SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-98436
SULLIVAN BROADCASTING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1719496
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18 Newbury Street, Boston, MA 02116
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 369-7755
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No ___ .
As of March 31, 1996, the Company had 520,105 shares of Common Stock
outstanding. The Company's Common Stock is not publicly traded and does not
have a quantifiable market value.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (SEE NOTE 1)
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
The Company
Predecessor -----------------------------
December 31, December 31, March 31,
1995 1995 1996
- - ---------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,584 $ -- $ 20,184
Restricted cash -- 126,916 --
Due from related party -- 390 --
Accounts receivable, net of
allowance for doubtful
accounts of $983 and
$1,159 28,943 -- 21,388
Current portion of
programming rights 8,943 -- 18,199
Current deferred tax asset -- -- 7,986
Prepaid expenses and other
current assets 213 -- 910
- - ------------------------------------------------------------------------------
Total current assets 41,683 127,306 68,667
Property and equipment, net 20,399 -- 43,940
Programming rights, net of
current portion 10,852 -- 18,113
Deferred loan costs, net of
accumulated amortization of
$2,219, $21 and $502 3,769 7,439 12,075
Deferred tax asset 7,326 236 --
Other assets and intangible
assets, net 50,797 -- 574,044
- - ------------------------------------------------------------------------------
Total assets $134,826 $134,981 $716,839
==============================================================================
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of program-
ming contracts payable $ 12,788 $ -- $ 16,973
Current portion of senior
debt 24,078 -- 5,500
Current income taxes
payable 1,961 4 1,795
Interest payable 515 356 8,451
Due to related parties -- 2,184 7,998
Accounts payable 1,482 -- 1,598
Accrued expenses 4,239 3,289 4,233
- - ------------------------------------------------------------------------------
Total current liabilities 45,063 5,833 46,548
Senior debt, net of current
portion 38,898 -- 214,500
Borrowings under revolving
line of credit -- -- 15,000
Subordinated debt 100,000 125,000 125,185
Programming contracts
payable, net of current
portion 12,542 -- 16,077
Deferred tax liability -- -- 96,502
Other liabilities 450 -- --
- - ------------------------------------------------------------------------------
Total liabilities 196,953 130,833 513,812
- - ------------------------------------------------------------------------------
Preferred stock (Predecessor) 26,386 -- --
- - ------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock
(Predecessor) 16 -- --
Common stock, $.01 par
value; 800,000 shares
authorized; 520,015
shares issued and
outstanding -- 5 5
Additional paid-in capital 3,767 5,196 206,797
Accumulated deficit (92,296) (1,053) (3,775)
- - ------------------------------------------------------------------------------
Total shareholders'
equity (deficit) (88,513) 4,148 203,027
- - ------------------------------------------------------------------------------
Total liabilities and
shareholders' equity
(deficit) $134,826 $134,981 $716,839
==============================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
Predecessor Company
1995 1996
- - --------------------------------------------------------------------
<S> <C> <C>
Revenues (excluding barter) $22,245 $26,042
Less - commissions (3,845) (4,329)
- - -----------------------------------------------------------------
Net revenues (excluding barter) 18,400 21,713
Barter revenues 1,670 2,546
- - -----------------------------------------------------------------
Total net revenues 20,070 24,259
- - -----------------------------------------------------------------
Expenses
Operating expenses 4,135 6,184
Selling, general and administrative 5,486 5,544
Amortization of programming rights 2,871 3,010
Depreciation and amortization 3,086 11,588
- - -----------------------------------------------------------------
15,578 26,326
- - -----------------------------------------------------------------
Operating income (loss) 4,492 (2,067)
Interest expense, including
amortization of debt discount
and deferred loan costs 4,626 8,130
Other expenses 15 12
- - -----------------------------------------------------------------
Loss before benefit
for income taxes (149) (10,209)
Benefit for income taxes 15 7,487
- - -----------------------------------------------------------------
Net loss $ (134) $ (2,722)
=================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited-dollars in thousands)
<TABLE>
<CAPTION>
Class B-2 Additional Total
Common stock paid-in Accumulated shareholders'
Shares Amount capital deficit equity
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 (Company) 520,105 $5 $ 5,196 $(1,053) $ 4,148
Additional investment by shareholder - - 201,601 - 201,601
Net loss (Unaudited) - - - (2,722) (2,722)
- - -----------------------------------------------------------------------------------------------------
Balance at March 31, 1996 520,105 $5 $206,797 $(3,775) $203,027
=====================================================================================================
</TABLE>
The accompanying notes to Consolidated Financial Statements are an
integral part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited-dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
Predecessor Company
1995 1996
- - ------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ (134) $ (2,722)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation of property, plant
and equipment 757 1,780
Amortization of intangible assets 2,329 9,306
Amortization of programming rights 2,871 3,010
Payments for programming rights (2,303) (2,208)
Amortization of debt discount and
deferred loan costs 222 502
Loss on disposal of fixed assets 4 -
Changes in assets and liabilities:
Decrease in accounts receivable 8,526 7,555
Increase in prepaid expenses
and other assets (20) (697)
Increase in due to related parties - 6,204
Decrease in income taxes payable (104) (962)
Increase in interest payable - 8,095
Decrease in deferred tax liability - (7,487)
Increase (decrease) in accounts payable
and other accrued liabilities 2,168 (3,179)
- - -----------------------------------------------------------------------------
Net cash provided by operating activities 14,316 19,197
- - -----------------------------------------------------------------------------
Cash flows from investing activities:
Decrease in restricted cash - 126,916
Acquisition of Act III Broadcasting, Inc.,
net of cash acquired - (549,259)
Payment for purchase options - (2,800)
Acquisition of WFXV assets - (400)
Capital expenditures (507) (280)
- - -----------------------------------------------------------------------------
Net cash used for investing activities (507) (425,823)
- - -----------------------------------------------------------------------------
Cash flows from financing activities:
Payment of principal amounts (14,000) -
Proceeds from term debt - 220,000
Proceeds from revolver borrowings - 15,000
Proceeds from stockholder contribution - 201,601
Advance buydown of programming rights - (4,396)
Payment of debt issuance costs - (5,395)
- - -----------------------------------------------------------------------------
Net cash (used) provided by financing activities (14,000) 426,810
Net (decrease) increase in cash and cash equivalents (191) 20,184
Cash and cash equivalents, beginning of period 3,295 -
- - -----------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,104 $ 20,184
=============================================================================
</TABLE>
For supplemental disclosures of cash flow information see Note 5 to
Consolidated Financial Statements.
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On January 4, 1996, all of the outstanding capital stock of Act III
Broadcasting, Inc. ("Act III" or the "Predecessor") was purchased by and Act
III was merged with and into A-3 Acquisition, Inc. ("A-3"), with Act III
surviving such merger (the "Acquisition"). Act III then changed its name to
Sullivan Broadcasting Company, Inc. (together with its subsidiaries, the
"Company"). The Acquisition was accounted for by the purchase method of
accounting. The results of operations of Act III for the period from January
1, 1996 through January 4, 1996 have been included in the results of
operations of the Company for the three months ended March 31, 1996 due to the
immateriality of such results in relation to the Company's financial
statements taken as a whole. Such results are as follows:
<TABLE>
<S> <C>
Net revenues $832,000
Operating expenses 178,000
Selling, general & administrative expenses 219,000
Operating income 435,000
</TABLE>
The accompanying consolidated financial statements as of and for the
three months ended March 31, 1996 have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures herein are
adequate and that the information presented is not misleading. It is
suggested that these consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in A-3's latest
annual report on Form 10-K for the year ended December 31, 1995. The
information furnished reflects all adjustments (consisting only of normal,
recurring adjustments) which are, in the opinion of management, necessary to
make a fair statement of the results for the interim period. Certain amounts
recorded in connection with accounting for the Acquisition are subject to
adjustment based upon the final valuation of certain assets and liabilities
acquired. Such adjustments are not expected to be material to the
consolidated financial statements. The results for these interim periods are
not necessarily indicative of results to be expected for the full fiscal year,
due to seasonal factors, among others.
For comparative purposes, the December 31, 1995 balance sheet of both
Act III and A-3 have been included. In addition, the results of operations
and of cash flows for the three months ended March 31, 1995 for Act III have
also been presented. A-3 was not incorporated until June 1995 and did not
have any operations for a comparable three month period ended March 31, 1995.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
-----------------------------------------------------------------
<S> <C> <C>
Land $ 1,771,000 $ 1,366,000
Broadcasting equipment 32,335,000 34,803,000
Buildings and improvements 8,006,000 5,637,000
Furniture and other equipment 4,144,000 2,556,000
Construction in progress 1,457,000 1,341,000
-----------------------------------------------------------------
47,713,000 45,703,000
Less: Accumulated depreciation
and amortization (27,314,000) (1,763,000)
- - --------------------------------------------------------------------
$ 20,399,000 $ 43,940,000
====================================================================
</TABLE>
3. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
Amortization December 31, March 31,
Period 1995 1996
---------------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill 40 Years $ 25,919,000 $ 194,296,000
Affiliation agreements 10 Years 18,260,000 90,681,000
Non-competition agreements 5 - 10 Years 20,875,000 --
Canadian cable rights 10 Years 22,826,000 59,000,000
Commercial advertising
contracts 15 years -- 131,131,000
FCC licenses 15 years -- 75,057,000
Other intangible assets 5 - 15 Years 21,931,000 33,185,000
---------------------------------------------------------------------------
109,811,000 583,350,000
Less: Accumulated amortization (59,157,000) (9,306,000)
---------------------------------------------------------------------------
$ 50,654,000 $574,044,000
===========================================================================
</TABLE>
4. LONG TERM DEBT
On January 4, 1996, concurrent with the Acquisition, the Company
borrowed $220,000,000 under a term loan and $4,000,000 under a revolving
credit facility to finance the Acquisition. Both the term loan and the
revolving credit facility bear interest at LIBOR plus an applicable margin
determined quarterly based upon the Company's leverage ratio for the preceding
quarter.
The revolving credit facility provides for borrowings up to $30,000,000
for working capital purposes, and is due on December 31, 2003 or upon
repayment of the term loan.
The term loan is payable in varying quarterly installments beginning
December 31, 1996 through 2003. The repayment of the term loan are as
follows:
<TABLE>
<S> <C>
1996 $ 5,500,000
1997 13,002,000
1998 21,010,000
1999 33,000,000
2000 44,000,000
Thereafter 103,488,000
</TABLE>
In addition, certain mandatory prepayments of the term loan are required
if the Company achieves certain financial results at the end of the fiscal
year. No such mandatory prepayments are payable at March 31, 1996.
In January 1996, the Company entered into various interest rate
protection agreements based upon LIBOR rates and a notional value equal to the
anticipated outstanding term debt levels through the year 2000.
In connection with the term loan and the revolving credit facility, the
Company also has a $75,000,000 line of credit available for future
acquisitions (collectively, the "Senior Credit Facility"). At March 31, 1996,
there were no borrowings outstanding on the acquisition line of credit.
The Senior Credit Facility requires the Company to comply with certain
covenants. At March 31, 1996, the Company was in compliance with all
covenants.
5. INCOME TAXES
The provisions for taxes for the interim periods were based on
projections of total year pre-tax income.
As discussed in Note 1, the Acquisition was accounted for by the
purchase method of accounting which requires that all assets acquired and
liabilities assumed be recorded at their fair value. For tax purposes, the
assets acquired and liabilities assumed retain their historical basis
resulting in a basis differential. The resulting basis differential and
acquired net operating loss carryforwards together with changes in deferred
tax assets and liabilities for the period give rise to the net deferred tax
asset and liability recorded at March 31, 1996.
At the date of the Acquisition, the Company had net operating loss
carryforwards of approximately $94,344,000 for federal income tax purposes,
available to reduce future taxable income. To the extent not used, federal
net operating loss carryforwards expire in varying amounts beginning in 2002.
In addition, the Company had net operating loss carryforwards of approximately
$79,189,000 for state and local income tax purposes in various jurisdictions.
An entity that undergoes a "change in ownership" pursuant to Section 382
of the Internal Revenue Code is subject to limitations on the amount of its
net operating loss carryforwards which may be used in the future. The
Acquisition resulted in a change in ownership pursuant to Section 382.
Management has estimated that the limitation on the net operating loss
carryforwards will not have a material adverse impact on the Company's
consolidated financial position or results of operation.
6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid interest of $746,000 during the period ended March 31,
1995 and no interest during the period ended March 31, 1996.
During the periods ended March 31, 1995 and March 31, 1996, programming
rights increased $884,000 and $859,000, respectively, due to the assumption of
programming liabilities.
During the periods ended March 31, 1995 and March 31, 1996, the Company
paid approximately $89,000 and $962,000, respectively, for state and local
income taxes.
7. COMMITMENTS AND CONTINGENCIES
The Company has executed contracts for programming rights totaling
approximately $18,961,000 and $18,004,000 at December 31, 1995 and March 31,
1996, respectively, for which the broadcast period has not begun.
Accordingly, the asset and related liability are not recorded at such dates.
The Company has operating lease agreements for land, office space,
office equipment and other property which expire on various dates through
2005. Rental expense was $163,000 and $90,000 for the periods ending March
31, 1995 and March 31, 1996, respectively.
The Company has no postretirement or postemployment benefit plans.
8. RELATED PARTY TRANSACTIONS
The Company reimburses ABRY Partners, Inc. ("ABRY"), an entity related
through common ownership, approximately $1,500 per month, representing the
Company's allocated share of rent paid by ABRY under its lease and other
general expenses including utilities, property insurance and supplies. In
addition, the Company has a management agreement with ABRY whereby the Company
pays ABRY a management fee of $250,000 annually. Such amounts have been
included in "Selling, general and administrative" expenses in the Company's
consolidated statements of operations. In addition, certain liabilities
assumed in the Acquisition were paid during the first quarter by the Company's
parent, Sullivan Broadcast Holdings, Inc.
9. SIGNIFICANT EVENTS
On February 7, 1996, the Company executed an asset purchase agreement to
acquire certain assets of Mohawk Valley Broadcasting, Inc. and Acme T.V.
Corporation, the owners/operators of two television stations in Utica, NY.
The total purchase price of the acquisition will be $400,000. In addition,
the Company paid $2,800,000 for the option to purchase the remaining assets of
the stations upon FCC approval. The Company concurrently executed a Time
Brokerage Agreement to operate the stations pending FCC approval of the
acquisition.
On February 22, 1996, the Company executed a Time Brokerage Agreement
with Central Tennessee Broadcasting Corporation pursuant to which the Company
programs WXMT-TV in Nashville, TN. In conjunction with this agreement, the
Company also executed an agreement to purchase certain assets of Central
Tennessee Broadcasting Corporation, with an option to buy the station should
applicable FCC regulations allow dual ownership in a single market.
On February 28, 1996, the Company executed a definitive purchase
agreement to acquire all the assets of Channel 47 Limited Partnership in
Madison, WI for a total purchase price of $26,500,000, pending FCC approval.
10. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data are based
upon the historical results of operations of Act III for the quarter ended
March 31, 1995 adjusted to give effect to the Acquisition as if it had
occurred on January 1, 1995:
<TABLE>
<S> <C>
Net revenue $20,309
Net loss 3,789
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company's revenues are derived principally from local and national
advertisers. Additional revenues are derived from commercial production and
rental of broadcast towers. Increased ratings and strong advertiser demand
have contributed to the Company's successful revenue growth. Also, the
Company has developed sales marketing programs, implemented to enhance the
image of the Company's television stations (the "Stations"), conducts local
"Kids Expos" and live remote broadcasts, publishes promotional advertising
print supplements and participates in joint marketing events with local
businesses and radio stations.
The Company's operating revenues are generally highest in the fourth
quarter of each year. This seasonality is primarily attributable to increased
expenditures by advertisers in anticipation of holiday retail spending and an
increase in viewership during the Fall/Winter season. Accordingly, accounts
receivable balances as of the end of each of the first three calendar quarters
are generally substantially less than the balances as of the end of the year.
Each of the Company's Stations generates positive Broadcast Cash Flow, defined
as operating income plus depreciation, amortization, barter expenses and
corporate expenses less payments for programming rights and barter revenue.
The Company's principal costs of operations are employee salaries and
commissions, programming, production, promotion and other expenses (such as
maintenance, supplies, insurance, rent and utilities). The Company has
historically experienced net losses primarily as a result of non-cash charges
attributable to amortization of intangibles that were recorded at the time of
the purchase of the Stations. The Company's amortization of programming
rights has historically exceeded the Company's payments for programming rights
due to the write-up of programming assets which occurred upon the respective
acquisitions of the Stations. This historic trend will continue with the
write-up of such assets in conjunction with the January 4, 1996 Acquisition.
In addition, the Company has paid in advance of scheduled programming
liabilities certain excess programming rights acquired as a result of the
aforementioned Acquisition.
Results of Operations
Three Months Ended March 31, 1995 of Act III (the "1995 Three Months")
Compared to Three Months Ended March 31, 1996 of the Company (the "1996 Three
Months")
Set forth below are selected consolidated financial data for the three
months ended March 31, 1995 of Act III and March 31, 1996 of the Company and
the percentage changes between the periods.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
Predecessor Company
1995 1996 Percentage
(in thousands) Change
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues (excluding barter) $18,400 $21,713 18.0%
Barter revenues 1,670 2,546 52.5
Total net revenues 20,070 24,259 20.9
Operating expenses 4,135 6,184 49.6
Selling, general
and administrative expenses 5,486 5,544 1.1
Depreciation and amortization 5,957 14,598 145.1
Operating income (loss) 4,492 (2,067) (146.0)
Interest expense 4,626 8,130 75.7
Net loss (134) (2,722) (1,931.3)
Payments for programming rights 2,303 2,208 (4.1)
Broadcast Cash Flow 9,060 11,026 21.7
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily
include local and national/Canadian spot advertising sales. Net revenues
(excluding barter) increased to $21,713,000 in the 1996 Three Months from
$18,400,000 in the 1995 Three Months, an increase of $3,313,000 or 18.0%.
This increase is due to reduced national sales representative commission rates
which commenced concurrent with the Acquisition and increasing advertising
spot rates. Advertising revenues for the 1996 Three Months were comprised of
46.9% from local advertising sales and 53.1% from national/Canadian
advertising sales.
Local revenues include gross revenues before commissions from local or
regional advertisers or their representative agencies. Local and regional
areas encompass a station's designated market area and its outlying areas.
Local revenues increased to $11,931,000 in the 1996 Three Months from
$9,820,000 in the 1995 Three Months, an increase of $2,111,000, or 21.5%. The
increase was primarily due to increased ratings as well as strong advertising
demand.
National/Canadian revenues include gross revenues before commissions
from national and Canadian advertisers or their representative agencies.
National advertisers are advertisers outside of a station's local market or
region. National/Canadian revenues increased to $13,533,000 in the 1996 Three
Months from $11,773,000 in the 1995 Three Months, an increase of $1,760,000,
or 15.0%. As with local revenues, national/Canadian revenues increased
primarily due to improved ratings and strong advertising demand.
Barter revenues increased to $2,546,000 in the 1996 Three Months from
$1,670,000 in the 1995 Three Months, an increase of $876,000, or 52.5%. This
increase was primarily due to the increase in the value of barter programming
rights related to the purchase accounting and resulting increase in the
revenue recognized therefrom.
Operating expenses include engineering, promotion, production,
programming operations and barter expenses. The Company barters advertising
time for certain program material. These transactions are included as
operating expenses at management's estimate of the value of the advertising
time exchanged, which approximates the fair value of the program material
received. Operating expenses increased to $6,184,000 in the 1996 Three Months
from $4,135,000 in the 1995 Three Months, an increase of $2,049,000. The
increase is due to the WXLV affiliation switch from Fox Broadcasting Company
to the American Broadcasting Company, Inc. in September 1995, as the Company
is now producing local news at WXLV, which increased operating expenses by
$476,000 during the 1996 Three Months. Additionally, the increase in employee
headcount resulting from the execution of the two Time Brokerage Agreements
executed in February 1996 further increased operating expenses as compared to
the 1995 Three Months.
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $5,544,000 in the 1996 Three
Months from $5,486,000 in the 1995 Three Months, an increase of $58,000, or
1.1%. This increase is the result of higher salary costs due to an overall
headcount increase, offset somewhat by reduced corporate overhead.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of intangibles.
Depreciation and amortization increased to $14,598,000 in the 1996 Three
Months from $5,957,000 in the 1995 Three Months, an increase of $8,641,000, or
145.1%, due to the increase in value of all fixed assets, programming rights
and intangible assets in conjunction with the Acquisition.
Operating income decreased to a loss of $2,067,000 in the 1996 Three
Months from operating income of $4,492,000 in the 1995 Three Months, a
decrease of $6,559,000, due to the reasons discussed above.
Interest expense includes interest charged on all outstanding debt and
the amortization of debt issuance costs over the life of the underlying debt.
The $3,504,000 increase for the 1996 Three Months as compared to the 1995
Three Months is the result of interest costs incurred on the debt utilized to
fund the Acquisition.
Net loss increased to a loss of $2,722,000 in the 1996 Three Months from
a loss of $134,000 in the 1995 Three Months, an increase in the loss of
$2,588,000, due to the reasons discussed above.
Payments for programming rights decreased to $2,208,000 in the 1996
Three Months from $2,303,000 in the 1995 Three Months, a decrease of $95,000,
or 4.1%. This decrease is attributable to a reduction in the amount of
programming required to be purchased by the Company due to the buydown of
certain excess programming liabilities in conjunction with the Acquisition,
increased Fox and United Paramount network programming, and an overall
decrease in the cost per program due to the competitive pricing of
programming.
Broadcast Cash Flow increased to $11,026,000 in the 1996 Three Months
from $9,060,000 in the 1995 Three Months, an increase of $1,996,000, primarily
due to the aforementioned increases in revenue with a smaller proportional
increase in operating and selling, general and administrative expenses. The
Company believes that Broadcast Cash Flow is important in measuring the
Company's financial results and its ability to pay principal and interest on
its debt because broadcasting companies traditionally have large amounts of
non-cash expense attributable to amortization of programming rights and other
intangibles. Broadcast Cash Flow does not purport to represent cash provided
by operating activities as reflected in the Company's consolidated financial
statements, 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.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash provided by
operations. Cash provided by operations during the 1996 Three Months was
$19,197,000 compared to $14,316,000 in the 1995 Three Months. The increase in
the Company's cash flow is attributable primarily due to the Company's
improved operating results, with revenue increases proportionally higher than
expense increases.
