there exists a Dispute, then such Person (the "Disputing Person") will
give each other Person involved in such Dispute a written notice
setting forth the nature of the asserted Dispute. If all such Persons
do not resolve any such asserted Dispute prior to the tenth Business
Day after such notice is given, then the Disputing Person may commence
arbitration pursuant to this Section 13.N by giving each other Person
involved in such Dispute a written notice to that effect (an
"Arbitration Notice"), setting forth any matters which are required to
be set forth therein in accordance with the AAA Rules. Unless otherwise
notified, the Acquiring Parties are entitled to assume that the
Stockholder Representative is authorized to act on behalf of each Old
Sullivan Stockholder with respect to any Dispute.
(3) SELECTION OF ARBITRATOR. The Persons involved in
such Dispute will attempt to select a single arbitrator by mutual
agreement. If no such arbitrator is selected prior to the twentieth
Business Day after the related Arbitration Notice is given, then an
arbitrator which is experienced in matters of the type which are the
subject matter of the Dispute will be selected in accordance with the
AAA Rules.
(4) CONDUCT OF ARBITRATION. The arbitration will be
conducted under the AAA Rules, as modified by any written agreement
among the Persons involved in such Dispute. The arbitrator will conduct
the arbitration in a manner so that the final result, determination,
finding, judgment or award determined by the arbitrator (the "Final
Arbitration Award") is made or rendered as soon as practicable, and the
Persons involved in such Dispute will use reasonable efforts to cause a
Final Arbitration Award to occur not later than the sixtieth day after
the arbitrator is selected. Any Final Arbitration Award will be final
and binding upon the Persons involved in such Dispute, and there will
be no appeal from or reexamination of any Final Arbitration Award,
except as provided in the Uniform Arbitration Act, as in effect in the
State of New York from time to time.
(5) ENFORCEMENT. A Final Arbitration Award may be
enforced in any state or federal court having jurisdiction over the
subject matter of the related Dispute.
(6) EXPENSES. The prevailing Person(s) in any
arbitration proceeding in connection with this Agreement will be
entitled to recover from the non-prevailing Person(s) their reasonable
attorneys' fees and disbursements in addition to any damages or other
remedies awarded to such prevailing Person(s), and the non-prevailing
Person(s) will be required to pay all other costs and expenses
associated with the arbitration; provided that (i) if an arbitrator is
unable to determine that a Person is a prevailing Person in any such
arbitration proceeding, then such costs and expenses will be equitably
allocated by such arbitrator upon the basis of the outcome of such
arbitration proceeding, and (ii) if such arbitrator is unable to
allocate such costs and expenses in such a manner, then the costs and
expenses of such arbitration will be paid one-half by Sullivan and
one-half by Sinclair, and each Party will pay the out-of-pocket
expenses incurred by it. As part of any Final Arbitration Award, the
arbitrator may designate the prevailing Person(s) for purposes of this
Section 13.N(6). Except as provided in the preceding sentences, each
Person involved in a
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Dispute will bear its own costs and expenses (including legal feesand
disbursements) in connection with any such proceeding or submission.
13.O STOCKHOLDER REPRESENTATIVE.
(1) APPOINTMENT; AUTHORITY GENERALLY. On behalf of
the Old Sullivan Stockholders, Sullivan hereby appoints ABRY Partners
as the initial Stockholder Representative under this Agreement, to
serve in accordance with the terms, conditions and provisions of this
Agreement, and ABRY Partners, by its execution of this Agreement,
hereby agrees to act as such, upon the terms, conditions and provisions
of this Agreement. From and after the Closing, the Stockholder
Representative will be authorized to act on behalf of the Old Sullivan
Stockholders in accordance with this Agreement.
(2) AUTHORIZATION. The Stockholder Representative, in
such capacity, will be entitled to take all actions on behalf of the
holders of Sullivan Shares or the Old Sullivan Stockholders, as the
case may be, with respect to this Agreement and the other agreements
contemplated hereby, and omit to take any action, each as directed by
(a) prior to the Effective Time, the holders
of capital stock of Sullivan having a majority of the voting
power represented by the outstanding capital stock of Sullivan
at the time in question, and
(b) after the Effective Time, Persons who
immediately prior to the Effective Time held Sullivan Shares
which represented a majority of the voting power of the
Sullivan Shares,
(in either case, the "Majority Sullivan Stockholders"). The Stockholder
Representative may be removed and replaced from time to time as the
representative of the holders of the Sullivan Shares or the Old
Sullivan Stockholders by written notice given by the Majority Sullivan
Stockholders to Sullivan (prior to the Effective Time) and the
Acquiring Parties.