Cash provided by operations is after payments for programming rights,
which amounted to $2,208,000 and $2,303,000, respectively, for the 1996 Three
Months and the 1995 Three Months. The Company has program payment commitments
(including contracts not yet recordable as assets) of $51,054,000, which are
payable in installments of $9,509,000 in 1996, $11,812,000 in 1997,
$10,772,000 in 1998, $8,827,000 in 1999, $5,502,000 in 2000 and $4,632,000
thereafter.
The Company's primary capital requirements have been for capital
expenditures and acquisitions. Capital expenditures totaled $280,000 for the
1996 Three Months compared to $507,000 for the 1995 Three Months. The larger
expenditures in 1995 includes the construction of a news facility at WXLV.
As of March 31, 1996, the Company had outstanding a $220,000,000 senior
debt facility (the "Senior Credit Agreement"), with a $30,000,000 revolving
credit facility (the "Revolving Credit Facility"), of which $15,000,000 was
outstanding, and a $75,000,000 acquisition credit facility (the "Acquisition
Credit Facility") (collectively, the "Senior Credit Facility"), with no
borrowings outstanding at March 31, 1996. The interest rate on all borrowings
under the Senior Credit Agreement vary depending upon either LIBOR or Prime
rates, as selected by the Company, with a margin ranging between 0.0% and 1.5%
for Prime borrowings and 1.25% and 2.75% for LIBOR borrowings added based upon
the Company's leverage ratio for the past quarter. The Company has entered
into various interest rate protection agreements based upon LIBOR rates and a
notional amount equal to the full value of the senior debt facility to protect
against significant fluctuations in interest rates through 2000. The Company
also has outstanding $125,000,000 of 10-1/4% senior subordinated notes due
December 2005.
The Company believes that it will be able to meet its required principal
payments in the future through funds generated from its operations. If the
funds generated from the Company's operations are insufficient to meet its
required principal payments, the Company will explore other financing
alternatives.
The indenture to the senior subordinated notes and the Senior Credit
Facility of the Company contain covenants which, among other restrictions,
require the maintenance of certain financial ratios (including cash flow
ratios), restrict asset purchases and the encumbrances of existing assets,
require lender approval for proposed acquisitions, and limit the incurrence of
additional indebtedness and the payment of dividends.
Based upon current operations, the Company anticipates the cash flow
from operations combined with the cash on hand will be adequate to meet its
requirements for current and foreseeable levels of operation. There can,
however, be no assurance that future developments or economic trends will not
adversely affect the Company's operations.
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Exhibit
4.3 Supplemental Indenture dated as of January 5, 1996 between Sullivan
Broadcasting Company, Inc. (as successor to A-3) and State Street
Bank and Trust Company, as trustee (the "Trustee") relating to the
Notes *
4.4 Bank Credit Agreement among A-3, Holdings, NationsBank of Texas,
N.A., Bankers Trust Company and certain other lenders *
4.5 Restated Certificate of Incorporation of Holdings *
10.1 Time Brokerage Agreement, dated as of February 7, 1996 by and among
Mohawk Valley Broadcasting, Inc. and Sullivan Broadcasting of
Utica, Inc.
10.2 Time Brokerage Agreement date as of February 22, 1996 by and
between Central Tennessee Broadcasting Corporation and Sullivan
Broadcasting of Nashville, Inc.
10.3 Asset Purchase Agreement, dated as of February 28, 1996 by and
between Sullivan Broadcasting Company, Inc., and Channel 47 Limited
Partnership
10.4 Executive Employment Agreement, dated as of April 8, 1996 between
Richard Montgomery and Sullivan Broadcasting Company, Inc.
10.5 Station Affiliation Agreement, dated May 17, 1990 between Fox
Broadcasting Company and Mohawk Valley Broadcasting
10.6 Station Affiliation Agreement, dated March 23, 1995 between United
Paramount Television Network Partnership and Acme TV Corp.
10.7 Supplemental Indenture dated as of February 7, 1996 between
Sullivan Broadcasting Company, Inc.(as successor to A-3) and State
Street Bank and Trust Company as trustee (the "Trustee") relating
to the Notes
10.8 Amended and Restated Option Agreement, dated as of February 22,
1996 by and among M.T. Communications, Inc., Central Tennessee
Broadcasting Corporation, Michael Thompson, and Sullivan
Broadcasting Company, Inc.
* Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-98436
(b) Reports on Form 8-K
Date of Event Event Reported
------------- --------------
January 4, 1996 Acquisition of all of the outstanding
stock of Act III and subsequent merger
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SULLIVAN BROADCASTING COMPANY, INC.
(Registrant)
May 14, 1996 By: /S/ Patrick Bratton
Patrick Bratton
Vice President - Finance
(Principal Financial and
Chief Accounting Officer)
Exhibit 10.1
TIME BROKERAGE AGREEMENT
By and Between
Mohawk Valley Broadcasting, Inc.,
ACME T.V. Corporation,
Kevin O'Kane
and
Sullivan Broadcasting of Utica, Inc.
TABLE OF CONTENTS
Page
----
TABLE OF DEFINITIONS.............................................. iv
1. Overall Purpose and Term; Renewal Option...................... 3
2. Facilities.................................................... 4
3. Payment....................................................... 4
4. Responsibilities.............................................. 5
A. Broker's Responsibilities................................. 5
B. Owner's Responsibilities.................................. 7
C. Additional Responsibilities............................... 7
D. Renewel, Modification and Cancellation of Contracts....... 8
5. Revenues and Deposits......................................... 8
A. Revenues from Post-Commencement Date Broadcast Time
Sales and Uses of Stations' Studio/Production Facilities.. 8
B. Bank Accounts for Revenues from Broker's
Activities/Payments By Broker from Such Revenues.......... 9
6. Station Facilities............................................ 9
A. Operation of Stations..................................... 9
B. Interruption of Normal Operations......................... 10
C. Studio Location........................................... 11
7. Handling of Stations Communications........................... 11
8. Owners' Compliance With FCC Rules and Policies................ 11
9. Programming and the Public Interest........................... 11
10. Special Programs.............................................. 14
11. Stations Identification....................................... 15
12. Political Advertising......................................... 15
13. Children's Programming........................................ 15
14. Owners' Responsibility For Compliance with FCC Technical
Rules........................................................ 17
15. Force Majeure................................................. 18
16. Trade Secrets and Proprietary Information..................... 19
17. Payola and Conflicts of Interest.............................. 19
18. Broker's Compliance with Law.................................. 20
19. No Sub-Brokering.............................................. 20
20. Indemnification............................................... 21
A. Broker's Indemnification of Owners........................ 21
B. Owners' Indemnification of Broker......................... 21
C. Procedure for Indemnification............................. 22
D. Insurance................................................. 25
21. Owner's Events of Default..................................... 26
22. Broker's Events of Default.................................... 29
23. Termination Upon Order of Governmental Authority.............. 33
24. Additional Representations, Warranties and Covenants.......... 34
A. Mutual Additional Representations, Warranties and
Covenants................................................. 34
B. Finders................................................... 35
C. Owners' Additional Representations, Warranties and
Covenants................................................. 35
D. Broker's Additional Representations, Warranties and
Covenants................................................. 36
25. Sale of Stations to Broker.................................... 36
26. Procedures for Termination.................................... 36
A. Upon Broker's Events of Default........................... 36
B. Upon Certain Owner's Events of Default.................... 37
C. Upon Government Termination............................... 37
D. Upon Certain Events....................................... 38
27. Notices....................................................... 38
28. Modification and Waiver....................................... 39
29. Construction.................................................. 40
30. Headings...................................................... 40
31. Assignment.................................................... 40
32. Counterparts.................................................. 40
33. Entire Agreement.............................................. 40
34. No Partnership or Joint Venture Created....................... 40
35. Severability.................................................. 41
36. Legal Effect.................................................. 41
37. No Party Deemed Drafter....................................... 41
38. Arbitration................................................... 41
A. Generally................................................. 41
B. Notice of Arbitration..................................... 42
C. Selection of Arbitrator................................... 42
D. Conduct of Arbitration.................................... 43
E. Enforcement............................................... 43
F. Expenses.................................................. 44
39. Liquidated Damages............................................ 44
TABLE OF DEFINITIONS
Term Page Defined
- - ---- ------------
AAA Rules......................................................... 42
ACME.............................................................. 1
Additional Local Programming...................................... 13
Additional Syndicated Programming................................. 13
Arbitration Notice................................................ 13
Asset Purchase Agreement.......................................... 42
ATV............................................................... 2
Broker............................................................ 36
Broker's Event of Default......................................... 1
Claimant.......................................................... 22
Commencement Date................................................. 3
Communications Act................................................ 1
Consideration..................................................... 20
Disputes.......................................................... 41
Disputing Person.................................................. 42
FCC............................................................... 1
Final Determination............................................... 43
Governmental Termination Event.................................... 33
HDTV.............................................................. 36
Indemnifying Party................................................ 22
Losses............................................................ 21
Mandatory Cessation Date.......................................... 38
O'Kane............................................................ 1
Option Agreement.................................................. 2
Owner............................................................. 1
Owner's Event of Default.......................................... 26
Owner's Termination Notice........................................ 37
Station........................................................... 1
Station Bank Account(s)........................................... 9
Station W28AQ..................................................... 1
Station W53AM..................................................... 1
Station WFXV...................................................... 1
Station WUPN-LP................................................... 1
TIME BROKERAGE AGREEMENT
THIS TIME BROKERAGE AGREEMENT is made this 7th of February, 1996, by and
between Mohawk Valley Broadcasting, Inc., a New York corporation ("Mohawk"),
ACME T.V. Corporation, a New York corporation ("ACME"), Mr. Kevin O'Kane
("O'Kane") and Sullivan Broadcasting of Utica, Inc., a Delaware corporation
("Broker").
WHEREAS, Mohawk is the owner and licensee of television broadcast station
WFXV, Utica, New York ("Station WFXV"), pursuant to authorization(s) issued by
the Federal Communications Commission ("FCC"); and
WHEREAS, O'Kane is the licensee, pursuant to authorizations issued by the
FCC, of: (1) television broadcast translator station W28AQ, Little Falls, New
York ("Station W28AQ"), which rebroadcasts the programming of Station WFXV; (2)
low power television broadcast station WUPN-LP, Utica, New York ("Station WUPN-
LP"); and (3) low power television broadcast station W53AM, Utica, New York
("Station W53AM"); and
WHEREAS, ACME owns certain assets used by and for Station W28AQ, Station
WUPN-LP and/or Station W53AM; and
WHEREAS, Station WFXV, Station W28AQ, Station WUPN-LP and Station W53AM
are referred to collectively herein as the "Stations"; and the term "Owners"
as used herein denotes each of Mohawk, ACME and O'Kane; and
WHEREAS, the parties hereto have carefully considered the Communications
Act of 1934, as amended (the "Communications Act") and the FCC's time brokerage
policies adopted pursuant thereto, and intend that this Agreement in all
respects comply with such Communications Act and policies; and
WHEREAS, Owners desire to enter into this Agreement to provide a regular
source of diverse programming and income to sustain the operations of the
Stations; and
WHEREAS, Broker desires to provide an over-the-air program service to the
Utica, New York area using the facilities of the Stations; and
WHEREAS, Owners agree to provide time exclusively to Broker on terms and
conditions that conform to policies of the Stations and the FCC for time
brokerage arrangements and that are as set forth herein; and
WHEREAS, Broker agrees to utilize the Stations' transmitting facilities
solely to broadcast programming of Broker's selection that conforms with the
policies of Mohawk and O'Kane and with all rules, regulations and policies of
the FCC, and as set forth herein; and
WHEREAS, Mohawk and O'Kane maintain, and shall continue to maintain
during the term of this Agreement, ultimate control over their respective
Stations' facilities including control over their Stations' finances,
personnel and programming; and
WHEREAS, contemporaneously herewith, the parties hereto have entered
into: (1) an Option Agreement (the "Option Agreement") granting to Broker or
Broker's assignee an option to purchase certain of the assets used in
connection with the operation of the Stations, and to obtain the assignment
of the Stations' FCC licenses to Broker or Broker's assignee; and (2) an Asset
Purchase Agreement (the "Asset Purchase Agreement") pursuant to which Broker or
Broker's assignee is purchasing certain other assets of Owners;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises set forth herein, and for other good and valuable consideration, the
sufficiency of which Owners and Broker hereby acknowledge, Owners and Broker,
intending to be bound legally, hereby agree as follows:
1. Overall Purpose and Term; Renewal Option. In accordance with the terms
and limitations set forth herein: (a) Broker shall program the Stations,
promote the Stations and their programming, sell commercial and other time on
the Stations and bill for and collect the payments for time sales on the
Stations; and (b) Owners will maintain the Stations' transmitting and microwave
relay facilities, and make said facilities available to Broker. Subject to the
terms of this Agreement, each party hereby warrants and covenants that it will
fulfill said obligations, and their other obligations specified herein, to the
fullest extent permitted by law (including the FCC's rules and policies) in a
diligent, reasonable manner.
Broker shall begin its time brokerage activities with regard to the
Stations pursuant to this Agreement on the date of this Agreement as stated
above, and said date shall be referred to herein as the "Commencement Date."
The term of this Agreement shall be a period of five (5) years from the
Commencement Date. Broker also shall have the option to extend this
Agreement for one successive five (5) year term, on the same terms and
conditions as this Agreement, by giving notice of its intent to exercise such
option not less than six (6) months prior to the expiration of the initial
term.
2. Facilities. Owners shall make the Stations' television broadcasting
transmission facilities available to Broker for broadcast on the Stations of
programs selected by Broker, and advertising/commercial announcements sold by
Broker, which may originate from the Stations' studios, Broker's studios or
from other sources contracted for by Broker. In addition, Owners will make
available to Broker, at no cost, during the term of this Agreement, exclusive
use (other than Owners' own use for the Stations pursuant to this Agreement) of
all of Owners' studio and production facilities, for Broker's use in its
activities with regard to the Stations pursuant to this Agreement. Mohawk and
O'Kane may use the Stations' studio and production facilities, during the term
of this Agreement, for Station public affairs programs and public service
announcements for their respective Stations, consistent with paragraphs 9 and
10 below.
3. Payment. As consideration for Owner permitting Broker to air Broker's
programming on the Stations pursuant to this Agreement, Broker shall pay Owner
as follows:
A. Beginning on the Commencement Date, the amount equal to Owners'
monthly operating expenses for the Stations, paid as follows: Broker shall
pay Mohawk, for the account of Owners, the amount of Eleven Thousand Dollars
($11,000) per month, by the fifteenth (15th) day of each month, adjusted
upwards or downwards after the first month based on Owner providing Broker, by
the fifth (5th) day of each month, an accounting of Owner's actual expenses for
the Stations for the prior month (i.e., if the actual expenses were more than
$11,000 during a month, then the payment for the next month shall be $11,000
plus the amount by which the prior month's actual expenses exceeded $11,000;
and if the actual expenses were less than $11,000 during a month, then the
payment for the next month shall be $11,000 minus the amount by which the prior
month's actual expenses were under $11,000).
B. Beginning with the twenty-fifth (25th) month after the Commencement
Date, Broker shall pay Mohawk, for the account of Owners, Owners' monthly
operating expenses for the Stations, pursuant to paragraph 3.A. above, plus
i. From months 25 through 36, an additional $3,000 per month;
ii. From months 37 through 48, an additional $4,000 per month (i.e.,
expenses plus $4,000);
iii. From months 49 through 60, an additional $5,000 per month (i.e.,
expenses plus $5,000);
iv. From months 61 through 72, an additional $6,000 per month (i.e.,
expenses plus $6,000);
and likewise, with the monthly amount increasing by One Thousand Dollars
($1,000) each year, through the last year of this Agreement, including any
renewals thereof.
4. Responsibilities.
A. Broker's Responsibilities.
i. Broker shall employ and be responsible for paying the
salaries, commissions, payroll taxes, insurance and all
other related costs for all personnel (other than any
Owner's employees) involved in the acquisition,
compilation, production, broadcast and sale of the
Stations' programming and commercial messages, including
but not limited to administrative, internal and external
sales, traffic, billing, collections, promotion,
production, outside talent and master control personnel
(but excluding any expenses incurred by any Owner).
ii. Broker also shall be responsible for paying all
promotional expenses in connection with the Stations'
programming (but excluding any expenses incurred by any
Owner).
iii. Broker's personnel shall operate and maintain Owners'
studio, production and master control facilities.
iv. Broker shall be responsible for its own telephone systems
and local and long-distance telephone service and fax
costs.
B. Owners' Responsibilities
Owners shall be responsible for and shall pay all of Owners'
own expenses of operating and maintaining the Stations, including,
but not limited to:
i. All lease obligations in connection with property leased
to any Owner;
ii. Utility bills for utility services at the Stations' main
studio/office location(s) and their tower/transmitter
sites;
iii. Telephone system maintenance costs and local exchange and
long distance telephone service costs for Owners'
telephone system(s) and usage at the Stations' main
studio/office location(s) and at the Stations' tower/
transmitter sites;
iv. Salaries, payroll taxes, insurance and other related costs
of all personnel employed by any Owner for any of the
Stations; and
v. Costs of engineering and technical personnel necessary to
assure compliance with the FCC's rules and policies and
maintenance and repair of the Stations' transmitting and
microwave relay facilities.
C. Additional Responsibilities
i. Broker shall be fully responsible for the supervision and
direction of its employees, and each Owner shall be fully
responsible for the supervision and direction of its
employees.
ii. Broker and Owners shall pay their respective expenses with
regard to the Stations and in no event will any such
payable remain unpaid for more than ninety (90) days
unless such payable is being disputed in good faith.
iii. Except as otherwise mutually agreed, as between Owner(s)
and Broker, each Owner is and will continue to be
responsible for all its obligations pursuant to any
contracts of employment of employees of any of the
Stations and any contracts with labor unions to which any
Owner is a party.
D. Renewal, Modification and Cancellation of Contracts.
Owners will comply with all reasonable requests of Broker with
respect to the renewal and cancellation of contracts (in accordance
with their terms) or the entry into or the modification of contracts
which affect Broker's time brokerage activities with regard to the
Stations pursuant to this Agreement.
5. Revenues and Deposits.
A. Revenues from Post-Commencement Date Broadcast Time Sales and
Uses of Stations' Studio/Production Facilities. Broker shall have the
exclusive right to sell, either directly or indirectly through sales
representatives, and shall be solely responsible for billing and
collecting payments for, all programs and commercials aired on the
Stations, and production fees for uses of the Stations' studio/production
facilities, on or after the Commencement Date until the termination of
this Agreement. Broker may contract and bill in its own name for the
sale of broadcast time on the Stations and uses of the Stations' studio/
production facilities on and after Commencement Date until the
termination of this Agreement. Subject to Mohawk's current agreement
with the Fox Television Network, Broker also shall have the right to
negotiate for, subject to Owner's approval, and to receive, for deposit
pursuant to sub-paragraph 5.B. below, all compensation due to the
Stations from cable television systems pursuant to the "retransmission
consent" provisions of the Cable Television Consumer Protection and
Competition Act of 1992.
B. Bank Accounts for Revenues from
Broker's Activities/Payments
By Broker from Such Revenues.
Broker may deposit any sums it receives pursuant to sub-paragraph
5.A. above into a bank account (or accounts) established by Broker, in
Broker's name, for this purpose (the "Station Bank Account(s)"), and the
funds in such Station Bank Account(s) shall be the property of Broker.
Broker shall be authorized to endorse payments received in names other
than Broker's (e.g., "WFXV," "WFXV-TV" or "WUPN") in order to deposit
such payments into the Station Bank Account(s).
6. Station Facilities
A. Operation of Stations. Owners represent that the Stations will
be operated throughout the term of this Agreement in all material
respects in accordance with the authorizations issued by the FCC and all
applicable FCC rules, regulations and policies. As of the Commencement
Date, Owners shall make the Stations available to Broker for program
transmissions, at least at ninety five percent (95%) of each Station's
currently authorized effective radiated power, for one hundred
sixty-eight (168) hours per week, Sunday through Saturday, except for
downtime occasioned by required maintenance and other interruptions
contemplated by sub-paragraph 6.B. below and paragraph 15 of this
Agreement. Any routine or non-emergency maintenance work affecting
operation of the Stations at full power shall be scheduled with at least
forty-eight (48) hours prior notice to Broker, and shall not take place
during a rating period, and to the extent possible Owners shall cause
such maintenance work to be performed between the hours of 1:00 AM and
6:00 AM Eastern time.
B. Interruption of Normal Operations. If any Station suffers any
loss or damage of any nature to its transmission or studio facilities
which results in the interruption of service or the inability of such
Station to operate with its maximum authorized facilities, an Owner shall
immediately notify Broker of such loss or damage and Owners shall
undertake, subject to Broker's prior consent, such consent not to be
unreasonably withheld, such repairs as are necessary to restore full-time
operation of such Station with its maximum authorized facilities as
expeditiously as possible following the occurrence of any such loss or
damage. If Owners are unable to or do not commence such repairs as soon
as possible, Broker may do so on Owners' behalf.
C. Studio Location. Mohawk shall maintain a main studio facility,
within Station WFXV's principal community contour, and shall staff
Station WFXV consistent with the FCC's rules and policies.
7. Handling of Stations Communications. Owners shall receive and handle
mail, faxes and telephone calls in connection with the operation of the
Stations.
8. Owners' Compliance With FCC Rules and Policies. Owners shall comply
in all material respects with all FCC rules and policies applicable to the
Stations. Without limiting the foregoing sentence, Mohawk's obligations shall
include ascertaining the needs and interests of Station WFXV's service area,
maintaining Station WFXV's political broadcasting and public inspection files
and Station WFXV's maintenance logs, meeting equal employment opportunity
requirements with regard to Mohawk's employees, preparing Station WFXV's
quarterly issues/programs lists and making all required FCC filings with regard
to Station WFXV; and O'Kane shall make all required filings with regard to
Station WUPN-LP, Station W28AQ and Station W53AM.
9. Programming and the Public Interest. Throughout the term of this
Agreement, unless otherwise agreed to by the parties hereto, Broker shall
program the Stations so as to maintain a general, advertiser-supported,
entertainment/sports format, with some mix permitted of home shopping,
religious, foreign language and infomercial programming. The Stations shall
not become predominantly home shopping, religious, foreign language and/or
infomercial stations. The programming selected by Broker shall consist of such
materials as are determined by Broker to be appropriate and/or in the public
interest including, without limitation, public affairs programming, public
announcements, entertainment, news, weather reports, sports, promotional
material, commercial material and advertising. Without limiting the foregoing
sentence, Broker will program at least a total of one and one-half hours per
week of news, public affairs, or other non-sports, non-entertainment
programming, between the hours of 6:00 AM and 12:00 midnight Eastern time, on
Station WFXV.
Following the commencement of Broker programming on the Stations,
Broker's management personnel as designated by Broker will meet at least twice
per month with Mohawk's and O'Kane's General Manager in order to help formalize
Mohawk's and O'Kane's oversight over Broker's activities at the Stations. At
such meetings, Mohawk will provide Broker with the results of Mohawk's ongoing
efforts to ascertain the problems, needs and interests of Station WFXV's
service area, so that the programming and public service announcements selected
and/or scheduled by Broker for Station WFXV will be responsive thereto. In the
event Mohawk determines that additional attention should be directed to
particular community needs, Broker will cooperate to assure that Station WFXV's
locally-produced programming serves those needs. In the event Mohawk decides
that additional local programming must be aired over Station WFXV in order to
better serve viewers' problems, needs and interests, Broker will cooperate with
Mohawk in producing up to one hour weekly of such programming using the
appropriate facilities of the Stations and staff of Broker. If Mohawk acquires
syndicated programming ("Additional Syndicated Programming") or if Mohawk uses
the Stations' staff for the production of local programs in addition to the
informational and public affairs programming described above in this paragraph
9 ("Additional Local Programming") and in addition to the one hour per week
specified in the immediately preceding sentence, then all expenses for such
additional programming (including fees to Broker for use of Broker's
facilities, in accordance with a schedule adopted by Broker) will be paid by
Mohawk and will not be included in the calculation of Broker payments due
Owners under this Agreement. Such programs will be aired on Station WFXV at a
mutually agreeable time between 6:00 AM and 12:00 midnight Eastern time.
Broker shall be entitled to any and all revenues received from time sales of or
during any such programs.
Broker shall provide Mohawk with all documents Broker receives which are
required to be placed in Station WFXV's political or public inspection files.
Broker shall, upon reasonable request by Mohawk, provide Mohawk with
information with respect to programs and public service announcements broadcast
on Station WFXV which are responsive to the problems, needs and issues facing
the residents of Station WFXV's service area and Broker's programming for
children, so as to assist Mohawk in the preparation of required programming
reports, and will assist Mohawk upon request in compiling such other
information which is reasonably necessary to enable Mohawk to prepare other
records and reports required by the FCC or other government agencies.
Mohawk (for Station WFXV) and O'Kane (for Station WUPN-LP and Station
W53AM) shall have the full and unrestricted right to reject, delete and not
broadcast any material contained in any part of the programming selected and/or
scheduled by Broker which Mohawk or O'Kane (as the case may be) in good faith
determines is unsuitable for broadcast or the broadcast of which Mohawk or
O'Kane (as the case may be) in good faith concludes would be contrary to law or
the public interest. Mohawk and O'Kane shall retain ultimate control over
their respective Stations' policies and standards, and, in that regard, shall
adopt written standards, generally in accordance with industry standards for
commercial television broadcast stations, in substantially the same form and
substance as Exhibit A attached hereto, for the acceptance of programming
material and commercial announcements. Mohawk and O'Kane retain the right to
modify such standards to conform to general industry standards or to meet
specific FCC rules and policies and to take any other actions necessary for
compliance with federal, state and local laws, rules and regulations. Broker
hereby covenants, warrants and represents that with regard to the Stations it
will, at all times during the term of this Agreement, comply in all material
respects with such standards for acceptance of programming material and
commercial announcements.
10. Special Programs. Mohawk reserves the right, in its discretion, to
preempt Broker's programs for Station WFXV to broadcast special programs on
occasion concerning issues or events of local, regional or national importance
in the event that Broker does not broadcast same on its own initiative;
however, in all such cases, Mohawk will use its best efforts to give Broker
reasonable notice of its intention to preempt programs scheduled by Broker.
Broker shall be entitled to any and all revenues received from Station WFXV
time sales of or during any such programs.
11. Stations Identification. Mohawk (for Station WFXV and Station W28AQ)
and O'Kane (for Station WUPN-LP, Station W28AQ and Station W53AM) will be
responsible for the proper broadcast of FCC-required station identification
announcements; however, Broker, while conducting its activities with regard to
the Stations pursuant to this Agreement, shall broadcast all required station
identification announcements with respect to the Stations in full compliance
with FCC rules and policies.
12. Political Advertising. Mohawk (for Station WFXV) and O'Kane (for
Station WUPN-LP and Station W53AM) will be responsible for compliance with the
political broadcasting requirements of the Communications Act and the FCC's
rules and policies promulgated thereunder. Broker, while conducting its
activities with regard to the Stations pursuant to this Agreement, will comply
with said political broadcasting requirements, rules and policies. Broker
promptly shall supply to Mohawk and/or O'Kane such information as may be
reasonably necessary to permit Mohawk and/or O'Kane to comply with the lowest
unit charge requirements of Section 315 of the Communications Act. To the
extent that Mohawk (for Station WFXV) or O'Kane (for Station WUPN-LP or Station
W53AM) believes necessary in Mohawk's or O'Kane's (as the case may be) sole
discretion, Broker shall release to Mohawk or O'Kane (as the case may be)
advertising availabilities and program time as required by the FCC's rules and
policies to permit Mohawk and O'Kane to comply with the reasonable access
provisions of Section 312(a)(7) of the Communications Act and the equal
opportunities provision of Section 315 of the Communications Act and the rules
and policies of the FCC promulgated thereunder; provided, however, that
revenues realized by Mohawk and/or O'Kane as a result of any such release of
advertising and programming time shall promptly be remitted to Broker.
13. Children's Programming. Mohawk will be responsible for insuring
Station WFXV's compliance with the Children's Television Act of 1990 [47 U.S.C.
303a and 303b], and the rules and policies of the FCC promulgated thereunder,
including ensuring that Station WFXV complies with the commercial limits
established therein and serves the educational and informational needs of
children. Broker, while conducting its activities with regard to Station WFXV
pursuant to this Agreement, will comply with said Children's Television Act and
FCC rules and policies by presenting a reasonable amount of children's
programming, including educational/informational programming, and by observing
the limitations on advertising. In connection therewith, Broker shall be
responsible for preparing all necessary reports and certifications and
delivering same to Mohawk for placement in Station WFXV's public inspection
file. Upon delivery of such reports and certifications, they shall be
certified by Broker as true and correct in all material respects. Such reports
and certifications shall include, without limitation, the following: (a) a
quarterly report on children's programming pursuant to Section
73.3526(a)(8)(iii) of the FCC's rules; and (b) a certificate with respect to
compliance with advertising limits in children's programs pursuant to Section
73.3526(a)(8)(ii) of the FCC's rules. Such advertising certification shall be
in the form of the certificate attached hereto as Exhibit B. In completing
each quarterly certificate in the form attached hereto as Exhibit F, Broker
shall list the titles of all children's programs carried on Station WFXV in the
past quarter in which the advertising limits apply, both local and network, all
program segments wherein the allowed commercial limits were exceeded, and a
separate memo explaining why any excesses occurred. In carrying out its
obligations with respect to children's programming, Broker shall further
maintain records with respect to commercial matter in children's programming
either in the form of logs of programs reflecting the commercial time, tapes of
the programs, lists of commercial minutes aired in identified children's
programs, or appropriate certificates from networks and syndicators with
respect to compliance with the FCC's requirements on commercial limits.
14. Owners' Responsibility For Compliance with FCC Technical Rules.
Owners shall retain, on a full-time or part-time basis, a qualified Chief
Engineer who shall be responsible for maintaining the Stations' transmission
facilities. Mohawk shall retain a Chief Operator, as that term is defined by
the rules and regulations of the FCC (who may also hold the position of Chief
Engineer), who shall be responsible for ensuring compliance by Station WFXV
with the technical operating and reporting requirements established by the FCC.
15. Force Majeure. Each party shall carry standard property and casualty
insurance for the property and equipment it owns. If any failure or impairment
of facilities 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,
occurs due to causes beyond the control of any Owner, then such failure,
impairment, delay or interruption, by itself, shall not constitute a breach of
or an event of default under this Agreement and Owners will not be liable to
Broker for any such failure, impairment, delay or interruption so long as (if
an Owner elects to remedy such failure, impairment, delay or interruption) such
Owner undertakes and continues reasonable efforts to remedy any such failure,
impairment, delay or interruption. Promptly thereafter, if an Owner elects to
do so by written notice to Broker, such Owner will obtain any applicable
insurance proceeds and apply such proceeds to the cost of remedying such
failure, impairment, delay or interruption; provided that, if no Owner
determines that it will not do so, an Owner will give Broker prompt written
notice of such determination. If no Owner elects to remedy such failure,
impairment, delay or interruption (or no Owner elects to do so prior to the
ninetieth (90th) day after such failure, impairment, delay or interruption
occurs), then Broker may elect to obtain such insurance proceeds and effect
such remedy by giving Owners written notice to that effect. Whether any Owner
or Broker has elected to effect such remedy, if the insurance proceeds are
inadequate to pay the cost of such remedy, Owners shall pay the difference.
16. Trade Secrets and Proprietary Information. In the event that: (a)
any trade secrets or other proprietary information of Broker in connection with
this Agreement become known to any Owner, and (b) such trade secrets and/or
proprietary information are not otherwise available in the public domain or
known publicly, Owners agrees to maintain the confidentiality of such trade
secrets and/or proprietary information and not to use or disclose any such
trade secrets and/or proprietary information without the prior written consent
of Broker (except as required by law, rule or regulation, or by order of any
government agency or court).
In the event that: (a) any trade secrets or other proprietary information
of any Owner in connection with this Agreement become known to Broker, and (b)
such trade secrets and/or proprietary information are not otherwise available
in the public domain or known publicly, Broker agrees to maintain the
confidentiality of such trade secrets and/or proprietary information and not to
use or disclose any such trade secrets and/or proprietary information without
the prior written consent of such Owner (except as required by law, rule or
regulation, or by order of any government agency or court).
The provisions of this paragraph 16 shall continue in effect for two (2)
years after the termination of this Agreement.
17. Payola and Conflicts of Interest. Broker agrees not to, and to use
reasonable efforts to cause its employees who have the ability to cause the
broadcast of programs and/or commercial matter on the Stations not to, accept
any consideration, compensation or gift or gratuity of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, material, supplies or other merchandise, services or labor
(collectively, "Consideration"), whether or not pursuant to written contracts
or agreements between Broker and merchants or advertisers, in consideration for
the broadcast of any matter on the Stations unless the payor is identified, in
the broadcast for which Consideration was provided, as having paid for or
furnished such Consideration, in accordance with Sections 317 and 507 of the
Communications Act [47 U.S.C. [SECTION] 317 and 508] and the FCC's rules and
policies. Broker agrees to execute, and, as a condition of each such
employee's employment, to cause each of Broker's employees to execute, at least
once every calendar year, a payola/conflict of interest affidavit in the form
attached hereto as Exhibit C, and Broker agrees to deliver the originals of all
such affidavits to Mohawk and O'Kane as expeditiously as possible following
their execution.
18. Broker's Compliance with Law. Broker agrees that, throughout the
term of this Agreement, Broker will comply with all laws, rules, regulations
and policies applicable to the functions performed by it in connection with the
Stations, including, but not limited to, meeting equal employment opportunity
requirements with respect to Broker's employees performing duties in connection
with the Stations.
19. No Sub-Brokering. Broker will not sell time on the Stations to other
time brokers who in turn will sell programming time to others. However,
nothing in this paragraph or this Agreement shall be interpreted as prohibiting
Broker from arranging for the broadcast on the Stations of barter programming,
as that term is commonly used in the television broadcast syndicated program
business.
20. Indemnification
A. Broker's Indemnification of Owners. Other than with respect to
matters described in paragraph 21 below, Broker will indemnify and hold
Owners and Owners' employees, agents and contractors harmless, including
but not limited to reasonable attorney's fees, from and against all
liability, claims, damages and causes of action ("Losses") arising out of
or resulting from acts or omissions of Broker which constitute: (a)
libel and slander to the extent not covered by insurance maintained by
Broker or an Owner; (b) infringement of trade marks, service marks or
trade names to the extent not covered by insurance maintained by Broker
or an Owner; (c) violations of law, rules, regulations, or orders
(including the FCC's rules and policies); (d) invasion of rights of
privacy or infringement of copyrights or other proprietary rights; or (e)
breaches of this Agreement. Broker's obligation to indemnify and hold
Owners and Owners' employees, agents and contractors harmless against the
Losses specified above shall survive any termination of this Agreement
until the expiration of all applicable statutes of limitation.
B. Owners' Indemnification of Broker. Other than with respect to
matters described in paragraph 22 below, Owners will indemnify and hold
Broker and Broker's employees, agents and contractors harmless, including
but not limited to reasonable attorney's fees, from and against all
Losses arising out of or resulting from acts or omissions of any Owner
which constitute: (a) libel and slander to the extent not covered by
insurance maintained by Broker or an Owner; (b) infringement of
trademarks, service marks or trade names to the extent not covered by
insurance maintained by Broker or an Owner; (c) violations of law, rules,
regulations or (d) invasion of rights of privacy or infringement of
copyrights and other proprietary rights; or (e) breaches of this
Agreement. Owners' obligation to indemnify and hold Broker and Broker's
employees, agents and contractors harmless against Losses specified above
shall survive any termination of this Agreement until the expiration of
all applicable statutes of limitation.
C. Procedure for Indemnification. The procedure for
indemnification pursuant to sub-paragraphs 20.A. and 20.B. above will be
as follows:
i. Notice. The party claiming indemnification (the
"Claimant") will give reasonably prompt notice to the party from
whom indemnification is claimed (the "Indemnifying Party") of any
claim for which indemnification is sought, whether between the
parties or brought by a third party, specifying (i) the factual
basis of such claim (to the extent that it is then known to the
Indemnifying Party) and (ii) the amount of the claim (to the extent
that it is then known to the Indemnifying Party). If such claim
relates to an action, suit or proceeding filed by a third party
against the Claimant, such notice will be given by the Claimant not
later than the twentieth day after the Claimant receives written
notice of such action, suit or proceeding; provided that any
failure to deliver or delay in delivering such notice on or prior
to such twentieth day will relieve the Indemnifying Party of its
obligations to the Claimant in respect of such claim only to the
extent that the Indemnifying Party is prejudiced by such failure or
delay.
ii. Investigation. Following receipt of notice from the
Claimant of a claim for which indemnification is sought, the
Indemnifying Party will have twenty days (or such shorter period of
time as is required to respond to the subject litigation or
proceeding) to make, at the Indemnifying Party's expense, such
investigation of the claim as the Indemnifying Party deems
necessary or desirable. For the purposes of such investigation,
the Claimant agrees to make available to the Indemnifying Party, at
the Indemnifying Party's expense, all information relied upon by
the Claimant to substantiate such claim.
iii. Third-Party Claims. With respect to any claim by a
third party pursuant to which such third party seeks only the
recovery of an amount of money and as to which a Claimant seeks
indemnification under sub-paragraph 20.A or 20.B. above, the
Indemnifying Party will have the right (at any time after the
Indemnifying Party gives the Claimant written notice wherein the
Indemnifying Party acknowledges that the Indemnifying Party is
obligated to indemnify the Claimant in respect of such claim
pursuant to sub-paragraph 20.A. or 20.B. above, as appropriate), at
the Indemnifying Party's own expense, to participate in or assume
control of the defense of such claim with counsel reasonably
satisfactory to the Claimant, and the Claimant will use reasonable
efforts to cooperate with the Indemnifying Party in such defense.
If the Indemnifying Party elects to assume control of the defense
of any third-party claim, the Claimant will have the right to
participate in the defense of such claim and retain separate
co-counsel at its own expense; provided that if the Indemnifying
Party requests that the Claimant participate in such defense or if
the Claimant reasonably believes that a conflict of interest exists
between the Claimant and the Indemnifying Party, then the
Indemnifying Party will reimburse the Claimant for the reasonable
expenses and fees of the Claimant's counsel. Without the
Claimant's consent, the Indemnifying Party will not consent to an
entry of judgment or settlement of such claim which does not
include a release of all liability of the Claimant. If the
Indemnifying Party does not elect to assume control or otherwise
participate in the defense of any third party claim, it will be
bound by the results obtained by the Claimant with respect to such
claim.
iv. Expedited Response. If a claim, whether between the
parties or by a third party, requires immediate action, the parties
will use reasonable efforts to reach a decision with respect to
such claim as expeditiously as possible.
D. Insurance. Broker and Owners each shall maintain liability
insurance policies covering general liability, blanket crime, property
damage, business interruption, automobile liability, and workers'
compensation insurance in forms and amounts customary in the television
broadcast industry, and each of the parties hereto shall name the other
as an additional insured under such policies to the extent that their
respective interests may appear and shall provide for notice to the other
party prior to cancellation thereof. Upon request, each party shall
provide the other with certificates evidencing such insurance, and shall
further provide certificates evidencing renewal thereof prior to the
expiration of such policies.
21. Owner's Events of Default. An "Owner's Event of Default" will
occur if:
(a) An Owner fails to provide the use of any Station's transmission
facilities or a material portion of any Station's studio/production
facilities to Broker in accordance with paragraph 2 above for any period
of five (5) or more consecutive days, or for any five (5) or more days
during any period of ten (10) consecutive days;
(b) A failure or impairment of facilities or delay or interruption
in the broadcast of programs, or failure to furnish facilities for
broadcast, described in paragraph 15 above, occurs and (i) an Owner gives
Broker written notice to the effect that Owners elect not to remedy such
failure, impairment, delay or interruption in accordance with paragraph
15 above, or (ii) such failure, impairment, delay or interruption
continues for ninety (90) days and, prior to the ninetieth (90th) day
thereof, no Owner gives Broker written notice to the effect that an Owner
elects to remedy such failure, impairment, delay or interruption in
accordance with paragraph 15 above;
(c) An Owner fails to cure any other breach of this Agreement by
such Owner on or prior to the ninetieth (90th) day after such Owner
receives a written request from Broker to cure such default, if such
default, if not cured, would have a materially adverse effect on Broker's
activities with respect to any Station pursuant to this Agreement
(provided that, so long as such Owner continues to use reasonable efforts
to cure such default, such failure will not constitute an Owner's Event
of Default so long as the continuing existence of such default will not
have a materially adverse effect on Broker's activities with respect to
the Stations pursuant to this Agreement); or
(d) An Owner commits repeated, willful breaches of its obligations
pursuant to this Agreement which, when considered separately, do not
constitute an Owner's Event of Default described in clauses (a) through
(c) above but which, when taken together, materially impair Broker's
ability to conduct its activities with respect to the Stations in
accordance with this Agreement, and such Owner thereafter commits any
such willful breach after having received written notice from Broker to
the effect that, if any such willful breach occurs again after more than
a reasonable cure period after such notice, Broker may declare that an
Owner's Event of Default has occurred pursuant to this sub-paragraph
21(d).
(e) Any Owner ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability
to pay its debts as they become due, files a voluntary petition in
bankruptcy, is adjudicated a bankrupt or an insolvent, files a petition
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar arrangement under any
present or future statute, law or regulation or files an answer admitting
the material allegations of a petition filed against it in any such
proceeding, consents to or acquiesces in the appointment of a trustee,
receiver, or liquidator of it or of any substantial part of its assets or
properties, or if it or its shareholders shall take any action looking to
its dissolution or liquidation.
Notwithstanding the foregoing, no fact or circumstance described in this
paragraph 21 will constitute an Owner's Event of Default if the existence of
such fact or circumstance is proximately caused or contributed to in any
material respect by any material breach by Broker of its obligations under this
Agreement. Any period provided in this paragraph 21 for the cure of any
condition which, if uncured, would constitute an Owner's Event of Default will
be tolled from the time an Owner gives Broker a written notice disputing the
existence of such condition and until the end of any arbitration pursuant to
this Agreement or the Option Agreement or Asset Purchase Agreement concerning
the existence of such condition or until such dispute is otherwise finally
resolved.