(3) RESPONSIBILITY. The Stockholder Representative
will have no duties or responsibilities except those expressly set
forth in this Agreement or any other agreement which may be entered
into by it hereunder. The Stockholder Representative will have no
responsibility for the validity of this Agreement or any agreement
referred to in this Agreement or for the performance of any such
agreements by any party thereto or for the interpretation of any of the
provisions of any such agreements. The Stockholder Representative's
liability in fulfilling its duties will be limited to bad faith,
willful misconduct or gross negligence on its part. The Stockholder
Representative will be protected in acting upon any certificate, notice
or other instrument whatsoever received by the Stockholder
Representative as to its due execution, the validity and effectiveness
of its provisions, and the truth and accuracy of any information
therein contained that the Stockholder Representative in good faith
believes to be genuine and to have been signed or presented by a proper
Person or Persons. The Stockholder Representative may, in its sole
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discretion, consult with and obtain advice from legal counsel and any
other Person in the event of any question as to any of the provisions
of this Agreement, any other agreement entered into in connection
herewith or its duties hereunder or thereunder. The reasonable cost of
such services, to the extent not borne by Sullivan, will be borne among
the Old Sullivan Stockholders who held Sullivan Shares immediately
prior to the Effective Time, pro rata in accordance with the respective
amounts of the Merger Consideration to be received by them in respect
of the Sullivan Shares.
(4) RESIGNATION; REPLACEMENT. The Stockholder
Representative will have the right, in its sole discretion, to resign
as the Stockholder Representative (in its capacity as the
representative of the holders of Sullivan Shares or the Old Sullivan
Stockholders) at any time by giving at least 30 days prior written
notice to Sullivan (prior to the Effective Time) and the Acquiring
Parties. In such event, Sullivan (prior to the Effective Time) or the
Majority Sullivan Stockholders (after the Effective Time) will promptly
appoint another Stockholder Representative to represent the holders of
Sullivan Shares and the Old Sullivan Stockholders and give notice of
such selection to the Acquiring Parties and the Old Sullivan
Stockholders (after the Effective Time). Such resignation of the
Stockholder Representative will be effective upon such notice being
given and such new Stockholder Representative's acceptance of such
appointment and will relieve the resigning Stockholder Representative
of all duties and responsibilities of the Stockholder Representative in
such capacity thereafter arising.
13.P COMPLETION OF SULLIVAN'S SCHEDULES. The Acquiring Parties
acknowledge that Sullivan has executed this Agreement without having the
opportunity to request of personnel of the Stations information which may be
material to the preparation of the attached Schedules referred to in Article IV
(and that, therefore, some or all of such attached Schedules may not be correct
and complete and, as a result, some or all of the representations and warranties
set forth in Article IV which refer to such attached Schedules may not be true
and correct). On or prior to March 9, 1998, Sullivan may deliver to Sinclair an
amendment and restatement of any such attached Schedule, or any portion thereof,
or a supplement to any such attached Schedule or any portion thereof, which may
be required in order to accurately depict facts and circumstances which exist on
the date of this Agreement (or any other applicable date referred to in any such
representation or warranty), and the attached Schedule or portion thereof in
question will be deemed to have been so amended and restated or modified, as the
case may be, as of the time of the execution and delivery of this Agreement.
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13.Q TREATMENT OF STATION KOKH. Each Acquiring Party
acknowledges that, notwithstanding any language to the contrary in this
Agreement, Sullivan has made and will make no representation, warranty or
certification of any kind with respect to Station KOKH (including with respect
to the assets, liabilities and operations related to Station KOKH), and no
representation or warranty set forth in Article IV, and no certification
relating thereto delivered pursuant to Section 3.C, will be deemed to apply to
Station KOKH (including to any related asset, liability or operations).
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement and
Plan of Merger to be duly executed by their duly authorized officers, all as of
the day and year first above written.
SULLIVAN BROADCASTING COMPANY II, INC.