22. Broker's Events of Default. A "Broker's Event of Default" occurs if:
(a) Broker fails to make any payment required by paragraph 3 above
and fails to cure such non-payment within thirty (30) days
after written notice from an Owner;
(b) Broker fails to provide programming for broadcast by Station
WFXV for any period of five (5) or more consecutive days, or
for any five (5) or more days during any period of ten (10)
consecutive days, unless any such failure is caused by
conditions or circumstances beyond Broker's control;
(c) Broker fails to cease or cure, as promptly as possible after
Broker receives written request from an Owner, any violation of
applicable law or any rule or regulation which, if not ceased
or cured at such time, would have a materially adverse effect
on any FCC authorization of Mohawk or O'Kane which is essential
to the operation of any of the Stations as they are operated on
the Commencement Date;
(d) Broker commits willful and repeated violations of applicable
law or rules or regulations of a type which are not described
in sub-paragraph 22(c) above if such willful and repeated
violations would have a materially adverse effect on any FCC
authorization of Mohawk or O'Kane which is essential to the
operation of any of the Stations as they are operated on the
Commencement Date, and Broker thereafter commits any such
willful violation after having received written notice from an
Owner to the effect that, if any such willful violation occurs
again after more than a reasonable cure period after such
notice, such Owner may declare that a Broker's Event of Default
has occurred pursuant to this sub-paragraph 22(d);
(e) Broker commits willful and repeated violations of Owners'
written standards for acceptance of programming material and
commercial announcements described in paragraph 9 above (as in
effect from time to time), and Broker thereafter commits any
such willful violation after having received written notice
from an Owner to the effect that, if any such willful violation
occurs again after more than a reasonable cure period after
such notice, such Owner may declare that a Broker's Event of
Default has occurred pursuant to this sub-paragraph 22(e);
(f) Broker fails to cure any other breach of this Agreement by
Broker on or prior to the ninetieth (90th) day after Broker
receives a written request from an Owner to cure such default,
if such default, if not cured, would have a materially adverse
effect on the operation of their respective Stations by Mohawk
or O'Kane if Broker's activities with respect to such Station
pursuant to this Agreement were terminated (provided that, so
long as Broker continues to use reasonable efforts to cure such
default, such failure will not constitute a Broker's Event of
Default so long as the continuing existence of such default
will not have a materially adverse effect on the operation of
such Station by Mohawk or O'Kane if Broker's activities with
respect to such Station pursuant to this Agreement were
terminated); or
(g) Broker commits repeated, willful breaches of its obligations
pursuant to this Agreement which, when considered separately,
do not constitute a Broker's Event of Default described in
clauses (a) through (f) above but which, when taken together,
frustrate Mohawk's or O'Kane's activities with respect to their
respective Stations in accordance with this Agreement, and
Broker thereafter commits any such willful breach after having
received written notice from Mohawk or O'Kane to the effect
that, if any such willful breach occurs again after more than a
reasonable cure period after such notice, Mohawk (with regard
to Station WFXV) or O'Kane (with regard to Station W28AQ,
Station WUPN-LP or Station W53AM) may declare that a Broker's
Event of Default has occurred pursuant to this sub-paragraph
22(g).
(h) Broker ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a
voluntary petition in bankruptcy, is adjudicated a bankrupt or
an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any
present or future statute, law or regulation or files an answer
admitting the material allegations of a petition filed against
it in any such proceeding, consents to or acquiesces in the
appointment of a trustee, receiver, or liquidator of it or of
any substantial part of its assets or properties, or if it or
its shareholders shall take any action looking to its
dissolution or liquidation.
Notwithstanding the foregoing, no fact or circumstance described in this
paragraph 22 will constitute a Broker's Event of Default if the existence of
such fact or circumstance is proximately caused or contributed to in any
material respect by any material breach by any Owner of its obligations under
this Agreement. Any period provided in this paragraph 22 for the cure of any
condition which, if uncured, would constitute a Broker's Event of Default will
be tolled from the time Broker gives Owners a written notice disputing the
existence of such condition and until the end of any arbitration pursuant to
this Agreement, the Option Agreement or the Asset Purchase Agreement concerning
the existence of such condition or until such dispute is otherwise finally
resolved.
23. Termination Upon Order of Governmental Authority. A "Governmental
Termination Event" will occur if any court or federal, state or local
government authority (including the FCC) orders or takes any action which
becomes effective and which requires the termination or material curtailment
of Broker's activities with respect to the Stations pursuant to this Agreement;
provided that such order or action will no longer constitute a Governmental
Termination Event if such action or order is subsequently stayed or ceases to
be effective. If any court or federal, state or local government authority
announces or takes any other action or proposed action which could result in a
Governmental Termination Event, then either Broker or any Owner may seek
administrative or judicial relief therefrom (in which event the other of them
shall cooperate with such effort in any reasonable manner requested) and
consult with such agency and its staff concerning such matters and, in the
event that this Agreement is not terminated, use their best efforts and
negotiate in good faith a modification to this Agreement which would obviate
any such questions as to validity while preserving, to the extent possible, the
intent of the parties and the economic and other benefits of this Agreement,
the Option Agreement and the Asset Purchase Agreement and the portions thereof
the validity of which are called into question. If the FCC designates the
license renewal application of any of the Stations for a hearing as a
consequence of this Agreement or for any other reason, or initiates any
revocation or other proceeding with respect to the authorizations issued to
Mohawk or O'Kane for the operation of the Stations, then Mohawk and/or O'Kane
(as appliable) shall use diligent, reasonable efforts to contest such action
and shall be responsible for its expenses incurred as a consequence of such FCC
proceeding; provided, however, that Broker shall cooperate and comply with any
reasonable request of any Owner to assemble and provide to the FCC information
relating to Broker's performance under this Agreement. In the event of
termination of Broker's activities with respect to any of the Stations pursuant
to this Agreement as a result of any Governmental Termination Event, Owners
shall cooperate reasonably with Broker to the extent permitted to enable Broker
to fulfill advertising or other programming contracts then outstanding.
24. Additional Representations, Warranties and Covenants
A. Mutual Additional Representations, Warranties and Covenants. Each of
Owners and Broker represents that it is legally qualified, and has all
requisite powers and capacity, to enter into this Agreement, and that the
execution, delivery and performance hereof by it shall not constitute a breach
or violation of any agreement, contract or other obligation to which it is
subject or by which it is bound. Each party hereto represents and warrants
that it has taken all necessary corporate and other necessary action to make
this Agreement legally binding on such party, and (in the case of Mohawk, ACME
and Broker) that the individual signing this Agreement on behalf of such party
has been fully authorized and empowered to execute this Agreement on behalf of
such party.
B. Finders. The parties hereto represent and warrant that no broker or
finder has been used in connection with the transactions contemplated by this
Agreement, the Option Agreement and the Asset Purchase Agreement.
C. Owners' Additional Representations, Warranties and Covenants. Owners
make the following further representations, warranties and covenants:
i. Authorizations. Mohawk (as to Station WFXV) and/or O'Kane
(as to Station WUPN-LP, Station W28AQ and Station W53AM) owns
or holds all material licenses and other permits and
authorizations reasonably necessary for the operation of such
Stations (including licenses, permits and authorizations
issued by the FCC), and no Owner (including Owners'
affiliates, principals, employees and agents) will take any
action to impair such licenses, permits and authorizations.
ii. Advanced Television/High Definition Television. If the FCC
gives Mohawk the right to apply for a second Utica, New York
area television channel for Advanced Television ("ATV") or
High Definition Television ("HDTV"), Mohawk will submit and
prosecute a complete, timely application to the FCC for that
purpose, if requested by Broker, provided that Broker shall
agree to reimburse Mohawk for all costs and expenses
occasioned by such filing and prosecution. If the FCC awards
Mohawk such a second Utica, New York area channel, such
channel will be included within this Time Brokerage Agreement
in the same manner, and under the same terms, as Station
WFXV's current broadcast channel.
D. Broker's Additional Representations, Warranties and Covenants. In
carrying out its activities with regard to the Stations pursuant to this
Agreement, Broker shall comply in all material respects with the terms,
provisions and conditions of the Stations' contracts and agreements which are
utilized by Broker.
25. Sale of Stations To Broker. Notwithstanding any other provision of
this Time Brokerage Agreement to the contrary, this Time Brokerage Agreement
shall terminate (except for the indemnification provisions and Section 16 of
this Time Brokerage Agreement, which shall survive any such termination) upon
the Closing as defined in the Option Agreement.
26. Procedures for Termination
A. Upon Broker's Events of Default. At any time when a Broker's Event of
Default is in existence, an Owner may give Broker written notice (an "Owner's
Termination Notice") to the effect that such Owner elects to terminate this
Agreement pursuant to this sub-paragraph 26.A; provided that, if the matter of
whether a Broker's Event of Default has occurred is the subject of a dispute
pursuant to this Agreement, then this Agreement will expire instead on the
sixtieth (60th) day after the Final Determination of the arbitrator (as defined
in paragraph 38.D.) that such Broker's Event of Default occurred.
B. Upon Certain Owner's Events of Default. At any time when an Owner's
Event of Default (other than an Owner's Event of Default described in sub-
paragraph 21(b) above) is in existence, Broker may give Owners written notice
(a "Broker's Termination Notice") to the effect that Broker elects to end the
term of this Agreement pursuant to this sub-paragraph 26.B.; provided that, if
the matter of whether an Owner's Event of Default has occurred is the subject
of a dispute pursuant to this Agreement, then this Agreement will expire
instead on the sixtieth (60th) day after the Final Determination of the
arbitrator (as defined in paragraph 38.D.) that such Owner's Event of Default
occurred.
C. Upon Government Termination. Subject to the termination provisions of
sub-paragraphs 26.A. and 26.B., if a Governmental Termination Event occurs,
then the term of this Agreement will continue until the first to occur of:
(i) the date upon which the activities of Broker and Owners are
required to be ceased, as mandated by the agency or authority
which brought about such Governmental Termination Event (the
"Mandatory Cessation Date"), and
(ii) the Closing (as that term is defined in the Option
Agreement); and
(iii) the expiration or the termination of the Option Agreement in
accordance with its terms.
D. Upon Certain Events. At any time after an Owner's Event of Default
described in sub-paragraph 21(b) has occurred, Broker may give Owners written
notice (also a "Broker's Termination Notice") to the effect that Broker elects
to terminate this Agreement pursuant to this sub-paragraph 26.D.
27. Notices. All notices, demands and requests required or permitted to
be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered to the recipient in person or sent by commercial delivery service or
registered or certified mail, postage prepaid and return receipt requested, (c)
deemed to have been given on the date received by the recipient (if delivered
in person) on the date set forth in the records of the delivery service (if
delivered by commercial delivery service) or on the date of receipt (if
delivered by certified mail) and (d) addressed as follows:
If to Owner(s): Mohawk Valley Broadcasting, Inc.
c/o Fox TV 33
Greenfield Road
Rome, New York 13440
ATTN: Kevin O'Kane, President
and
Craig L. Fox
4853 Manor Hill Drive
Syracuse, New York 13215
with a copy (which shall not constitute notice to any Owner) to:
Bruce Poushter
Suite 1010
500 S. Salina Street
Syracuse, New York 13202
If to Broker:
Sullivan Broadcasting of Utica, Inc.
4431 Dyke Bennett Road
Franklin, Tennessee 37064
ATTN: J. Daniel Sullivan
with a copy (which shall not constitute notice to Broker) to:
David Pulido
Sullivan Broadcasting of Utica, Inc.
18 Newbury Street
Boston, Massachusetts 02116
and
John Kuehn
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
or to any such other or additional persons and addresses as the parties may
from time to time designate in a writing delivered in accordance with this
paragraph 27.
28. Modification and Waiver. No amendment, supplement or modification of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by the party against whom enforcement of any such amendment,
supplement or modification is sought, and then such amendment, supplement or
modification shall be effective only in the specific instance and for the
purpose for which given.
29. Construction. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
30. Headings. The headings in this Agreement are included for ease of
reference only and will not control or affect the meaning or construction of
the provisions of this Agreement.
31. Assignment. This Agreement may not be assigned by any Owner without
the express written approval of Broker; however, this Agreement shall be
assignable by Broker without consent of Owners, and where appropriate in the
context and consistent with this provision, the term "Broker" as used herein
shall mean and include such assignee.
32. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature(s) on each such
counterpart were upon the same instrument. This Agreement shall be effective
as of the date first above written.
33. Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement between the parties with respect to the
subject matter of this Agreement, and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
34. No Partnership or Joint Venture. Nothing in this Agreement shall be
construed to create a partnership or joint venture between any Owner and Broker
or to afford any rights to any third party other than as expressly provided
herein. Neither any Owner nor Broker shall have any authority to create or
assume in the name or on behalf of the other party any obligation, express or
implied, or to act or purport to act as the agent or legally empowered
representative of the other party hereto for any purpose.
35. Severability. Whenever possible each provision of this Agreement
will be interpreted so as to be effective and valid under applicable law.
Subject to the provisions of paragraph 23 above, if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise affecting the remainder or such
provision or the remaining provisions of this Agreement.
36. Legal Effect. This Agreement shall be binding shall inure to the
benefit of the parties hereto, their heirs, executors, personal
representatives, successors and assigns.
37. No Party Deemed Drafter. No party will be deemed the drafter of this
Agreement and if this Agreement is construed by a court of law such court
should not construe this Agreement or any provision against any party as its
drafter.
38. Arbitration.
A. Generally. Broker and Owners agree that the arbitration
procedures described in this paragraph 38 will be the sole and exclusive
method of resolving and remedying claims for money damages (including any
claim for indemnification pursuant to paragraph 20) arising under this
Agreement ("Disputes"). Nothing in this paragraph 38 will prohibit a
party from instituting litigation to enforce any Final Determination, as
defined in sub-paragraph 38.D. below, or availing itself of any remedy
other than money damages. Broker and Owners agree that, except as
otherwise provided in the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time (the "AAA Rules"), the
arbitration procedures described in this paragraph 38 and any Final
Determination 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.
B. Notice of Arbitration. If Broker or any Owner asserts that
there exists a dispute, then such person (the "Disputing Person") will
give the other person a written notice setting forth the nature of the
asserted Dispute. If Broker and such Owner 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 paragraph 38 by giving the other person 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.
C. Selection of Arbitrator. Broker and Owners will attempt to
select a single arbitrator by mutual agreement. If no such arbitrator is
selected prior to the twentieth (20th) business day after the related
Arbitration Notice is given, then an arbitrator who is experienced in
matters of the type which are the subject matter of the Dispute will be
selected in accordance with the AAA Rules.
D. Conduct of Arbitration. The arbitration will be conducted under
the AAA Rules, as modified by any written agreement between Broker and
Owners. 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 Determination") is made or rendered as soon as
practicable, and the parties and arbitrator will use their reasonable
best efforts to reach a Final Determination no later than the sixtieth
day after the arbitrator is selected. Any Final Determination will be
final and binding upon Broker and Owners there will be no appeal from or
reexamination of any Final Determination, except in the case of fraud,
perjury or evident partiality or misconduct by the arbitrator prejudicing
the rights of Broker or an Owner or to correct manifest clerical errors.
E. Enforcement. Broker and Owners agree that a Final Determination
may be enforced in any state or federal court having jurisdiction over
the subject matter of the related Dispute. For purposes or any action or
proceeding instituted with respect to any Final Determination, each of
Broker and Owners irrevocably submits to the jurisdiction of any such
court, irrevocably consents to the service of process by registered mail
or personal service, and irrevocably waives, to the fullest extent
permitted by law, any objection which it may have as to personal
jurisdiction, the laying of venue, and any claim that such action or
proceeding has been brought in an inconvenient forum.
F. Expenses. The prevailing party in any such arbitration
proceeding in connection with this Agreement also will be entitled to
recover from the other party its reasonable attorneys' fees and
disbursements and the non-prevailing party also will be required to pay
all other costs and expenses associated with the arbitration or audit
(including the fees and expenses of any such arbitrator or Independent
Accountant). As part of the Final Determination the arbitrator may
designate the prevailing party. In the event that the arbitrator is
unable to determine that a party has prevailed in the arbitration or
audit, such costs and expenses shall be equitably allocated by the
arbitrator upon the basis of the outcome of the arbitration or audit.
If the arbitrator is unable to allocate such fees on this basis as a
result of the outcome, then the costs of arbitration or audit shall be
paid equally by the parties and each party shall pay its own expenses.
Except as provided in this sub-paragraph 38.F., each party to this
Agreement will bear its own costs and expenses (including legal fees and
disbursements) in connection with any such proceeding or submission.
39. Liquidated Damages. Notwithstanding any other provision of this
Agreement or any other agreement referred to herein, if Owners (or any Owner)
refuse(s) to make available eighty percent (80%) or more of the Stations'
broadcast time in any calendar week, and continues to refuse to make available
eighty percent (80%) or more of the Stations' broadcast time for more than
forty-eight (48) hours after notice to Owners and their attorney as specified
in paragraph 27, then Owners shall be liable to Broker for Two Hundred Thousand
Dollars ($200,000) in liquidated damages (and not as a penalty), it being
understood and acknowledged that the subject matter of this Agreement is unique
and that it would be impracticable or extremely difficult to fix the actual
damage that Broker would incur if any Owner prevents Broker from utilizing the
Stations' facilities as set both in this Agreement; provided, however, no Owner
shall be liable for such liquidated damages if the refusal to make available
air time is due to compliance with FCC rules or policies.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date above written.
MOHAWK VALLEY BROADCASTING, INC.
("Mohawk")
By:
ACME T.V. CORPORATION
("Acme)
By:
KEVIN O'KANE
By:
SULLIVAN BROADCASTING OF
UTICA, INC.
("Broker")
By:
Acknowledged and Agreed to:
______________________________
Craig Fox
______________________________
John Bunkfeldt
Exhibit 10.2
TIME BROKERAGE AGREEMENT
By and Between
CENTRAL TENNESSEE BROADCASTING CORPORATION
and
SULLIVAN BROADCASTING OF NASHVILLE, INC.
TABLE OF CONTENTS
Page
TABLE OF DEFINITIONS................................................ iv
1. Overall Purpose and Term; Renewal Option........................ 2
2. Facilities...................................................... 4
3. Payment......................................................... 4
4. Responsibilities................................................ 5
A. Broker's Responsibilities................................... 5
B. CTBC's Responsibilities..................................... 6
C. Additional Responsibilities................................. 7
D. Renewal, Modification and Cancellation
of Contracts............................................... 8
5. Revenues and Deposits........................................... 8
A. Revenues from Post-Commencement Date Broadcast Time Sales
and Uses of Station's Studio/Production Facilities......... 8
B. Bank Accounts for Revenues from Broker's Activities/Payments
By Broker from Such Revenues............................... 9
C. Receivables of CTBC......................................... 9
D. Compromise of Certain Obligations........................... 13
6. Station Facilites............................................... 14
A. Operation of Station........................................ 14
B. Interruption of Normal Operations........................... 15
C. Studio Location............................................. 15
7. Handling of Station Communications.............................. 15
8. CTBC's Compliance With FCC Rules and Policies................... 15
9. Programming and the Public Interest............................. 16
10. Special Programs................................................ 18
11. Station Identification.......................................... 19
12. Political Advertising........................................... 19
13. Children's Programming.......................................... 20
14. CTBC's Responsibility For Compliance with FCC Technical Rules... 21
15. Force Majeure................................................... 21
16. Trade Secrets and Proprietary Information....................... 22
17. Payola and Conflicts of Interest................................ 23
18. Broker's Compliance with the Law................................ 23
19. Sub-Brokering................................................... 24
20. Indemnification................................................. 24
A. Broker's Indemnification of CTBC............................. 24
B. Thompson's Indemnification of Broker........................ 25
C. Procedure of Indemnification................................ 25
D. Insurance................................................... 29
21. CTBC's Events of Default........................................ 29
22. Broker's Events of Defaults..................................... 32
23. Termination Upon Order of Governmental Authority................ 34
24. Additional Representations, Warranties and Covenants............ 35
A. Mutual Additional Representations, Warranties
and Covenants............................................... 35
B. Finders..................................................... 36
C. CTBC's Additional Representations, Warranties
and Covenants............................................... 36
D. Broker's Additional Representations, Warranties
and Covenants............................................... 37
25. [Reserved]...................................................... 37
26. Procedures for Termination...................................... 37
A. Upon Broker's Events of Default............................. 37
B. Upon Certain CTBC's Events of Default....................... 38
C. Upon Government Termination................................. 38
D. Upon Certain Events......................................... 38
27. Notices......................................................... 38
28. Modification and Waiver......................................... 40
29. Construction.................................................... 40
30. Headings........................................................ 40
31. Assignment...................................................... 40
32. Counterparts.................................................... 40
33. Entire Agreement................................................ 41
34. No Partnership or Joint Venture Created......................... 41
35. Severability.................................................... 41
36. Legal Effect.................................................... 41
37. No Party Deemed Drafter......................................... 41
38. Arbitration..................................................... 42
A. Generally................................................... 42
B. Notice of Arbitration....................................... 42
C. Selection of Arbitrator ................................... 43
D. Conduct of Arbitration...................................... 43
E. Enforcement................................................. 43
F. Expenses.................................................... 44
39. Liquidated Damages.............................................. 45
TABLE OF DEFINITIONS
Term Page Defined
AAA Rules........................................................... 42
Additional Local Programming........................................ 17
Additional Syndicated Programming................................... 17
Arbitration Notice.................................................. 42
ATV................................................................. 36
Broker.............................................................. 1
Broker's Event of Default........................................... 32
Claimant............................................................ 25
Communications Act.................................................. 1
Consideration....................................................... 23
CTBC................................................................ 1
CTBC's Event of Default............................................. 29
CTBC's Termination Notice........................................... 37
Disputes............................................................ 42
Disputing Person.................................................... 42
FCC................................................................. 1
Final Determination................................................. 43
Governmental Termination Event...................................... 34
HDTV................................................................ 36
Indemnifying Party.................................................. 25
Losses.............................................................. 24
M.T. Communications, Inc. and Michael P. Thompson ("Thompson")...... 2
Option Agreement.................................................... 2
Station............................................................. 1
Station Bank Account(s)............................................. 9
TIME BROKERAGE AGREEMENT
THIS TIME BROKERAGE AGREEMENT is made this ___ of ___________, 1996, by
and between Central Tennessee Broadcasting Corporation, Inc., a Tennessee
corporation ("CTBC"), and Sullivan Broadcasting of Nashville, Inc., a
Tennessee corporation ("Broker").
WHEREAS, CTBC is the owner and licensee of television broadcast station
WXMT, Nashville, Tennessee (the "Station"), pursuant to authorization(s)
issued by the Federal Communications Commission ("FCC"); and
WHEREAS, the parties hereto have carefully considered the Communications
Act of 1934, as amended (the "Communications Act") and the FCC's time
brokerage policies adopted pursuant thereto, and intend that this Agreement in
all respects comply with such Communications Act and policies; and
WHEREAS, CTBC desires to enter into this Agreement to provide a regular
source of diverse programming and income to sustain the operations of the
Station; and
WHEREAS, Broker desires to provide an over-the-air program service to
the Nashville, Tennessee area using the facilities of the Station; and
WHEREAS, CTBC agrees to provide time exclusively to Broker on terms and
conditions that conform to policies of the Station and the FCC for time
brokerage arrangements and that are as set forth herein; and
WHEREAS, Broker agrees to utilize the Station's transmitting facilities
solely to broadcast programming of Broker's selection that conforms with the
policies of CTBC and with all rules, regulations and policies of the FCC, and
as set forth herein; and
WHEREAS, CTBC maintains, and shall continue to maintain during the term
of this Agreement, ultimate control over the Station's facilities including
control over the Station's finances, personnel and programming; and
WHEREAS, on June 30, 1995, CTBC, along with M.T. Communications, Inc.
and Michael P. Thompson, ("Thompson") entered into an Option Agreement with
ABRY Broadcast Partners II, L.P. ("ABRY") and A-3 Holdings, Inc. ("A-3"),
granting to ABRY, A-3 and/or their respective assignees an option to acquire
certain of the assets used in connection with the operation of the Station,
and to obtain the assignment of the Station's FCC licenses to ABRY or its
assignee; and
WHEREAS, on February , 1996, Sullivan Broadcasting Company, Inc., as
assignee of ABRY and A-3, entered into an Amended and Restated Option
Agreement (the "Option Agreement") with CTBC, M.T. Communications, Inc. and
Michael P. Thompson;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises set forth herein, and for other good and valuable consideration, the
sufficiency of which CTBC and Broker hereby acknowledge, CTBC and Broker,
intending to be bound legally, hereby agree as follows:
1. Overall Purpose and Term; Renewal Option. In accordance with the
terms and limitations set forth herein: (a) Broker shall program the Station
(using programming acquired by CTBC and/or Broker), promote the Station and
its programming, sell commercial and other time on the Station and bill for
and collect the payments for time sales on the Station; and (b) CTBC will
maintain the Station's transmitting and microwave relay facilities, and make
said facilities available to Broker. Subject to the terms of this Agreement,
each party hereby warrants and covenants that it will fulfill said
obligations, and its other obligations specified herein, to the fullest extent
permitted by law (including the FCC's rules and policies) in a diligent,
reasonable manner.
Broker shall begin its time brokerage activities with regard to the
Station pursuant to this Agreement at 12:01 a.m., Nashville, Tennessee, time,
on the day following the date of this Agreement (said date and time being
referred to as the "Commencement Date" and the "Commencement Time,"
respectively). The term of Broker's time brokerage activities pursuant to
this Agreement (the "Brokerage Term") will continue until 11:59 p.m.,
Nashville, Tennessee, time, on June 30, 1999; provided that, at CTBC's option
(exercised by prior written notice to Broker not later than April 1, 1999),
the Brokerage Term will continue beyond June 30, 1999, and Broker will
continue to fulfill its obligations and responsibilities, and may continue to
exercise its rights, under this Agreement, until 11:59 p.m., Nashville,
Tennessee, time, on December 31, 1999. If the Brokerage Term ends on June 30,
1999 as provided in the preceding sentence, then after June 30, 1999 Broker
will use reasonable efforts, at CTBC's expense, to permit CTBC to continue to
air on the Station (at CTBC's cost) programming which is being provided to the
Station by Broker as of June 30,1999, until the end of the term of the related
programming contract (or, if earlier, December 31, 1999).
2. Facilities. CTBC shall make the Station's television broadcasting
transmission facilities available to Broker for broadcast on the Station of
programs selected by Broker (including programs acquired by CTBC), and
advertising/commercial announcements sold by Broker, which may originate from
the Station's studios, Broker's studios or from other sources contracted for
by Broker. In addition, CTBC will make available to Broker, at no cost,
during the term of this Agreement, exclusive use of all of CTBC's programming
and (other than CTBC's own use for the Station pursuant to this Agreement) of
all of CTBC's studio and production facilities, for Broker's use in its
activities with regard to the Station pursuant to this Agreement and for other
purposes as Broker may desire. CTBC may use the Station's studio and
production facilities, during the term of this Agreement, for Station public
affairs programs and public service announcements, consistent with paragraphs
9 and 10 below.
3. Payment. As consideration for CTBC permitting Broker to exercise the
rights granted to Broker with regard to the Station pursuant to this
Agreement, Broker shall pay CTBC as follows:
Beginning as of February 1, 1996, the amount equal to CTBC's monthly
operating expenses for the Station, in accordance with Exhibit D attached
hereto, paid as follows: For the month of February, 1996, CTBC shall provide
Broker, concurrent with the execution of this Agreement, with a list of
expenses, including those already paid in February and those to be paid in
February; and Broker shall pay the total of those expenses to CTBC within five
(5) business days of the execution of this Agreement. For the month of March,
1996, CTBC shall provide Broker, by February 26, 1996, with a list of expenses
for March 1996; and Broker shall pay the total of those expenses to CTBC by
March 1, 1996. For subsequent months, CTBC shall provide Broker, by the
fifteenth (15th) day of each month (beginning on March 15, 1996), with
evidence of payment of all of the prior month's expenses for which CTBC
previously has requested reimbursement and for which Broker has reimbursed
CTBC, and a list of CTBC's anticipated expense payments for the next month;
and Broker shall pay CTBC, prior to first day of said next month, the total
anticipated expenses for said next month; however, for extraordinary and/or
unanticipated expenses or for capital improvements, Broker shall have thirty
(30) days to pay CTBC, unless Broker has previously agreed to reimburse CTBC
for such expense.
4. Responsibilities
A. Broker's Responsibilities
i. Broker shall employ and be responsible for paying the
salaries, commissions, payroll taxes, insurance and all
other costs for all personnel (other than CTBC's
employees) involved in the acquisition, compilation,
production, broadcast and sale of the Station's
programming and commercial messages (other than
programming and commercial messages originated by
CTBC), including but not limited to administrative,
internal and external sales, traffic, billing,
collections, promotion, production, outside talent and
master control personnel.
ii. Broker also shall be responsible for paying all
promotional expenses in connection with the Station's
programming (but excluding any such expenses incurred
by CTBC).
iii. Broker's personnel shall operate and maintain CTBC's
studio, production and master control facilities,
including maintaining the Station's program and
operations logs, under the supervision of the Station's
General Manager and Chief Operator.
iv. Broker shall be responsible for its own telephone
systems and local and long-distance telephone service
and fax costs.
B. CTBC's Responsibilities
CTBC shall be responsible for and shall pay all of CTBC's own
expenses of operating and maintaining the Station, including, but not
limited to:
i. All lease obligations in connection with property
leased to CTBC;
ii. Utility bills for utility services at both the
Station's main studio/office location and its
tower/transmitter site(s);
iii. Telephone system maintenance costs and local exchange
and long distance telephone service costs for CTBC's
telephone system and usage at the Station's main
studio/office location and at the Station's
tower/transmitter site(s);
iv. Salaries, payroll taxes, insurance and other related
costs of all personnel employed by CTBC; and
v. Costs of engineering and technical personnel necessary
to assure compliance with the FCC's rules and policies
and maintenance and repair of the Station's
transmitting and microwave relay facilities (including
all equipment at the Station's tower/transmitter site).
C. Additional Responsibilities
i. Broker shall be fully responsible for the supervision
and direction of its employees, and CTBC shall be fully
responsible for the supervision and direction of its
employees.
ii. Broker and CTBC shall pay their respective expenses
with regard to the Station and in no event will any
such payable remain unpaid for more than ninety (90)
days unless such payable is being disputed in good
faith.
iii. Except as otherwise mutually agreed, as between CTBC
and Broker, CTBC is and will continue to be responsible
for all obligations of CTBC pursuant to any contracts
of employment of Station employees and any contracts
with labor unions to which CTBC is a party.
D. Renewal, Modification and Cancellation of Contracts.
CTBC will comply with all reasonable requests of Broker with
respect to the renewal and cancellation of contracts (in accordance with
their terms) or the entry into or the modification of contracts which
affect Broker's time brokerage activities with regard to the Station
pursuant to this Agreement.
5. Revenues and Deposits
A. Revenues from Post-Commencement Date Broadcast Time Sales and Uses of
Station's Studio/Production Facilities. Broker shall have the exclusive right
to sell, either directly or indirectly through sales representatives, and
shall be solely responsible for billing and collecting payments for, all
programs and commercials aired on the Station, at any time, and production
fees for uses of the Station's studio/production facilities, on or after the
Commencement Date until the termination of this Agreement. Broker may
contract and bill in its own name for the sale of broadcast time on the
Station and uses of the Station's studio/production facilities on and after
Commencement Date until the termination of this Agreement. Subject to
existing agreements relating to the Station and provided to Broker, Broker
also shall have the right to negotiate for, and to receive, for deposit
pursuant to sub-paragraph 5.B. below, all compensation due to the Station from
cable television systems pursuant to the "retransmission consent" provisions
of the Cable Television Consumer Protection and Competition Act of 1992.
B. Bank Accounts for Revenues from Broker's Activities/Payments By
Broker from Such Revenues. Broker may deposit any sums it receives pursuant to
sub-paragraph 5.A. above and sub-paragraph 5.C. below into a bank account (or
accounts) established by Broker, in Broker's name, for this purpose (the
"Station Bank Account(s)"), and the funds in such Station Bank Account(s)
shall be the property of Broker. Broker shall be authorized to endorse
payments received in names other than Broker's (e.g., "WXMT" or "WXMT-TV") in
order to deposit such payments into the Station Bank Account(s).
C. Receivables of CTBC
(i) CTBC's and Thompson's Obligations. CTBC hereby assigns to
Broker all accounts receivable of CTBC (whether billed or unbilled)
arising out of time provided on the Station on or prior to the date of
this Agreement which have not been collected by CTBC. Commencing on the
date of this Agreement CTBC will cease its efforts, and throughout the
term of this Agreement CTBC will make no effort to collect any such
accounts receivable. CTBC will turn over to Broker all proceeds of
collections received by CTBC on or after the date of this Agreement from
any Person which is the account debtor of any such account receivable,
promptly after receipt by CTBC. In addition, promptly after the date of
this Agreement CTBC will turn over to Broker in cash an amount equal to
all proceeds of collections received by CTBC after January 31, 1996
prior to the date of this Agreement; provided that CTBC may effect such
turn over by instructing Broker to withhold such amount from the
payments to be made to CTBC pursuant to paragraph 3 above in respect of
CTBC's February, 1996 operating expenses (in which case Broker will be
deemed to have received such amount from CTBC for application pursuant
to paragraph 5.C(iii)). All such proceeds will be applied and paid by
Broker in the manner described in this paragraph 5.C. Thompson will
assist Broker as Broker may reasonably request in Broker's efforts to
collect such accounts receivable as described in subparagraph 5.C(ii)
below.
(ii) Collection by Broker. Commencing on the date of this
Agreement, Broker will use commercially reasonable efforts in accordance
with the Broker's normal business practices and business objectives (but
not including resorting to or threatening litigation) to collect all
amounts owed to CTBC in respect of the outstanding accounts receivable
described in subparagraph 5.C(i) above; provided that Broker will not be
obligated to provide, or request that CTBC provide, any "make-good" or
"bonus-weight" or other time on the Station in order to further the
collection of any such account receivable.
(iii) Application to Collections to Outstanding Accounts.
Collections from any Person which are turned over to Broker by CTBC or
are otherwise received by Broker will be applied to billings of such
Person by CTBC and Broker for time provided on the Station in the
chronological order of CTBC's and Broker's billings to such account
debtor (i.e., to the oldest unpaid billing first) unless (i) such
account debtor disputes in writing its obligation to pay the billing to
which such payment would otherwise be applied, (ii) such account 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 not be reasonable to conclude that such account debtor
does not intend such payment to be applied in another, specified manner.
(iv) Collections on Post-2/1/96, Pre-Commencement Date,
Receivables. Collections applied in accordance with subparagraph
5.C(iii) above to accounts receivable of CTBC arising out of time
provided on the Station from or after 12:01 a.m., Nashville, Tennessee,
time, on February 1, 1996 will be retained by Broker to offset amounts
paid or to be paid by Broker pursuant to paragraph 3.
(v) Collections on Adjustment Time Receivables. Collections
applied in accordance with subparagraph 5.C(iii) above to Adjustment
Time Receivables (as that term is defined in the Option Agreement) will
be paid or retained by Broker as follows:
(a) first, such collections will be paid by Broker (on
CTBC's behalf) to ABRY until the aggregate amount of
$443,395 has been paid pursuant to this subparagraph
5(C)(v)(a), and such payments will be applied by ABRY to
the payment of the $443,395 in interest accrued as of
January 31, 1996 in respect of loans (other than the so-
called "Third Draw") previously made by ABRY to CTBC;
(b) second, if the amount of the Current Obligations (as
that term is defined in the Option Agreement) exceeds
$491,944, then Broker will retain for its own account
the amount of such excess (reduced by the aggregate
amount previously retained by Broker pursuant to this
subparagraph 5.C(v)(b); and
(c) third, of the amount of such collections which are not
paid to ABRY or retained by Broker pursuant to
subparagraphs 5.C(v)(a) and (b) above: (1) Broker will
retain one-half (1/2) for its own account, and (2) of
the remaining one-half (1/2), the first $167,427 will be
paid to CTBC, and any amount in excess of $167,427 will
be paid to Thompson (as compensation for Thompson
agreeing to be available, as an independent contractor,
to provide the assistance described in the final
sentence of subparagraph 5.C(i) above).
(vi) Report to CTBC. Not later than the twentieth (20th business
day of each month, commencing with March, 1996, Broker will deliver to
CTBC a written report setting forth in reasonable detail: (a) the
amount of collections (if any) turned over to Broker by CTBC or
otherwise received by Broker during the preceding month from any Person
who is the account debtor of any account receivable of CTBC which arose
out of time provided on the Station on or prior to the Commencement Date
and which was not paid in full prior to the beginning of such preceding
month, (b) the application of such collections in accordance with
subparagraph 5.C(iii) above, and (c) the amount(s) of such collections
to be paid or retained by Broker in accordance with subparagraph 5.C(v)
above. Payment in full of any such amount which is payable to Thompson
pursuant to subparagraph 5.C(v)(c) above will accompany such report.
D. Compromise of Certain Obligations. The attached Exhibit __ describes
certain obligations of CTBC which Broker and CTBC believe Broker may be able
to settle on CTBC's behalf for less than the face amount thereof (the
"Disputed Obligations"). From and after the Commencement Date, on CTBC's
behalf, Broker will use reasonable efforts consistent with Broker's business
practices and objectives (but not including resorting to or threatening
litigation) to negotiate settlements of such obligations which will enable
CTBC to settle such obligations for less than their respective face amounts
and thereupon obtain a release in respect of the remaining amount, and
Thompson will assist Broker with such efforts, as Broker may reasonably
request. Upon the settlement of any Disputed Obligation for an amount which is
less than the face amount specified on Exhibit __ and the release of CTBC from
the excess (the "Discount Amount") of such face amount and the settlement
amount, CTBC will pay to Broker an amount equal to the Discount Amount. Upon
receiving such payment, Broker will pay Thompson one-half (1/2) of the
Discount Amount paid to Broker, as compensation for Thompson agreeing to be
available, as an independent contractor, to provide the assistance described
in the second sentence of this subparagraph 5.D. Broker will retain the
remainder of such Discount Amount for Broker's own account.
6. Station Facilities
A. Operation of Station. CTBC represents that the Station will be
operated by CTBC throughout the term of this Agreement in all material
respects in accordance with the authorizations issued to it by the FCC
and all applicable FCC rules, regulations and policies. As of the
Commencement Date, CTBC shall make the Station available to Broker for
program transmissions, at least at ninety five percent (95%) of the
Station's authorized effective radiated power, for one hundred forty
(140) hours per week, Sunday through Saturday, from 6:00 a.m. to 2:00
a.m. Nashville time, except for downtime occasioned by required
maintenance and other interruptions contemplated by sub-paragraph 6.B.
below and paragraph 15 of this Agreement. Any routine or non-emergency
maintenance work affecting operation of the Station at full power shall
be scheduled with at least forty-eight (48) hours prior notice to
Broker, and shall not take place during a rating period, and to the
extent possible CTBC shall cause such maintenance work to be performed
between the hours of 1:00 AM and 6:00 AM Nashville time; written
approval for such maintenance work from either Dan Sullivan or David
Pulido, and Broker's Nashville General Manager shall suffice as CTBC's
compliance with this sentence.
B. Interruption of Normal Operations. If the Station suffers any
loss or damage of any nature to its transmission or studio facilities
which results in the interruption of service or the inability of the
Station to operate with its maximum authorized facilities, CTBC shall
immediately notify Broker of such loss or damage and CTBC shall
undertake, subject to Broker's prior consent, such consent not to be
unreasonably withheld and to include Broker's agreement to reimburse
CTBC (to the extent CTBC is not reimbursed on indemnified by insurance
proceeds or otherwise), such repairs as are necessary to restore full-
time operation of the Station with its maximum authorized facilities as
expeditiously as possible following the occurrence of any such loss or
damage. If CTBC is unable to or does not commence such repairs as soon
as possible, Broker may do so on CTBC's behalf.
C. Studio Location. CTBC shall maintain a main studio facility for
the Station, within the Station's principal community contour, and shall
staff the Station consistent with the FCC's rules and policies.
7. Handling of Station Communications. CTBC shall receive and handle
mail, faxes, and telephone calls in connection with CTBC's operation of the
Station.
8. CTBC's Compliance With FCC Rules and Policies. CTBC shall comply in
all material respects with all FCC rules and policies applicable to its
operation of the Station. Without limiting the foregoing sentence, CTBC's
obligations shall include ascertaining the needs and interests of the
Station's service area, maintaining the Station's political broadcasting and
public inspection files and the Station's maintenance logs, meeting equal
employment opportunity requirements with regard to CTBC's employees, preparing
the Station's quarterly issues/programs lists and making all required FCC
filings.
9. Programming and the Public Interest. The programming selected by
Broker shall consist of such materials as are determined by Broker to be
appropriate and/or in the public interest including, without limitation,
public affairs programming, public service announcements, entertainment, news,
weather reports, sports, promotional material, commercial material and
advertising. Without limiting the foregoing sentence, Broker will program at
least a total of one and one-half hours per week of news, public affairs, or
other non-sports, non-entertainment programming, between the hours of 6:00 AM
and 12:00 midnight Nashville time.
Following the commencement of Broker programming on the Station,
Broker's management personnel as designated by Broker will meet regularly with
CTBC's Station Manager in order to facilitate CTBC's oversight over Broker's
activities at the Station. At such meetings, CTBC will provide Broker with
the results of CTBC's ongoing efforts to ascertain the problems, needs and
interests of the Station's service area, so that the programming and public
service announcements selected and/or scheduled by Broker will be responsive
thereto. In the event CTBC determines that additional attention should be
directed to particular community needs, Broker will cooperate to assure that
the Station's programming serves those needs. In the event CTBC determines
that additional or alternative programming must be aired over the Station in
order to adequately serve viewers' problems, needs and interests, Broker will
cooperate with CTBC in producing or obtaining up to one hour weekly of such
programming using the appropriate facilities of the Station and staff of
Broker. If CTBC acquires syndicated programming ("Additional Syndicated
Programming") or if CTBC uses the Station's staff for the production of local
programs in addition to the informational and public affairs programming
described above in this paragraph 9 ("Additional Local Programming") and in
addition to the one hour per week specified in the immediately preceding
sentence, then all expenses for such additional programming (including fees to
Broker for use of Broker's facilities, in accordance with a schedule adopted
by Broker) will be paid by CTBC and will not be included in the calculation of
payments due CTBC under this Agreement. Such programs will be aired at a
mutually agreeable time between 6:00 AM and 12:00 midnight Nashville time.
Broker shall be entitled to any and all revenues received from Station time
sales of or during any such programs.
Broker shall provide CTBC with all documents it receives which are
required to be placed in the Station's political or public inspection files.
Broker shall, upon reasonable request by CTBC, provide CTBC with information
with respect to programs and public service announcements broadcast on the
Station which are responsive to the problems, needs and issues facing the
residents of the Station's service area, and Broker's programming for
children, so as to assist CTBC in the preparation of required programming
reports, and will assist CTBC upon request in compiling such other information
which is reasonably necessary to enable CTBC to prepare other records and
reports required by the FCC or other government agencies.
CTBC shall have the full and unrestricted right to reject, delete and
not broadcast any material contained in any part of the programming selected
and/or scheduled by Broker which CTBC in good faith determines is unsuitable
for broadcast or the broadcast of which CTBC in good faith concludes would be
contrary to law or the public interest. CTBC shall retain ultimate control
over the Station's policies and standards, and, in that regard, shall adopt
written standards, generally in accordance with applicable industry standards,
initially in the same form and substance as Exhibit A attached hereto, for the
acceptance of programming material and commercial announcements. CTBC retains
the right to modify such standards to conform to applicable industry standards
or to meet specific FCC rules and policies and to take any other actions
necessary for compliance with federal, state and local laws, rules and
regulations. Broker hereby covenants, warrants and represents that with
regard to the Station it will, at all times during the term of this Agreement,
comply in all material respects with such standards for acceptance of
programming material and commercial announcements.
10. Special Programs. CTBC reserves the right, in its discretion, to
preempt Broker's programs to broadcast special programs on occasion concerning
issues or events of local, regional or national importance in the event that
Broker does not broadcast same on its own initiative; however, in all such
cases, CTBC will use its best efforts to give Broker reasonable notice of its
intention to preempt programs scheduled by Broker. Broker shall be entitled
to any and all revenues received from Station time sales of or during any such
programs.
11. Station Identification. CTBC will be responsible for the proper
broadcast of FCC-required station identification announcements; however,
Broker, while conducting its activities with regard to the Station pursuant to
this Agreement, shall broadcast all required station identification
announcements with respect to the Station in full compliance with FCC rules
and policies.