By:
-----------------------------------------------
Its:
----------------------------------------------
SINCLAIR BROADCAST GROUP, INC.,
in its own right and on behalf of a Subsidiary
to be formed by it
By:
-----------------------------------------------
Its:
----------------------------------------------
ABRY PARTNERS, INC.
By:
-----------------------------------------------
Its:
----------------------------------------------
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APPENDIX
ADDITIONAL DEFINED TERMS. The following capitalized terms have
the following meanings when used in this Agreement and the Schedules attached to
this Agreement:
"ABRY FUND" means ABRY Broadcast Partners II, L.P., a Delaware
limited partnership.
"ACQUIRING PARTIES" means Sinclair, the Merger Sub and
Post-Merger Sullivan.
"ACQUIRING PARTY CONSENTS" means all Consents other than the
Required FCC Consent, any Consent required under the Hart-Scott-Rodino
Act, or any Sullivan Consent.
"AFFILIATE" of any Person means any other Person which is
controlled by, controls, or is under common control with, such first
Person.
"AFFILIATED GROUP" means an affiliated group of corporations,
as that term is defined in Section 1504(a) of the Tax Code (or in any
analogous combined, consolidated or unitary group defined under state,
local or foreign income Tax law).
"APPROVAL DATE" means the first day upon which the Required
FCC Consent has been Granted and the requisite waiting period under the
Hart-Scott-Rodino Act for the consummation of the Merger has expired or
been terminated.
A "BUSINESS DAY" means any day other than a Saturday, a Sunday
or another day upon which banks in New York, New York generally are not
open for business.
"CLOSING DATE" means the date upon which the Closing occurs.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended and as in effect from time to time.
"CONSENT" means any consent, order, approval, authorization or
other action of, or any filing with or notice to or other action by or
with respect to, any Person which is required for any of the execution,
delivery or performance of this Agreement, the consummation of the
Spin-Off, the Merger, or the conduct of the business of Sullivan or
Post-Merger Sullivan or the holding or utilization of any Station Asset
thereafter, whether such requirement arises pursuant to any Legal
Requirement, Contract, a Person's organizational documents or
otherwise, including any of the foregoing which is required in order to
prevent a breach of or a default under or a termination or modification
of any Contract.
"CONTRACT" means any agreement, lease, arrangement,
commitment, or understanding to which Sullivan, with respect to the
Stations, is a party.
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"CONTRACTS SCHEDULE" means the attached Exhibit C.
"CORPORATE PERSONNEL" means J. Daniel Sullivan, David Pulido,
Patrick Bratton, Richard Montgomery, Barry Charbonneau and any
successor to any of them in his
capacity as an employee and/or officer of Sullivan.
"EFFECTIVE TIME" means the time of the filing of the
Certificate of Merger described in Article II.
"EXPIRATION DATE" means the earlier of (a) the last to occur
of the 15th day after the date upon which the Required FCC Consent is
Granted and the last day of the calendar month during which the
Required FCC Consent is Granted, and (b) December 31, 2008.
"FCC" means the Federal Communications Commission or any
successor thereto.
"FCC AUTHORIZATIONS" means the authorizations issued by the
FCC and described on the attached Schedule 4C.
A "FINAL ORDER" means the Required FCC Consent if (a) the
Required FCC Consent has been Granted and has not been reversed,
stayed, set aside, enjoined, annulled or suspended (whether under
Section 402 or 405 of the Communications Act or otherwise) and (b) (i)
no request has been filed for administrative or judicial review,
reconsideration, appeal, certiorari or stay and the time for filing any
such request and for the FCC to review the Required FCC Consent on its
own motion has expired, or (2) if such a review, reconsideration or
appeal has occurred, such review, reconsideration or appeal has been
denied and the time for further review, reconsideration or appeal has
expired.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time, as applied by Sullivan and
its Subsidiaries from time to time.
The Required FCC Consent is "GRANTED" on the effective date,
as determined under the FCC's rules, regulations and policies, of the
grant thereof by the FCC or its staff.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as in effect from time to time.