12. Political Advertising. CTBC will be responsible for compliance with
the political broadcasting requirements of the Communications Act and the
FCC's rules and policies promulgated thereunder. Broker, while conducting its
activities with regard to the Station pursuant to this Agreement, will comply
with said political broadcasting requirements, rules and policies. Broker
promptly shall supply to CTBC such information as may be reasonably necessary
to permit CTBC to comply with the lowest unit charge requirements of Section
315 of the Communications Act. To the extent that CTBC believes necessary,
Broker shall release to CTBC advertising availabilities and program time as
required by the FCC's rules and policies to permit CTBC to comply with the
reasonable access provisions of Section 312(a)(7) of the Communications Act
and the equal opportunities provision of Section 315 of the Communications Act
and the rules and policies of the FCC promulgated thereunder; provided,
however, that revenues realized by CTBC as a result of any such release of
advertising and programming time shall promptly be remitted to Broker.
13. Children's Programming. CTBC will be responsible for insuring the
Station's compliance with the Children's Television Act of 1990 [47 U.S.C.
303a and 303b], and the rules and policies of the FCC promulgated thereunder,
including ensuring that the Station complies with the commercial limits
established therein and serves the educational and informational needs of
children. Broker, while conducting its activities with regard to the Station
pursuant to this Agreement, will comply with said Children's Television Act
and FCC rules and policies by presenting a reasonable amount of children's
programming, including educational/informational programming, and by observing
the limitations on advertising. In connection therewith, Broker shall be
responsible for preparing all necessary reports and certifications and
delivering the same to CTBC for placement in the Station's public inspection
file. Such reports and certifications shall include, without limitation, the
following: (a) quarterly reports on children's programming pursuant to
Section 73.3526(a)(8)(iii) of the FCC's rules; and (b) certificates with
respect to compliance with advertising limits in children's programs pursuant
to Section 73.3526(a)(8)(ii) of the FCC's rules. Such advertising
certification shall be in the form of the certificate attached hereto as
Exhibit B. In completing each quarterly certificate in the form attached
hereto as Exhibit B, Broker shall list the titles of all children's programs
carried in the past quarter in which the advertising limits apply, both local
and network, list all program segments wherein the allowed commercial limits
were exceeded, and provide a separate memo explaining why any excesses
occurred. In carrying out its obligations with respect to children's
programming, Broker shall further maintain records with respect to commercial
matter in children's programming either in the form of logs of programs
reflecting the commercial time, tapes of the programs, lists of commercial
minutes aired in identified children's programs, or appropriate certificates
from networks and syndicators with respect to compliance with the FCC's
requirements regarding commercial limits.
14. CTBC's Responsibility For Compliance with FCC Technical Rules. CTBC
shall retain, on a full-time or part-time basis, a qualified Chief Engineer
who shall be responsible for maintaining the Station's transmission
facilities. CTBC shall retain a Chief Operator, as that term is defined by
the rules and regulations of the FCC (who may also hold the position of Chief
Engineer), who shall be responsible for ensuring compliance by the Station
with the technical operating and reporting requirements established by the
FCC.
15. Force Majeure. CTBC shall carry standard property and casualty
insurance for the property and equipment it owns. If any failure or
impairment of facilities 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, occurs due to causes beyond the control of CTBC, then such
failure, impairment, delay or interruption, by itself, shall not constitute a
breach of or an event of default under this Agreement and CTBC will not be
liable to Broker for any such failure, impairment, delay or interruption so
long as (if CTBC elects to remedy such failure, impairment, delay or
interruption) CTBC undertakes and continues reasonable efforts to remedy any
such failure, impairment, delay or interruption. Promptly thereafter, if it
elects to do so by written notice to Broker, CTBC will obtain any applicable
insurance proceeds and apply such proceeds to the cost of remedying such
failure, impairment, delay or interruption; provided that, if CTBC determines
that it will not do so, CTBC will give Broker prompt written notice of such
determination. If CTBC elects not to remedy such failure, impairment, delay
or interruption (or does not elect to do so prior to the ninetieth (90th) day
after such failure, impairment, delay or interruption occurs), then Broker may
elect to obtain such insurance proceeds and effect such remedy by giving CTBC
written notice to that effect.
16. Trade Secrets and Proprietary Information. In the event that: (a)
any trade secrets or other proprietary information of Broker in connection
with this Agreement become known to CTBC, and (b) such trade secrets and/or
proprietary information are not otherwise available in the public domain or
known publicly, CTBC agrees to maintain the confidentiality of such trade
secrets and/or proprietary information and not to use or disclose any such
trade secrets and/or proprietary information without the prior written consent
of Broker (except as required by law, rule or regulation, or by order of any
government agency or court).
The provisions of this paragraph 16 shall continue in effect for two (2)
years after the termination of this Agreement.
17. Payola and Conflicts of Interest. Broker agrees not to, and to use
reasonable efforts to cause its employees who have the ability to cause the
broadcast of programs and/or commercial matter on the Station not to, accept
any consideration, compensation or gift or gratuity of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, material, supplies or other merchandise, services or labor
(collectively, "Consideration"), whether or not pursuant to written contracts
or agreements between Broker and merchants or advertisers, in consideration
for the broadcast of any matter on the Station unless the payor is identified,
in the broadcast for which Consideration was provided, as having paid for or
furnished such Consideration, in accordance with Sections 317 and 507 of the
Communications Act [47 U.S.C. [section] 317 and 508] and the FCC's rules and
policies. Broker agrees to execute, and, as a condition of each such
employee's employment, to cause each of Broker's employees to execute, at
least once every calendar year, a payola/conflict of interest affidavit in the
form attached hereto as Exhibit C, and Broker agrees to deliver the originals
of all such affidavits to CTBC as expeditiously as possible following their
execution.
18. Broker's Compliance with Law. Broker agrees that, throughout the
term of this Agreement, Broker will comply with all laws, rules, regulations
and policies applicable to the functions performed by it in connection with
the Station, including, but not limited to, meeting equal employment
opportunity requirements with respect to Broker's employees performing duties
in connection with the Station.
19. Sub-Brokering. Broker may sell time during discrete time periods on
the Station to other parties who in turn may sell advertising time to others.
Furthermore, nothing in this Agreement shall be interpreted as prohibiting
Broker from arranging for the broadcast on the Station of barter programming,
as that term is commonly used in the television broadcast syndicated program
business.
20. Indemnification
A. Broker's Indemnification of CTBC. Other than with respect to
matters described in paragraph 21 below, Broker will indemnify and hold
CTBC, Michael P. Thompson, and CTBC's employees, agents and contractors
harmless, including but not limited to reasonable attorney's fees, from
and against all liability, claims, damages and causes of action
("Losses") arising out of or resulting from acts or omissions of Broker
which constitute: (a) libel and slander to the extent not covered by
insurance maintained by Broker or CTBC; (b) infringement of trade marks,
service marks or trade names to the extent not covered by insurance
maintained by Broker or CTBC; (c) violations of law, rules, regulations,
or orders (including the FCC's rules and policies); (d) invasion of
rights of privacy or infringement of copyrights or other proprietary
rights; or (e) breaches of this Agreement. Broker's obligation to
indemnify and hold CTBC and CTBC's employees, agents and contractors
harmless against the Losses specified above shall survive any
termination of this Agreement until the expiration of all applicable
statutes of limitation.
B. Thompson's Indemnification of Broker. Other than with respect
to matters described in paragraph 22 below, Thompson will indemnify and
hold Broker and Broker's employees, agents and contractors harmless,
including but not limited to reasonable attorney's fees, from and
against all Losses arising out of or resulting from acts or omissions of
CTBC and/or Thompson which constitute: (a) libel and slander to the
extent not covered by insurance maintained by Broker or CTBC or
Thompson; (b) infringement of trademarks, service marks or trade names
to the extent not covered by insurance maintained by Broker or CTBC or
Thompson; (c) violations of law, rules, regulations or (d) invasion of
rights of privacy or infringement of copyrights and other proprietary
rights; or (e) breaches of this Agreement. Thompson's obligation to
indemnify and hold Broker and Broker's employees, agents and contractors
harmless against Losses specified above shall survive any termination of
this Agreement until the expiration of all applicable statutes of
limitation.
C. Procedure for Indemnification. The procedure for
indemnification pursuant to sub-paragraphs 20.A. and 20.B. above will be
as follows:
i. Notice. The party claiming indemnification (the
"Claimant") will give reasonably prompt notice to the
party from whom indemnification is claimed (the
"Indemnifying Party") of any claim for which
indemnification is sought, whether between the parties
or brought by a third party, specifying (i) the factual
basis of such claim (to the extent that it is then
known to the Claimant) and (ii) the amount of the claim
(to the extent that it is then known to the Claimant).
If such claim relates to an action, suit or proceeding
filed by a third party against the Claimant, such
notice will be given by the Claimant not later than the
twentieth day after the Claimant receives written
notice of such action, suit or proceeding; provided
that any failure to deliver or delay in delivering such
notice on or prior to such twentieth day will relieve
the Indemnifying Party of its obligations to the
Claimant in respect of such claim only to the extent
that the Indemnifying Party is actually prejudiced
by such failure or delay.
ii. Investigation. Following receipt of notice from the
Claimant of a claim for which indemnification is
sought, the Indemnifying Party will have twenty days
(or such shorter period of time as is required to
respond to the subject litigation or proceeding) to
make, at the Indemnifying Party's expense, such
investigation of the claim as the Indemnifying Party
deems necessary or desirable. For the purposes of such
investigation, the Claimant agrees to make available to
the Indemnifying Party, at the Indemnifying Party's
expense, all information relied upon by the Claimant to
substantiate such claim.
iii. Third-Party Claims. With respect to any claim by a
third party pursuant to which such third party seeks
only the recovery of an amount of money and as to which
a Claimant seeks indemnification under sub-paragraph
20.A or 20.B. above and as to which representation of
the Claimant by legal counsel to the Indemnifying Party
wound not (as reasonably determined by the Claimant)
result in a conflict of interest, the Indemnifying
Party will have the right (at any time after the
Indemnifying Party gives the Claimant written notice
wherein the Indemnifying Party acknowledges that the
Indemnifying Party is obligated to indemnify the
Claimant in respect of such claim pursuant to sub-
paragraph 20.A. or 20.B. above, as appropriate, and
evidence which establishes to the Claimant's reasonable
satisfaction that the Indemnifying Party has and will
have sufficient funds to provide such indemnity), at
the Indemnifying Party's own expense, to participate in
or assume control of the defense of such claim with
counsel reasonably satisfactory to the Claimant, and
the Claimant will use reasonable efforts to cooperate
with the Indemnifying Party in such defense. If the
Indemnifying Party elects to assume control of the
defense of any such third-party claim, the Claimant
will have the right to participate in the defense of
such claim and retain separate co-counsel at its own
expense; provided that if the Indemnifying Party
requests that the Claimant participate in such defense,
then the Indemnifying Party will reimburse the Claimant
for the reasonable expenses and fees of the Claimant's
counsel. Without the Claimant's consent, the
Indemnifying Party will not consent to an entry of
judgment or settlement of any such claim which does not
include a release of all liability of the Claimant. If
the Indemnifying Party cannot or does not elect to
assume control the defense of any third party
claim, it will be bound by the results obtained by the
Claimant with respect to such claim.
iv. Expedited Response. If a claim, whether between the
parties or by a third party, requires immediate action,
the parties will use reasonable efforts to reach a
decision with respect to such claim as expeditiously as
possible.
D. Insurance. Broker and CTBC each shall maintain liability
insurance policies covering general liability, libel, slander, invasion
of privacy, copyright infringement, blanket crime, property damage,
business interruption, automobile liability, and workers' compensation
insurance in forms and amounts customary in the television broadcast
industry, and each of the parties hereto shall name the other as an
additional insured under such policies to the extent that their
respective interests may appear and shall provide for notice to the
other party prior to cancellation thereof. Upon request, each party
shall provide the other with certificates evidencing such insurance, and
shall further provide certificates evidencing renewal thereof prior to
the expiration of such policies.
21. CTBC's Events of Default. A "CTBC's Event of Default" will occur if:
(a) CTBC fails to provide the use of the Station's transmission
facilities or a material portion of the Station's
studio/production facilities to Broker in accordance with
paragraph 2 above for any period of five (5) or more
consecutive days, or for any five (5) or more days during any
period of ten (10) consecutive days;
(b) A failure or impairment of facilities or delay or interruption
in the broadcast of programs, or failure to furnish facilities
for broadcast, described in paragraph 15 above, occurs and (i)
CTBC gives Broker written notice to the effect that CTBC
elects not to remedy such failure, impairment, delay or
interruption in accordance with paragraph 15 above, or (ii)
such failure, impairment, delay or interruption continues for
thirty (30) days and, prior to the thirtieth (30th) day
thereof, CTBC does not give Broker written notice to the
effect that CTBC elects to remedy such failure, impairment,
delay or interruption in accordance with paragraph 15 above;
(c) CTBC fails to cure any other breach of this Agreement by CTBC
on or prior to the ninetieth (90th) day after CTBC receives a
written request from Broker to cure such default, if such
default, if not cured, would have a materially adverse effect
on Broker's activities with respect to the Station pursuant to
this Agreement (provided that, so long as CTBC continues to
use reasonable efforts to cure such default, such failure will
not constitute a CTBC's Event of Default so long as the
continuing existence of such default does not have a
materially adverse effect on Broker's activities with respect
to the Station pursuant to this Agreement); or
(d) CTBC commits repeated, willful breaches of its obligations
pursuant to this Agreement which, when considered separately,
do not constitute a CTBC's Event of Default described in
clauses (a) through (c) above but which, when taken together,
materially impair Broker's ability to conduct its activities
with respect to the Station in accordance with this Agreement,
and CTBC thereafter commits any such willful breach after
having received written notice from Broker to the effect that,
if any such willful breach occurs again after more than a
reasonable cure period after such notice, Broker may declare
that a CTBC's Event of Default has occurred pursuant to this
sub-paragraph 21(d).
Notwithstanding the foregoing, no fact or circumstance described in this
paragraph 21 will constitute a CTBC's Event of Default if the existence of
such fact or circumstance is proximately caused or contributed to in any
material respect by any material breach by Broker of its obligations under
this Agreement. Any period provided in this paragraph 21 for the cure of any
condition which, if uncured, would constitute a CTBC's Event of Default will
be tolled from the time CTBC gives Broker a written notice disputing the
existence of such condition and until the end of any arbitration pursuant to
this Agreement or the Option Agreement concerning the existence of such
condition or until such dispute is otherwise finally resolved.
22. Broker's Events of DefaultA "Broker's Event of Default" occurs if:
(a) Broker fails to make any payment required by paragraph 3 above
and fails to cure such non-payment within ten (10) days after
written notice from CTBC;
(b) Broker fails to fulfill its obligations pursuant to paragraph
1 of this Agreement with regard to the Station for any period
of two (2) or more consecutive days, or for any five (5) or
more days during any period of ten (10) consecutive days
(other than failures caused by circumstances beyond control of
Broker);
(c) Broker fails to cease or cure, as promptly as possible after
Broker receives written request from CTBC, any violation of
applicable law or any rule or regulation which, if not ceased
or cured at such time, would have a materially adverse effect
on any FCC authorization of CTBC;
(d) Broker commits willful and repeated violations of CTBC's
written standards for acceptance of programming material and
commercial announcements described in paragraph 9 above (as in
effect from time to time), and Broker thereafter commits any
such willful violation after having received written notice
from CTBC to the effect that, if any such willful violation
occurs again after more than a reasonable cure period after
such notice, CTBC may declare that a Broker's Event of Default
has occurred pursuant to this sub-paragraph 22(e);
(e) Broker commits repeated, willful breaches of its obligations
pursuant to this Agreement which, when considered separately,
do not constitute a Broker's Event of Default described in
clauses (a) through (d) above but which, when taken together,
could reasonably be expected to result in material harm or
penalty to CTBC and/or its stockholders, and Broker thereafter
commits any such willful breach after having received written
notice from CTBC to the effect that, if any such willful
breach occurs again after more than a reasonable cure period
after such notice, CTBC may declare that a Broker's Event of
Default has occurred pursuant to this sub-paragraph 22(g).
Notwithstanding the foregoing, no fact or circumstance described in this
paragraph 22 will constitute a Broker's Event of Default if the existence of
such fact or circumstance is proximately caused or contributed to in any
material respect by any material breach by CTBC of its obligations under this
Agreement. Any period provided in this paragraph 22 for the cure of any
condition which, if uncured, would constitute a Broker's Event of Default will
be tolled from the time Broker gives CTBC a written notice disputing the
existence of such condition and until the end of any arbitration pursuant to
this Agreement or the Option Agreement concerning the existence of such
condition or until such dispute is otherwise finally resolved.
23. Termination Upon Order of Governmental Authority. A "Governmental
Termination Event" will occur if any court or federal, state or local
government authority (including the FCC) orders or takes any action which
becomes effective and which requires the termination or material curtailment
of Broker's activities with respect to the Station pursuant to this Agreement;
provided that such order or action will no longer constitute a Governmental
Termination Event if such action or order is subsequently stayed or ceases to
be effective. If any court or federal, state or local government authority
announces or takes any other action or proposed action which could result in a
Governmental Termination Event, then Broker may seek administrative or
judicial relief therefrom (in which event CTBC shall cooperate with such
effort in any reasonable manner requested) and consult with such agency and
its staff concerning such matters and, in the event that this Agreement is not
terminated, Broker and CTBC will use their best efforts to negotiate in good
faith a modification to this Agreement which would obviate any such questions
as to validity while preserving, to the extent possible, the intent of the
parties and the economic and other benefits of this Agreement and the Option
Agreement and the portions thereof the validity of which are called into
question. Notwithstanding the prior sentence, CTBC will have no obligation to
amend or modify this Agreement in any manner that would reduce the
consideration to be received by CTBC pursuant to the Option Agreement. If the
FCC designates the license renewal application of the Station for a hearing as
a consequence of this Agreement or for any other reason, or initiates any
revocation or other proceeding with respect to the authorizations issued to
CTBC for the operation of the Station, then CTBC shall use diligent,
reasonable efforts to contest such action and shall be responsible for its
expenses incurred as a consequence of such FCC proceeding; provided, however,
that Broker shall cooperate and comply with any reasonable request of CTBC to
assemble and provide to the FCC information relating to Broker's performance
under this Agreement. In the event of termination of Broker's activities with
respect to the Station pursuant to this Agreement as a result of any
Governmental Termination Event, CTBC shall cooperate reasonably with Broker to
the extent permitted to enable Broker to fulfill advertising or other
programming contracts then outstanding.
24. Additional Representations, Warranties and Covenants.
A. Mutual Additional Representations, Warranties and Covenants.
each of CTBC and Broker represents that, as of the Commencement Date, it
will be legally qualified, and will have all requisite corporate powers
and capacity, to enter into this Agreement, and that the execution,
delivery and performance hereof by it shall not constitute a breach or
violation of any agreement, contract or other obligation to which it is
then subject or by which it is then bound. Each party hereto represents
and warrants that it has taken all necessary corporate and other
necessary action to make this Agreement legally binding on such party,
and that the individual signing this Agreement on behalf of such party
has been fully authorized and empowered to execute this Agreement on
behalf of such party.
B. Finders. The parties hereto represent and warrant that no
broker or finder has been used in connection with the transactions
contemplated by this Agreement and the option Agreement.
C. CTBC's Additional Representations, Warranties and Covenants.
CTBC makes the following further representations, warranties and
covenants:
i. Authorizations. CTBC owns or holds all material
licenses and other permits and authorizations
reasonably necessary for the operation of the Station
(including licenses, permits and authorizations issued
by the FCC), and CTBC (including its Affiliates,
principals, employees and agents) will take no action
to impair such licenses, permits and authorizations.
ii. Advanced Television/High Definition Television. If the
FCC gives CTBC the right to apply for a second
Nashville, Tennessee area television channel for
Advanced Television ("ATV") or High Definition
Television ("HDTV"), CTBC will submit and prosecute a
complete, timely application to the FCC for that
purpose, if requested by Broker, provided that Broker
shall agree to reimburse CTBC for all costs and
expenses occasioned by such filing and prosecution.
If the FCC awards CTBC such a second Nashville,
Tennessee area channel, such channel will be included
within this Time Brokerage Agreement in the same
manner, and under the same terms, as the Station's
current broadcast channel.
D. Broker's Additional Representations, Warranties and Covenants.
In carrying out its activities with regard to the Station pursuant to
this Agreement, Broker shall comply in all material respects with the
terms, provisions and conditions of the Station's contracts and
agreements which are utilized by, and copies of which have been provided
to, Broker.
25. [ Reserved ]
26. Procedures for Termination.
A. Upon Broker's Events of Default. At any time when a Broker's
Event of Default is in existence, CTBC may give Broker written notice (a
"CTBC's Termination Notice") to the effect that CTBC elects to terminate
this Agreement pursuant to this sub-paragraph 26.A; provided that, if
the matter of whether a Broker's Event of Default has occurred is the
subject of a dispute pursuant to this Agreement, then this Agreement
will expire instead on the sixtieth (60th) day after the Final
Determination of the arbitrator (as defined in paragraph 38.D.) that
such Broker's Event of Default occurred. The sixty (60) day period
referred to in the prior sentence shall not apply if the Broker's Event
of Default involved is a Broker's Event of Default described in sub-
paragraph 22(c), in which case this Agreement will expire instead two
(2) days after said Final Determination of the arbitrator.
B. Upon Certain CTBC's Events of Default. At any time when an
CTBC's Event of Default (other than an CTBC's Event of Default described
in sub-paragraph 21(b) above) is in existence, Broker may give CTBC
written notice (a "Broker's Termination Notice") to the effect that
Broker elects to end the term of this Agreement pursuant to this sub-
paragraph 26.B.; provided that, if the matter of whether an CTBC's Event
of Default has occurred is the subject of a dispute pursuant to this
Agreement, then this Agreement will expire instead on the sixtieth
(60th) day after the Final Determination of the arbitrator (as defined
in paragraph 38.D.) that such CTBC's Event of Default occurred.
C. Upon Government Termination. Subject to the termination
provisions of sub-paragraphs 26.A. and 26.B., if a Governmental
Termination Event occurs, then the term of this Agreement will continue
until the date upon which the activities of Broker and CTBC are required
to be ceased, as mandated by the agency or authority which brought about
such Governmental Termination Event.
D. Upon Certain Events. At any time after a CTBC's Event of
Default described in sub-paragraph 21(b) has occurred, Broker may give
CTBC written notice (also a "Broker's Termination Notice") to the effect
that Broker elects to terminate this Agreement pursuant to this sub-
paragraph 26.D.
27. Notices. All notices, demands and requests required or permitted to
be given under the provisions of this Agreement shall be (a) in writing, (b)
delivered to the recipient in person or sent by commercial delivery service or
registered or certified mail, postage prepaid and return receipt requested,
(c) deemed to have been given on the date received by the recipient (if
delivered in person) on the date set forth in the records of the delivery
service (if delivered by commercial delivery service) or on the date of
receipt (if delivered by certified mail) and (d) addressed as follows:
If to CTBC:
Central Tennessee Broadcasting Corporation
300 Peabody Street
Nashville, TN 37210
ATTN: Michael P. Thompson
Daniel R. Loftus
If to Broker:
Sullivan Broadcasting of Nashville, Inc.
4431 Dyke Bennett Road
Franklin, TN 37064
ATTN: J. Daniel Sullivan
with a copy (which shall not constitute notice to Broker) to:
David Pulido
Sullivan Broadcasting of Nashville, Inc.
18 Newbury Street
Boston, MA 02116
and
John Kuehn
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
or to any such other or additional persons and addresses as the parties may
from time to time designate in a writing delivered in accordance with this
paragraph 27.
28. Modification and Waiver. No amendment, supplement or modification of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by the party against whom enforcement of any such
amendment, supplement or modification is sought, and then such amendment,
supplement or modification shall be effective only in the specific instance
and for the purpose for which given.
29. Construction. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Tennessee, without giving
effect to any choice of law or conflict of law provision or rule (whether of
the State of Tennessee or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Tennessee.
30. Headings. The headings in this Agreement are included for ease of
reference only and will not control or affect the meaning or construction of
the provisions of this Agreement.
31. Assignment. This Agreement may not be assigned by CTBC without the
express written approval of Broker; however, this Agreement shall be
assignable by Broker without consent of CTBC, and where appropriate in the
context and consistent with this provision, the term "Broker" as used herein
shall mean and include such assignee.
32. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature(s) on each such
counterpart were upon the same instrument. This Agreement shall be effective
as of the date first above written.
33. Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement between the parties with respect to the
subject matter of this Agreement, and supersede any prior understandings,
agreements or representations by or between the parties, written or oral,
which may have related to the subject matter hereof in any way.
34. No Partnership or Joint Venture Created. Nothing in this Agreement
shall be construed to create a partnership or joint venture between CTBC and
Broker or to afford any rights to any third party other than as expressly
provided herein. Neither CTBC nor Broker shall have any authority to create
or assume in the name or on behalf of the other party any obligation, express
or implied, or to act or purport to act as the agent or legally empowered
representative of the other party hereto for any purpose.
35. Severability. Whenever possible each provision of this Agreement
will be interpreted so as to be effective and valid under applicable law.
Subject to the provisions of paragraph 23 above, if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise affecting the remainder or such
provision or the remaining provisions of this Agreement.
36. Legal Effect. This Agreement shall be binding shall inure to the
benefit of the parties hereto, their heirs, executors, personal
representatives, successors and assigns.
37. No Party Deemed Drafter. No party will be deemed the drafter of
this Agreement and if this Agreement is construed by a court of law such court
should not construe this Agreement or any provision against any party as its
drafter.
38. Arbitration.
A. Generally. Broker and CTBC agree that the arbitration
procedures described in this paragraph 38 will be the sole and exclusive
method of resolving and remedying claims for money damages (including
any claim for indemnification pursuant to paragraph 20) arising under
this Agreement ("Disputes"). Nothing in this paragraph 38 will prohibit
a party from instituting litigation to enforce any Final Determination,
as defined in sub- paragraph 38.D. below, or availing itself of any
remedy other than money damages. Broker and CTBC agree that, except as
otherwise provided in the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time (the "AAA Rules"), the
arbitration procedures described in this paragraph 38 and any Final
Determination will be governed by, and will be enforceable pursuant to,
the Uniform Arbitration Act as in effect in the State of Tennessee from
time to time.
B. Notice of Arbitration. If Broker or CTBC asserts that there
exists a dispute, then such person (the "Disputing Person") will give
the other person a written notice setting forth the nature of the
asserted Dispute. If Broker and CTBC 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 paragraph
38 by giving the other person 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.
C. Selection of Arbitrator. Broker and CTBC will attempt to
select a single arbitrator by mutual agreement. If no such arbitrator
is selected prior to the twentieth (20th) business day after the related
Arbitration Notice is given, then an arbitrator who is experienced in
matters of the type which are the subject matter of the Dispute will be
selected in accordance with the AAA Rules.
D. Conduct of Arbitration. The arbitration will be conducted
under the AAA Rules, as modified by any written agreement between Broker
and CTBC. 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 Determination") is made or
rendered as soon as practicable, and the parties and arbitrator will use
their reasonable best efforts to reach a Final Determination no later
than the tenth (10th) business day after the arbitrator is selected.
Any Final Determination will be final and binding upon Broker and CTBC
and there will be no appeal from or reexamination of any Final
Determination, except in the case of fraud, perjury or evident
partiality or misconduct by the arbitrator prejudicing the rights of
Broker or CTBC or to correct manifest clerical errors.
E. Enforcement. Broker and CTBC agree that a Final Determination
may be enforced in any state or federal court having jurisdiction over
the subject matter of the related Dispute. For purposes or any action
or proceeding instituted with respect to any Final Determination, each
of Broker and CTBC irrevocably submits to the jurisdiction of any such
court, irrevocably consents to the service of process by any delivery
method prescribed by paragraph 27 above or by any other means permitted
by applicable law, and irrevocably waives, to the fullest extent
permitted by law, any objection which it may have as to personal
jurisdiction, the laying of venue, and any claim that such action or
proceeding has been brought in an inconvenient forum.
F. Expenses. The prevailing party in any such arbitration
proceeding in connection with this Agreement also will be entitled to
recover from the other party its reasonable attorneys' fees and
disbursements and the non-prevailing party also will be required to pay
all other costs and expenses associated with the arbitration (including
the fees and expenses of any such arbitrator). As part of the Final
Determination the arbitrator may designate the prevailing party. In the
event that the arbitrator is unable to determine that a party has
prevailed in the arbitration, such costs and expenses shall be equitably
allocated by the arbitrator upon the basis of the outcome of the
arbitration. If the arbitrator is unable to allocate such fees on this
basis as a result of the outcome, then the costs of arbitration shall be
paid equally by the parties and each party shall pay its own expenses.
Except as provided in this sub-paragraph 38.F., each party to this
Agreement will bear its own costs and expenses (including legal fees and
disbursements) in connection with any such proceeding or submission.
39. Liquidated Damages. Notwithstanding any other provision of this
Agreement, if CTBC refuses to make available to Broker the Station's broadcast
time as provided in paragraph 2 above, then Broker shall have the right to
cure such default; however, if CTBC refuses to allow such cure or takes any
efforts to prevent such cure, then Thompson shall be liable to Broker (in
addition to any other remedies pursuant to this Agreement) for Five Hundred
Thousand Dollars ($500,000) in liquidated damages (and not as a penalty), it
being understood and acknowledged that the subject matter of this Agreement is
unique and that it would be impracticable or extremely difficult to fix the
actual damage that Broker would incur if CTBC prevents Broker from utilizing
the Station's facilities as set both in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date above written.
CENTRAL TENNESSEE BROADCASTING
CORPORATION
("CTBC")
By: ________________________________
SULLIVAN BROADCASTING OF
NASHVILLE, INC.
("Broker")
By: ________________________________
As to paragraph 5.C., 5.D.,
20.B. and 39 only:
_________________________________
Michael P. Thompson
EXHIBIT 10.3
=============================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SULLIVAN BROADCASTING COMPANY, INC.
AND
CHANNEL 47 LIMITED PARTNERSHIP
DATED AS OF FEBRUARY 28, 1996
=============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE OF ASSETS......................................... 1
1.1 Transfer of Assets............................................. 1
(a) FCC Authorizations......................................... 2
(b) Tangible Personal Property................................. 2
(c) Real Property.............................................. 2
(d) Agreements for Sale of Time................................ 2
(e) Program Contracts.......................................... 3
(f) Other Contracts............................................ 3
(g) Trademarks, etc............................................ 3
(h) Programming Copyrights..................................... 3
(i) FCC Records................................................ 4
(j) Files and Records.......................................... 4
(k) Goodwill................................................... 4
(l) Prepaid Items.............................................. 4
1.2 Excluded Assets................................................ 4
(a) Cash....................................................... 4
(b) Receivables and Other Claims............................... 4
(c) Pension Assets, Etc........................................ 4
(d) Certain Contracts.......................................... 5
(e) Corporate Books and Records................................ 5
(f) Transaction Documents...................................... 5
1.3 Treatment of Liabilities....................................... 5
(a) Permitted Liens............................................ 5
(b) Assumption of Liabilities Generally........................ 6
(c) Assumption of Certain Program Liabilities.................. 7
(d) Consent-Pending Contracts.................................. 8
(e) Payment of Seller's Share of Prorated Amounts.............. 10
1.4 Adjustments.................................................... 10
(a) Generally.................................................. 10
(b) Trade Items................................................ 10
1.5 Adjustment Procedures.......................................... 11
(a) Estimate at Closing........................................ 11
(b) Report After Closing....................................... 11
(c) Mutual Resolution.......................................... 11
(d) Resolution by Accounting Firm.............................. 11
(e) Final Settlement........................................... 12
(f) Costs...................................................... 12
ARTICLE II
PURCHASE/CLOSING.................................................... 12
2.1 Purchase Price................................................. 12
(a) Amount and Form............................................ 13
(b) Allocation of Cash Purchase Price.......................... 13
2.2 Closing Transactions........................................... 13
(a) Closing; Delayed Closing................................... 13
(b) Closing Transactions....................................... 13
2.3 Conditions to Buyer's Obligations.............................. 14
2.4 Conditions to Seller's Obligations............................. 16
ARTICLE III
PRE-CLOSING COVENANTS............................................... 17
3.1 Operation and Maintenance of the Business...................... 17
3.2 Negative Covenants of Seller................................... 19
3.3 Information.................................................... 20
(a) Interim Reports............................................ 20
(b) Buyer's Access............................................. 20
(c) Exclusivity................................................ 20
3.4 Consents Generally............................................. 21
3.5 Application(s) for FCC Consent................................. 21
3.6 Notice and Cooperation......................................... 22
(a) Notice of Breach........................................... 22
(b) Notice of Certain Other Events............................. 22
(c) Efforts to Close........................................... 22
3.7 Real Estate Matters............................................ 23
(a) Lease-Related Materials.................................... 23
(b) Title Insurance............................................ 23
(c) Surveys.................................................... 23
3.8 Copies of New Contracts........................................ 23
3.9 HSR Act........................................................ 24
3.10 No Premature Assumption of Control............................. 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER............................ 24
4.1 Organization and Power......................................... 25
4.2 Authorization of Transactions.................................. 25
4.3 Subsidiaries; Investments...................................... 25
4.4 Absence of Conflicts........................................... 25
4.5 Financial Statements........................................... 26
4.6 Certain Developments........................................... 26
4.7 Title to, Condition and Sufficiency of Assets.................. 27
(a) Owned Properties........................................... 27
(b) Leased Properties.......................................... 27
(c) No Proceedings............................................. 28
(d) Current Use................................................ 28
(e) Condition and Operation of Improvements.................... 28
(f) Ownership of Assets........................................ 29
(g) Condition of the Assets.................................... 29
4.8 FCC Matters.................................................... 29
(a) Generally.................................................. 29
(b) Cable Matters.............................................. 30
4.9 Taxes.......................................................... 31
4.10 Contracts and Commitments...................................... 32
(a) Listing.................................................... 32
(b) Absence of Breach, etc..................................... 33
(c) Available Program Runs..................................... 33
(d) Copies..................................................... 34
4.11 Proprietary Rights............................................. 34
(a) Listing.................................................... 34
(b) Ownership; Infringement.................................... 34
(c) Protective Measures........................................ 35
4.12 Litigation; Proceedings........................................ 35
4.13 Brokerage...................................................... 35
4.14 Governmental Licenses and Permits.............................. 35
4.15 Employees...................................................... 35
4.16 Employee Benefit Plans......................................... 36
4.17 Affiliate Transactions......................................... 36
4.18 Compliance with Laws........................................... 36
4.19 Environmental Matters.......................................... 37
(a) Compliance Generally....................................... 37
(b) Permits.................................................... 37
(c) Claims..................................................... 37
(d) Storage Tanks.............................................. 37
(e) Operations................................................. 37
(f) Transaction-Triggered Requirements......................... 38
(g) Liability for Others....................................... 38
(h) Environmental Liens........................................ 38
4.20 Disclosure..................................................... 38
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER............................. 39
5.1 Organization and Power......................................... 39
5.2 Authorization of Transaction................................... 39
5.3 Absence of Conflicts........................................... 40
5.4 Brokerage...................................................... 40
5.5 Litigation..................................................... 40
5.6 Qualification as a Licensee.................................... 40
5.7 Disclosure..................................................... 41
ARTICLE VI
TERMINATION......................................................... 41
6.1 Termination.................................................... 41
6.2 Effect of Termination.......................................... 42
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS................................. 43
7.1 Survival; Absence of Other Representations..................... 43
7.2 Indemnification................................................ 43
(a) By Seller.................................................. 43
(b) By Buyer................................................... 45
7.3 Indemnification Procedures..................................... 46
(a) Notice of Claim............................................ 46
(b) Assumption of Defense...................................... 46
(c) Limits of Assumption of Defense............................ 46
7.4 Treatment of Indemnification Payments.......................... 48
ARTICLE VIII
ADDITIONAL AGREEMENTS............................................... 48
8.1 Buyer's Retention of Retained Records; Continuing Assistance... 48
8.2 Press Releases and Announcements............................... 49
8.3 Further Transfers.............................................. 50
8.4 Specific Performance........................................... 50
8.5 Expenses....................................................... 50
8.6 Non-Solicitation and Confidentiality........................... 51
(a) Non-Solicitation........................................... 51
(b) Confidentiality by Seller.................................. 52
(c) Confidentiality by Buyer................................... 52
(d) Remedy for Seller's Breach................................. 53
(e) Remedy for Buyer's Breach.................................. 53
(f) Similar Agreements......................................... 53
8.7 Billing and Collection of Seller's Receivables................. 54
(a) Billing by Buyer........................................... 54
(b) Collection and Application by Buyer........................ 54
(c) Application of Collections................................. 54
(d) Non-Interference........................................... 54
(e) Termination................................................ 55
(f) Access..................................................... 55
8.8 Seller's Name.................................................. 55
ARTICLE IX
MISCELLANEOUS....................................................... 55
9.1 Amendment and Waiver........................................... 55
9.2 Notices........................................................ 56
9.3 Binding Agreement; Assignment.................................. 57
9.4 Severability................................................... 58
9.5 No Strict Construction......................................... 58
9.6 Captions....................................................... 58
9.7 Entire Agreement............................................... 58
9.8 Counterparts................................................... 58
9.9 Governing Law.................................................. 58
9.10 Parties in Interest............................................ 59
9.11 Generally Accepted Accounting Principles....................... 59
9.12 WAIVER OF JURY TRIAL........................................... 59
9.13 Other Definitional Provisions.................................. 59
CROSS REFERENCES TO DEFINITIONS
Page
----
Adjustment Time....................................................... 10
Assets................................................................ 2
Assumed Contracts..................................................... 6
Assumed Liabilities................................................... 6
Barter Program Contract............................................... 19
Buyer................................................................. 1
Cable Act Requirements................................................ 30
Cash Purchase Price................................................... 12
Closing............................................................... 13
Closing Balance Sheet................................................. 11
Closing Date.......................................................... 13
Closing Transactions.................................................. 14
Communications Act.................................................... 62
Confidential Information.............................................. 52
Consent............................................................... 62
Consent-Denied Contract............................................... 9
Consent-Pending Contract.............................................. 8
Contract.............................................................. 62
Delinquent Accounts................................................... 55
Double-Run Program.................................................... 62
DOJ................................................................... 24
Environmental and Safety Requirements................................. 63
Environmental Lien.................................................... 63
ERISA................................................................. 36
Escrow Agent.......................................................... 1
Escrow Agreement...................................................... 1
Escrow Fund........................................................... 1
Excludable Contract................................................... 63
Excluded Assets....................................................... 4
Excluded Contracts.................................................... 5
FCC................................................................... 63
FCC Approval Date..................................................... 63
FCC Authorizations.................................................... 2
FCC Consents.......................................................... 63
FCC Regulations....................................................... 63
Final Approval Date................................................... 63
Final Net Adjustment.................................................. 11
Final Order........................................................... 64
Financial Statements.................................................. 26
FTC................................................................... 24
GAAP.................................................................. 64
Governmental Entity................................................... 64
HSR Act............................................................... 15
Improvements.......................................................... 28
Indebtedness.......................................................... 64
Indemnified Party..................................................... 46
Indemnifying Party.................................................... 46
Insider............................................................... 65
Investigating Parties................................................. 20
Latest Balance Sheet.................................................. 26
Leased Realty......................................................... 27
Leases................................................................ 2
Legal Requirement..................................................... 65
Lien.................................................................. 65
Loss.................................................................. 43
Mandatory Consent..................................................... 65
Market Cable System................................................... 65
Material Adverse Effect............................................... 65
Network Affiliation Agreements........................................ 66
Non-FCC Authorizations................................................ 35
Non-Solicitation Period............................................... 51
Other Assumed Contracts............................................... 3
Owned Realty.......................................................... 27
Parties............................................................... 1
Permitted Liens....................................................... 6
Person................................................................ 66
Program Contracts..................................................... 3
Program Payments...................................................... 7
Proprietary Rights.................................................... 66
Retained Records...................................................... 5
Seller................................................................ 1
Seller's Debtor....................................................... 54
Seller's Receivables.................................................. 4
Station............................................................... 1
Tax................................................................... 66
Tax Code.............................................................. 67
Tax Return............................................................ 67
Taxable............................................................... 66
Taxes................................................................. 66
Taxing................................................................ 66
Termination Date...................................................... 41
Threshold Amount...................................................... 44
Time Sale Contracts................................................... 2
Title Insurer......................................................... 23
Trades................................................................ 67
Transaction Documents................................................. 5
Transfer Taxes........................................................ 51
Transferred Records................................................... 4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of February 28, 1996,
by and between Sullivan Broadcasting Company, Inc., a Delaware corporation
("Buyer"), and Channel 47 Limited Partnership, a Wisconsin limited partnership
("Seller"). Buyer and Seller are sometimes collectively referred to as the
"Parties". Other capitalized terms used and not otherwise defined in this
Agreement are defined in the attached Exhibit A.
Seller is the licensee and operator of broadcast television station
WMSN-TV, Madison, Wisconsin (the "Station"). Seller desires to sell to Buyer,
and Buyer desires to purchase from Seller, the assets of the Station, as a
going concern, subject to the terms and conditions set forth in this
Agreement.
Contemporaneously with the closing of the transactions contemplated by
this Agreement, the Parties will execute and deliver an escrow agreement,
substantially in the form of the attached Exhibit B, among them and the escrow
agent to be named therein (as in effect from time to time, the "Escrow
Agreement"), and Buyer will deliver to such escrow agent, as agent (together
with any successor thereto under the Escrow Agreement, the "Escrow Agent"),
cash in the amount of $2,000,000 (the "Escrow Fund") pursuant to Section
2.1(a) below. The Escrow Fund will be held by the Escrow Agent in accordance
with the terms and conditions of the Escrow Agreement and will be disbursed as
provided in the Escrow Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF ASSETS
---------------------------
1.1 Transfer of Assets. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date, Seller, as its interests may
appear, will convey, transfer, and deliver to Buyer, and Buyer will acquire
from Seller, all of Seller's rights in, to and under all assets, rights and
properties of Seller, whether real, personal or mixed, tangible and
intangible, and of every kind, character and description, which are used or
useful in the business and operation of the Station, as a going concern, but
excluding all such assets, rights and properties which constitute Excluded
Assets. The rights, assets, property, and business of Seller to be
transferred to Buyer pursuant to this Agreement are referred to as the
"Assets". Subject to Section 1.2, the Assets will include Seller's rights in,
to and under the following:
(a) FCC Authorizations. All licenses and authorizations issued
by the FCC to Seller with respect to the Station (the "FCC
Authorizations"), including all applications therefor and all renewals,
extensions, or modifications thereof and additions thereto.
(b) Tangible Personal Property. All equipment, vehicles,
furniture, fixtures, transmitting towers, antennas, transmitters,
satellite earth stations, office materials and supplies, spare parts and
other tangible personal property of every kind and description owned as
of the date of this Agreement by Seller and used or useful in connection
with the business and operation of the Station, and any additions,
improvements, replacements, and alterations thereto made between the
date of this Agreement and the Closing Date, all to the extent of
Seller's interest therein, but excluding all such property consumed,
retired, or disposed of by Seller as permitted by this Agreement,
between the date of this Agreement and the Closing Date.
(c) Real Property. The Owned Realty and the Leased Realty, and
all Improvements, owned as of the date of this Agreement or on the
Closing Date by Seller and used or useful in the business and operation
of the Station, and all leases of Leased Realty as in effect on the
Closing Date (the "Leases"); provided that, if there occurs any
condemnation or destruction of or damage to any such real property
interest or underlying real property or any Improvement which is not
replaced, repaired or restored prior to the Closing Date, whether or not
such condemnation, destruction or damage could have a Material Adverse
Effect, then, if Buyer so elects, at the Closing Seller will assign to
Buyer all of Seller's interest, if any, in the proceeds of such
condemnation or any insurance covering such damage or destruction.
(d) Agreements for Sale of Time. All orders, agreements and
other Contracts existing on the date of this Agreement, or entered into
in the ordinary course of business of the Station, or as otherwise
permitted by this Agreement, between the date of this Agreement and the
Closing Date, for the sale of advertising time (including Trades) on the
Station, to the extent unperformed on the Closing Date (collectively,
the "Time Sale Contracts").