"HEADQUARTERS ASSETS" means the assets of Sullivan Holdings
and its Subsidiaries located in the offices of Sullivan Holdings and
its Subsidiaries located in Franklin, Tennessee, and Boston,
Massachusetts, and any so-called "personal seat license" or other right
of Sullivan Holdings or any of its Subsidiaries to subscribe for
tickets to events at the stadium presently being constructed or
proposed to be constructed in the Nashville, Tennessee, metropolitan
area.
"INDEMNITY AGREEMENT" means the Indemnity Agreement entered
into among
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Sullivan, Sinclair and certain other Persons dated as of the date of
this Agreement, as such agreement is in effect from time to time.
"INDEMNITY ESCROW AGREEMENT" means the Indemnity Escrow
Agreement entered into among the Stockholder Representative, Sinclair
and certain other Persons dated as of the date of this Agreement, as
such agreement is in effect from time to time.
"LEGAL REQUIREMENTS" means the Communications Act, the rules,
regulations and published policies of the FCC, and all other federal,
state and local laws, rules, regulations, ordinances, judgments, orders
and decrees.
"LIEN" means any mortgage, pledge, hypothecation, encumbrance,
lien (statutory or otherwise), preference, priority or other security
agreement of any kind or nature whatsoever (including any conditional
sale or other title retention agreement and any lease having
substantially the same effect as any of the foregoing and any
assignment or deposit arrangement in the nature of a security device).
"MARKET CABLE SYSTEM" means, with respect to any Station, any
cable television system located within such Station's television
market, as that term is defined in Section 76.55(e) of the rules of the
FCC.
"MISSION GUARANTEES" means the (i) Guaranty of Sullivan
Broadcasting dated as of July 11, 1996 in favor of NationsBank of
Texas, N.A., and any other lenders referred to therein relating to
certain indebtedness of Mission Broadcasting I, Inc., a Delaware
corporation, and (ii) the Guaranty of Sullivan Broadcasting dated as of
July 29, 1996 in favor of NationsBank of Texas, N.A., and any other
lenders referred to therein relating to certain indebtedness of Mission
Broadcasting II, Inc., a Delaware corporation, in each case as in
effect from time to time.
"OLD SULLIVAN STOCKHOLDER" means any holder of record of any
Sullivan Share immediately prior to the Effective Time.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of the
conduct of business by Sullivan Holdings and is Subsidiaries,
substantially consistent with their respective past practices.
"PARTIES" means the parties to this Agreement.
"PERMITTED ENCUMBRANCES" means (i) Liens arising by operation
of law and securing the payment of Taxes which are not yet due and
payable, (ii) with respect to any property leased by Sullivan as
lessee, the interest of the lessor in such property, (iii) easements,
rights-of-way, reservations of rights, conditions or covenants, zoning,
building or similar restrictions or other non-monetary Liens or defects
that do not, individually or in the aggregate, materially interfere
with the use of the affected property in the operation of
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the Stations as currently conducted or as presently proposed by
Sullivan Holdings and its Subsidiaries to be conducted, (iv)
restrictions on transfer imposed under state or federal securities laws
or pursuant to the Communications Act or the FCC Regulations, and (v)
Liens securing indebtedness under the Sullivan Senior Debt
Arrangements, other indebtedness and the Mission Guarantees.
A "PERSON" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
association or government or department thereof.
"REQUIRED FCC CONSENT" means the action(s) or order(s) by the
FCC granting its Consent to the transfer of control of Sullivan by
reason of the Merger, without any condition which in the reasonable
judgment of the Sullivan and the Acquiring Parties is adverse to such
Person (or, in Sullivan's or the Stockholder Representative's
reasonable judgment, adverse to any of the Old Sullivan Stockholders),
as the case may be, in any material respect.
"SINCLAIR-RELATED ENTITY" means Sinclair, the Merger Sub, any
direct or indirect assignee or proposed assignee (by operation of law
or otherwise) of any of the rights of any of them pursuant to this
Agreement or any other agreement contemplated hereby, any direct or
indirect successor or proposed successor to Post-Merger Sullivan's
business or operation with respect to any Station, or any Affiliate or
any of them.
"SPIN-OFF" means the transfer of the assets described on the
attached Exhibit D to Sullivan by Sullivan Holdings and its
Subsidiaries.
"STATION ASSETS" means all of Sullivan's rights in, to and
under the assets and properties of the Stations, real and personal,
tangible and intangible, of every kind and description which are owned
and used by Sullivan in connection with the business and operations of
the Stations, including rights under contracts and leases, real and
personal property, plant and equipment, inventories, intangibles,
licenses and goodwill, and all other assets and properties of Sullivan
used solely in connection with the operation of any Station; provided
that the Station Assets will not include the Headquarters Assets.
"STATION KOKH" means broadcast television station KOKH-TV,
Oklahoma City, Oklahoma, together with all related translator stations
(if any) owned by Sullivan.
"STATIONS" means broadcast television station WZTV, Nashville,
TN; broadcast television station WUTV, Buffalo, New York; broadcast
television station WXLV-TV, Winston-Salem, North Carolina; broadcast
television station WRLH-TV, Richmond, Virginia; broadcast television
station WUHF, Rochester, New York; and broadcast television station
WMSN-TV, Madison, Wisconsin; in each case together with all associated
translator stations (if any) owned by Sullivan Holdings or any of its
Subsidiaries immediately prior to the Spin-Off.
"STOCKHOLDER REPRESENTATIVE" means ABRY Partners, Inc., a
Delaware corporation,
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or any successor thereto as the Stockholder Representative designated
pursuant to Section 13.O.
With respect to any Person, a "SUBSIDIARY" means any
corporation, partnership, limited liability company, association or
other business entity of which, at the time of such reference, (i) if a
corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof, or a
majority economic interest, is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company, association or other business
entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or
a combination thereof. For purposes hereof, a Person or Persons will be
deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person
or Persons will be allocated a majority of partnership, company,
association or other business entity gains or losses or will be or
control the managing director or general partner of such partnership,
company, association or other business entity.
"SULLIVAN BROADCASTING" means Sullivan Broadcasting Company,
Inc., a Delaware corporation.
"SULLIVAN COMMON STOCK" means Sullivan Shares which are common
stock.
"SULLIVAN CONSENTS" means all Consents of the board of
directors or stockholders of Sullivan.
"SULLIVAN HOLDINGS" means Sullivan Broadcast Holdings, Inc., a
Delaware corporation.
"SULLIVAN HOLDINGS FINANCIAL STATEMENTS" means the Financial
Statements attached to this Agreement as Exhibit E.
"SULLIVAN-RELATED ENTITY" means any Affiliate of ABRY Partners
Inc. or ABRY Broadcast Partners II, L.P., including Sullivan, prior to
the Effective Time.
"SULLIVAN SENIOR DEBT ARRANGEMENTS" means the Credit Agreement
dated as of January 4, 1996 among Sullivan Holdings, Sullivan
Broadcasting, the various Agents and co-Agents referred to therein, and
the several Lenders from time to time parties thereto, together with
all "Loan Documents" and other documents and instruments relating to
the "Obligations" referred to therein, in each case as in effect from
time to time.
"SULLIVAN SHARE" means any share of capital stock of Sullivan
which is outstanding immediately prior to the Effective Time.
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"SULLIVAN STATION ASSETS" means all of Sullivan Holdings', its
Subsidiaries, Sullivan's and Sullivan Three's rights in, to and under
the assets and properties of the Sullivan Stations, real and personal,
tangible and intangible, of every kind and description which are owned
and used by Sullivan Holdings, its Subsidiaries, Sullivan or Sullivan
Three in connection with the business and operations of the Sullivan
Stations, including rights under contracts and leases, real and
personal property, plant and equipment, inventories, intangibles,
licenses and goodwill, and all other assets and properties of Sullivan,
its Subsidiaries, Sullivan and Sullivan Three used solely in connection
with the operation of any Sullivan Station; provided that the Sullivan
Station Assets will not include the Headquarters Assets.
"SULLIVAN STATIONS" means broadcast television station WZTV,
Nashville, TN; broadcast television station WUTV, Buffalo, New York;
broadcast television station WXLV-TV, Winston-Salem, North Carolina;
broadcast television station WRGT-TV, Dayton, Ohio; broadcast
television station WRLH-TV, Richmond, Virginia; broadcast television
station WVAH-TV, Charleston, West Virginia; broadcast television
station WUHF, Rochester, New York; broadcast television station
WTAT-TV, Charleston, South Carolina; broadcast television station WFXV,
Utica, New York; low-power television station WPNY-LP, Rome, New York;
broadcast television station WMSN-TV, Madison, Wisconsin; Station KOKH;
broadcast television station WUXP, Nashville, Tennessee; and broadcast
television station WUPN-TV, Greensboro, North Carolina; in each case
together with all associated translator stations (if any).
"SULLIVAN THREE" means Sullivan Broadcasting Company III,
Inc., a Delaware corporation.
"TAX" (and, with correlative meaning, "Taxes", "Taxable" and
"Taxing") means any (A) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profits,
environmental (including under Section 59A of the Tax Code), customs,
duties, real property, real property gains, personal property, capital
stock, social security, unemployment, disability, payroll, license,
employee or other withholding, or other tax of any kind whatsoever,
including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; (B) liability of any corporation
for the payment of any amounts of the type described in clause (A)
arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included in any Tax Return relating
thereto); and (C) liability for the payment of any amounts of the type
described in clause (A) or (B) as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability
of any other Person.
"TAX CODE" means the Internal Revenue Code of 1986, as amended
(including, where applicable, the Internal Revenue Code of 1954, as
amended).
"TRANSACTION DOCUMENTS" means this Agreement and all
agreements between or
40
<PAGE>
among any or all of the Sullivan-Related Entities and the
Sinclair-Related Entities relating thereto, in each case as in effect
from time to time.
41
<PAGE>
LIST OF SCHEDULES
Schedule 4C FCC Matters
Schedule 4D Certain Asset-Related Matters
Schedule 4F Litigation
Schedule 4H Conflicts
Schedule 4J Tax Matters
Schedule 4N Employee Benefit Matters
LIST OF EXHIBITS
Exhibit A Opinions of Sullivan's Counsel
Exhibit B Opinions of Sinclair's and the Merger Sub's Counsel
Exhibit C Contracts Schedule
Exhibit D Spin-Off Assets
Exhibit E Sullivan Holdings Financial Statements
42
EXHIBIT 12
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
COMPUTTATION OF RATIO FO EARNINGS TO FIXED CHARGES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, 1995, 1996, AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Income (loss) before provision (benefit)
for income taxes and extraordinary
items ....................................... $ 922 $ (3,387) $ 10,188 $ 8,067 11,488
Fixed charges(a) ............................. 12,852 25,418 39,253 84,314 98,393
-------- -------- -------- -------- ------
Earnings available for fixed charges ......... 13,774 22,031 49,441 92,381 109,881
Fixed charges ................................ 12,852 25,418 39,253 84,314 98,393
-------- -------- -------- -------- -------
Ratio of earnings to fixed charges ........... 1.1 x -- 1.3 x 1.1 x 1.1 x
</TABLE>
- ----------
(a) Fixed charges consist of interest expense, which includes interest on all
debt and amortization of debt discount, and deferred financing costs.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference into Prospectus Supplement File Nos. 333-12255, 333-12257, 333-31569,
333-31571 and 333-43047 of our report dated February 9, 1998, except for Note
24, as to which the date is February 23, 1998, of Sinclair Broadcast Group, Inc.
It should be noted that we have not audited any financial statements of the
Company subsequent to December 31, 1997, or performed any audit procedures
subsequent to the date of our report.
Baltimore, Maryland Arthur Andersen LLP
March 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF SINCLAIR
BROADCAST GROUP, INC. FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000912752
<NAME> SINCLAIR BROADCAST GROUP, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 139,327
<SECURITIES> 0
<RECEIVABLES> 123,018
<ALLOWANCES> 2,920
<INVENTORY> 0
<CURRENT-ASSETS> 330,752
<PP&E> 161,714
<DEPRECIATION> 18,040
<TOTAL-ASSETS> 2,034,234
<CURRENT-LIABILITIES> 154,704
<BONDS> 751,899
200,000
45
<COMMON> 392
<OTHER-SE> 542,851
<TOTAL-LIABILITY-AND-EQUITY> 2,034,234
<SALES> 0
<TOTAL-REVENUES> 516,435
<CGS> 0
<TOTAL-COSTS> 390,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,993
<INCOME-PRETAX> 11,488
<INCOME-TAX> 15,984
<INCOME-CONTINUING> (4,496)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,070)
<CHANGES> 0
<NET-INCOME> (10,566)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