(e) Program Contracts. All program licenses and other Contracts
under which Seller is authorized to broadcast film or other product or
programs on the Station and which are described on Schedule 4.10C to
this Agreement or which are in effect on the date of this Agreement and
which are Excludable Contracts, together with all such program licenses
and other Contracts entered into in accordance with this Agreement
between the date of this Agreement and the Closing Date, to the extent
existing as of the Closing Date (collectively, the "Program Contracts").
(f) Other Contracts. The Network Affiliation Agreements and all
Contracts relating to the Station to which Seller is a party on the date
of this Agreement and described on Schedule 4.10A to this Agreement,
together with all such Contracts which are in effect on the date of this
Agreement and which are Excludable Contracts, and all such Contracts
entered into as permitted by this Agreement between the date of this
Agreement and the Closing Date, in each case to the extent existing as
of the Closing Date and in each case other than any Contract described
in Section 1.1(c), 1.1(d) or 1.1(e) (collectively, the "Other Assumed
Contracts").
(g) Trademarks, etc. All trademarks, service marks, trade names,
jingles, slogans, logotypes and other Proprietary Rights, and all
goodwill associated with the foregoing, used or useful in connection
with the business and operation of the Station, including all Seller's
rights to use the call letters "WMSN" and any related names and phrases,
existing on the date of this Agreement or acquired by Seller between the
date of this Agreement and the Closing Date, in each case to the extent
existing on the Closing Date.
(h) Programming Copyrights. All program and programming
materials and elements of whatever form or nature owned by Seller and
used or useful in connection with the business and operation of the
Station, whether recorded on tape or any other substance or intended for
live performance, and whether completed or in production, and all
related common law and statutory copyrights owned by or licensed to
Seller and used or useful in connection with the business and operation
of the Station, together with all such programs, materials, elements,
and copyrights acquired by Seller between the date of this Agreement and
the Closing Date, in each case to the extent existing on the Closing
Date.
(i) FCC Records. All FCC logs and other compliance records of
Seller that relate to the operation of the Station and in existence on
the Closing Date.
(j) Files and Records. All files and other records of Seller
which may relate to the business or operation of the Station on or after
the Closing Date or which may be pertinent to the performance of Buyer's
obligations pursuant to Section 8.7, including all related books,
records, accounts, cancelled checks, payment records, Tax records
(including payroll, unemployment, real estate, and other tax records),
and all similar books and records of Seller relating to the Station (the
"Transferred Records").
(k) Goodwill. All of Seller's goodwill in, and going concern
value of, the Station or otherwise associated with any other Asset.
(l) Prepaid Items. All prepaid expenses relating to the Station
(which will be prorated as provided in Section 1.4).
As used in this Agreement, the terms "Leases," "Time Sale Contracts," "Program
Contracts" and "Other Assumed Contracts" will not include Contracts of any
type described above which are Excluded Contracts.
1.2 Excluded Assets. There will be excluded from the Assets and, to
the extent in existence on the Closing Date, retained by Seller, the following
assets (the "Excluded Assets"):
(a) Cash. All cash, cash equivalents, and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank
balances, rights in and to bank accounts, and marketable securities held
by Seller.
(b) Receivables and Other Claims. All accounts and notes receiv
able of Seller relating to or arising out of the operation of the
Station prior to the Adjustment Time (collectively, the "Seller's
Receivables"), and all other claims of Seller with respect to
transactions or other conduct of the business of the Station prior to
the Adjustment Time, including claims for Tax refunds and rebates and
claims of Seller under all Contracts with respect to events or periods
prior to the Adjustment Time.
(c) Pension Assets, Etc. Pension, profit sharing, retirement,
bonus, stock purchase, savings plans and trusts, 401(k) plans, health
insurance plans, and the assets thereof, and all other plans,
agreements, or understandings to provide employee welfare, pension or
other benefits of any kind for any employees or former employees (or
dependents or related persons of any employees or former employees) of
Seller.
(d) Certain Contracts. All Consent-Denied Contracts, and all
leases and Contracts of a type described in Section 1.1(c), 1.1(d),
1.1(e) or 1.1(f) but which have expired or may expire and are not
renewed, or which otherwise have terminated or may terminate, as
permitted by this Agreement, between the date of this Agreement and the
Closing Date (collectively, the "Excluded Contracts").
(e) Corporate Books and Records. All minutes of meetings of the
board or directors (or similar governing body) or partners of Seller and
files and other records which are not Transferred Records (the "Retained
Records").
(f) Transaction Documents. All rights of Seller pursuant to this
Agreement, the Escrow Agreement and the other agreements and instruments
delivered pursuant hereto or thereto (collectively, the "Transaction
Documents").
(g) Personal Assets. The personal assets of certain employees of
Seller, to the extent described on Schedule 1.2.
1.3 Treatment of Liabilities.
(a) Permitted Liens. The Assets will be sold and conveyed to
Buyer free and clear of all Liens other than:
(1) Liens arising by operation of law and securing the
payment of Taxes which are not yet due and payable or which are
being contested in good faith by appropriate proceedings (and, as
to which contested Liens, Seller has or will by the Closing have
disclosed the same to Buyer in writing and at the time of the
Closing will have in effect arrangements which are reasonably
satisfactory to Buyer for the payment of any underlying liability
or obligation without recourse to Buyer or any Asset),
(2) easements, rights-of-way, reservations of rights,
conditions or covenants, zoning, building or similar restrictions
or other restrictions or encumbrances that do not, individually or
in the aggregate materially interfere with the use of the affected
property in the operation of the Station as conducted or as
proposed to be conducted by Seller,
(3) restrictions on transfer imposed under state or federal
securities laws or pursuant to the Communications Act or the FCC
Regulations,
(4) the lessors' and sublessors' rights under the Leases and
leases of personal property by Seller as lessee which are part of
the Assets,
(5) mechanics', carriers', workers', repairers', and similar
non-consensual Liens arising by operation of law and relating to
obligations which are incurred in the ordinary course of business
and which are not yet due and payable on the Closing Date,
(6) Liens arising out of any failure to comply with the
provisions of any bulk transfer law which may be applicable to the
purchase and sale of the Assets pursuant to this Agreement, and
(7) other Liens which secure some or all of the Assumed
Liabilities and no other liabilities or obligations of Seller or
any other Person, all of which Liens are described on Schedule 1.3
to this Agreement
(collectively, the "Permitted Liens").
(b) Assumption of Liabilities Generally. Subject to Section
1.3(c), the "Assumed Liabilities" are
(1) all liabilities and obligations of Seller pursuant to
the Leases, the Time Sales Contracts, the Program Contracts and
the Other Assumed Contracts (collectively, the "Assumed
Contracts"), including each such Contract which is a Consent-
Pending Contract unless and until such Consent-Pending Contract
becomes a Consent-Denied Contract, in each case to the extent that
any such liability or obligation arises or accrues after the
Adjustment Time, and
(2) all obligations of Seller to provide advertising time
pursuant to Trades in existence on the date of this Agreement or
entered into after the date of this Agreement and prior to the
Closing Date in accordance with this Agreement, to the extent that
such obligations exist at the Adjustment Time.
On the Closing Date, Buyer will assume and agree to pay, satisfy, perform and
discharge as and when due, and will hold Seller harmless from and against, all
Assumed Liabilities. Without limiting the foregoing but subject to Section
1.3(c), the Assumed Liabilities will not include, and Buyer will not assume or
otherwise become responsible for, any other liability or obligation of Seller,
including:
(A) any liability or obligation of Seller arising out of the
operations of the Station or any Asset prior to the Adjustment Time;
(B) any liability or obligation of Seller under any Contract which
is not an Assumed Contract, including any Consent-Denied Contract;
(C) except as otherwise provided in Section 8.5, any liability or
obligation of Seller for any federal, state, or local income or other
Taxes;
(D) any liability or obligation of Seller to any employee or
former employee of Seller or the Station attributable to any period of
time prior to the Adjustment Time, including any severance or other
liability of Seller arising out of the termination by Seller of any
employee's employment with Seller, or any duty, obligation, or liability
of Seller relating to any pension, 401(k) or other similar plan,
agreement, or arrangement provided by Seller to employees or former
employees of Seller, and none of such plans will be assumed by Buyer;
(E) any liability or obligation which constitutes Indebtedness of
Seller (other than Indebtedness arising under any capitalized lease
which is described on Schedule 4.10A); or
(F) any liability or obligation of Seller arising out of any
litigation, proceeding, or claim by any Person, to the extent that such
liability or obligation relates to the operations of the Station by
Seller prior to the Adjustment Time, whether such litigation, pro
ceeding, or claim is pending, threatened, or asserted before, on, or
after the Closing Date.
(c) Assumption of Certain Program Liabilities. Notwithstanding Section
1.3(b), as between Buyers and Seller:
(1) Seller will be responsible for, and Buyer will not assume,
all obligations to make cash payments of license and usage fees pursuant
to any Program Contract ("Program Payments") which first become due and
payable under the terms of the Program Contract in question prior to the
first day of the calendar month which includes the Closing Date;
(2) Buyer will be responsible for, and will assume and agree to
pay, satisfy, perform and discharge, all Program Payments which first
become due and payable under the terms of the Program Contract in
question after the last day of the calendar month which includes the
Closing Date; and
(3) with respect to Program Payments which first become due and
payable under the terms of the Program Contract in question during the
calendar month which includes the Closing Date: (A) Seller will be
responsible for, and Buyer will not assume, a portion of each such
Program Payment which is equal to a fraction, the numerator of which is
the number of days (if any) in such calendar month which are prior to
the Closing Date and the denominator of which is the total number of
days in such calendar month, and (B) Buyer will be responsible for, and
will assume and agree to pay, satisfy, perform and discharge, the
remaining portion of such Program Payments.
Notwithstanding Section 1.3(b), the Assumed Liabilities will not include any
Program Payments to the extent that Seller is responsible therefor pursuant to
this Section 1.3(c), but will include all Program Payments to the extent that
Buyer is responsible therefor pursuant to this Section 1.3(c).
(d) Consent-Pending Contracts. An Assumed Contract is a "Consent-
Pending Contract" at any time after the Closing when any Consent relating to
such Assumed Contract has not been obtained or is not in effect. As an
accommodation in order to permit the purchase and sale of the Assets to be
consummated in a timely manner, and based upon the Parties' mutual belief that
no other party to a Consent-Pending Contract will object to or be materially
harmed by Buyer's enjoyment or use of Seller's rights or performance of
Seller's obligations under any Consent-Pending Contract and that each such
third party will grant any required Consent, the Closing Transactions will be
consummated notwithstanding the fact that any required Consent which is not a
Mandatory Consent has not been obtained under one or more Consent-Pending
Contracts. In that event, Buyer and Seller agree as follows with respect to
each Consent-Pending Contract:
(1) After the Closing and until March 1, 1998, Seller and Buyer
will continue to attempt to obtain all Consents with respect to such
Contract in accordance with Section 3.4.
(2) From and after the Closing Date, Buyer and Seller will
cooperate with one another to provide Buyer with the benefits of each
Consent-Pending Contract (and Buyer may utilize such benefits), and
Buyer will assume and agree to timely pay, satisfy, perform, and
discharge Seller's liabilities which arise under such Contract after the
Adjustment Time, unless and until such Contract is a Consent-Denied
Contract. If such Contract becomes a Consent-Denied Contract, then
Buyer may thereafter suspend its performance of Seller's obligations
arising thereafter under such Contract until such time as such Consent-
Pending Contract is no longer a Consent-Denied Contract, and Seller will
perform or otherwise satisfy such obligations. If Buyer is denied the
benefits of any Consent-Pending Contract while it is a Consent-Pending
Contract, then Seller will be responsible for the obligations of Seller
pursuant to such Contract to the extent that they relate to the period
during which it is a Consent-Pending Contract or a Consent-Denied
Contract; provided that to the extent that Buyer actually receives or
received the benefit of any Consent-Pending Contract or Consent-Denied
Contract while it is or was a Consent-Pending Contract or a Consent-
Denied Contract, Buyer will be responsible for the performance of
Seller's obligations arising thereunder to the extent they relate to the
benefit received by Buyer while such Consent-Pending Contract or
Consent-Denied Contract is or was a Consent-Pending Contract or a
Consent-Denied Contract.
(3) A Consent-Pending Contract becomes a "Consent-Denied
Contract" if, prior to March 1, 1998, any party to such Contract other
than Seller or Buyer expressly terminates Buyer's enjoyment of the
rights and benefits pursuant to such Contract on the ground that such
party's Consent to the assignment of Seller's rights under such Contract
to Buyer pursuant to this Agreement has not been obtained, or if such
Consent-Pending Contract remains a Consent-Pending Contract on March 1,
1998. Any such Consent-Pending Contract will remain a Consent-Denied
Contract unless and until each Consent which is required to be obtained
in order to permit the assignment of Seller's rights under such Contract
pursuant to this Agreement has been obtained; provided that no Consent-
Denied Contract will cease to be a Consent-Denied Contract after
March 1, 1998.
In addition, at Buyer's request, Seller will cooperate with Buyer to the
extent reasonably necessary to enforce all rights under each Consent-Pending
Contract.
(e) Payment of Seller's Share of Prorated Amounts. Notwithstanding any
provision of this Agreement to the contrary, to the extent, if any, that
Seller makes payment to Buyer, or Buyer receives a credit against any amount
otherwise payable to Seller pursuant to this Agreement, as a result of any
proration or adjustment pursuant to Section 1.4, Buyer will assume and will be
obligated to pay the obligation and liability for which such proration or
adjustment was actually made pursuant to Section 1.4.
1.4 Adjustments.
(a) Generally. The operation of the Station and the revenues,
expenses, and liabilities attributable thereto, including power and utilities
charges, ad valorem property taxes (upon the basis of the most recent
assessment available), rents, and similar accruing, prepaid and deferred items
(other than Program Payments, which will be allocated in the manner described
in Section 1.3(c), and obligations under Trades, which will be allocated in
the manner provided in Section 1.4(b)), will be prorated between Seller and
Buyer in accordance with the principle that
(1) Seller will receive all revenues earned or accrued, and will
be responsible for all such expenses, costs and liabilities incurred in
or allocable to the conduct of the business and operation of the Station
or the ownership or operation of the Assets through 11:59 p.m. (local
time) on the day preceding the Closing Date (the "Adjustment Time"), and
(2) Buyer will receive all revenues earned or accrued, and will
be responsible for all such expenses, costs and liabilities incurred in
or allocable to the conduct of the business and operation of the Station
or the ownership or operation of the Assets after the Adjustment Time.
Notwithstanding the foregoing, Seller will be liable for all liabilities and
obligations which are not Assumed Liabilities, and Buyer will be liable for
those costs of employee compensation, including all payroll taxes and related
contributions, vacation, sick leave, and personal days, attributed to or
accruable on account of service with respect to the Station after the
Adjustment Time only for those employees of Seller to whom Buyer (in its
discretion) elects to offer employment by Buyer as of the time of the Closing
and who accept such employment (and then only from and after the commencement
of such employment by Buyer).
(b) Trade Items. If, as of the Adjustment Time, the aggregate value of
Seller's performance obligations with respect to the Station to be performed
after the Adjustment Time under all Trades exceeds $35,000, then Buyer will
receive a refund of the Cash Purchase Price in the amount of such excess over
$35,000. The value of Seller's obligations under Trades will be determined in
accordance with the valuation methods used by Seller as of the date of this
Agreement. There will be no proration or other adjustment with respect to
Trades except in accordance with this Section 1.4(b), and there will be no
proration or adjustment with respect to any program barter agreements.
1.5 Adjustment Procedures.
(a) Estimate at Closing. On the Closing Date, to the extent
practicable, the prorations and adjustments described in Sections 1.3(c),
1.4(a) and 1.4(b) will be determined and paid on the basis of the then most
recently available financial statements and other information relating to the
Station, to the extent agreed by Buyer and Seller.
(b) Report After Closing. On or prior to the 90th day after the
Closing Date, Buyer will prepare and submit to Seller a balance sheet for the
Station (the "Closing Balance Sheet") as of the Adjustment Time, together with
Buyer's determination of the net amount of any remaining adjustment to be paid
to, or by, Buyer in order to give effect to the provisions of Sections 1.3(c),
1.4(a) and 1.4(b) (the "Final Net Adjustment"). Buyer's determination of the
Final Net Adjustment will become final and binding upon Buyer and Seller on
the sixtieth (60th) day after the Closing Balance Sheet is given to Seller
unless, prior to such sixtieth (60th) day, Seller gives Buyer written notice
stating that Seller disagrees with such determination and, to the extent
reasonably possible, stating in reasonable detail the nature, extent of, and
basis for, Seller's disagreement.
(c) Mutual Resolution. If Seller timely gives Buyer such a dispute
notice, then, during the thirty (30) days after Seller gives such dispute
notice, Seller and Buyer will attempt in good faith to resolve such
disagreement, and any mutual determination of the Final Net Adjustment by
Seller and Buyer will be final and binding upon each of them on the date of
such mutual determination.
(d) Resolution by Accounting Firm. If any such dispute cannot be
resolved by Buyer and Seller on or prior to such thirtieth (30th) day, then
such dispute will be referred to an independent public accounting firm of
national or regional stature which is designated and retained by Seller and
approved by Buyer (which approval Buyer will not unreasonably withhold) and
which has not been employed by either Party or any of its affiliates during
any portion of the three (3) years preceding the date of such retention, and
such firm's determination of the Final Net Adjustment will be final and
binding upon Buyer and Seller.
(e) Final Settlement. Payment of the amount of the Final Net
Adjustment will be made not later than the fifth (5th) business day after the
Final Net Adjustment is finally determined pursuant to this Section 1.5;
provided that, if any dispute arises over the amount to be paid, such payment
will nonetheless be made to the extent such amount is not in dispute.
(f) Costs. The prevailing Party in any determination pursuant to
Section 1.5(d) also will be entitled to recover from the non-prevailing Party
such prevailing Party's reasonable attorneys' fees and disbursements in
addition to any damages or other remedies awarded to the prevailing Party, and
the non-prevailing Party also will be required to pay all other costs and
expenses associated with the arbitration; provided that (1) 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 (2) if such firm is unable to allocate such costs and
expenses in such a manner, then each Party will pay the out-of-pocket expenses
incurred by it and the Parties will each pay one-half of the costs and
expenses of the independent public accounting firm retained pursuant to
Section 1.5(d). Such firm may designate the prevailing party for purposes of
this Section 1.5(f).
ARTICLE II
PURCHASE/CLOSING
----------------
2.1 Purchase Price.
(a) Amount and Form. In consideration of Seller's performance of this
Agreement and the transfer and delivery of the Assets to Buyer at the Closing,
Buyer will pay to Seller an aggregate amount equal to $26,500,000 (the "Cash
Purchase Price"), plus or minus the amount of any adjustments made pursuant to
Section 1.4, and Buyer will assume the Assumed Liabilities. Buyer will pay
the Cash Purchase Price on the Closing Date in the following manner:
(1) $24,500,000 will be paid by wire transfer of immediately
available funds to such bank account as Seller may designate on or prior
to the Closing Date; and
(2) $2,000,000 will be paid by wire transfer of immediately
available funds to such bank account as the Escrow Agent may designate,
for deposit in the Escrow Fund;
provided that, at its election, Buyer may apply all or any of the amount
specified in clause (1) above to the payment of any obligation which at the
time of the Closing is secured by any Lien on any Asset which is not a
Permitted Lien.
(b) Allocation of Cash Purchase Price. Buyer and Seller agree to
allocate the Cash Purchase Price among the Assets in a manner mutually
agreed upon by Seller and Buyer and consistent with the applicable
provisions of the Tax Code. Buyer and Seller agree to file (at such
times and in such manner as required by applicable Legal Requirements)
all relevant returns and reports (including Forms 8594, Asset
Acquisition Statements, and all income and other tax returns) on the
basis of such allocation, in each case to the extent permitted by
applicable Legal Requirements.
2.2 Closing Transactions.
(a) Closing; Delayed Closing. The closing of the purchase and sale of
the Assets and the assumption of the Assumed Liabilities pursuant to this
Agreement (the "Closing") will occur at a place located in Milwaukee,
Wisconsin, Chicago, Illinois or New York, New York and designated by Buyer by
written notice to Seller not less than five business days in advance of the
Closing, at 10:00 a.m. on a date to be so designated by Buyer (which date,
subject to the following sentence, will not be earlier than the FCC Approval
Date and will not be later than the tenth business day after the Final
Approval Date), or on such other date or at such other place or time as may be
mutually acceptable to Buyer and Seller. Notwithstanding the foregoing, if,
on any date for the Closing described in the preceding sentence or specified
pursuant to this sentence, any condition of Buyer or Seller specified in
Section 2.3 or Section 2.4 has not been satisfied (and will not be satisfied
by the delivery of documents by the Parties at the Closing) or waived by Buyer
or Seller, as the case may be, then the date for the Closing will be extended
to any date specified by Buyer to Seller, or by Seller to Buyer, with not less
than five business days' prior notice (subject to Buyer's and Seller's
respective conditions to Closing being satisfied or waived on such specified
date). The date upon which the Closing actually occurs is referred to as the
"Closing Date".
(b) Closing Transactions. Subject to the conditions set forth in
Sections 2.3 and 2.4, the Parties will consummate the following transactions
(including the purchase and sale of the Assets and the assumption of the
Assumed Liabilities, the "Closing Transactions") at the Closing:
(1) Seller will deliver to Buyer such deeds (including warranty
deeds with respect to the Owned Realty), bills of sale and other
instruments of assignment (including lease assignments with respect to
the Leased Realty) as Buyer reasonably deems necessary in order to
effect the sale of the Assets to Buyer;
(2) Buyer will deliver to Seller one or more instruments as
Seller reasonably deems necessary in order to give effect to the
assumption of the Assumed Liabilities by Buyer;
(3) Buyer will deliver the Cash Purchase Price, as described in
Section 2.1(a);
(4) there will be delivered to Buyer and Seller, as applicable,
the opinions, certificates and other documents and instruments required
to be delivered to such Parties under Sections 2.3 and 2.4; and
(5) each Party will execute and deliver to the other and to the
Escrow Agent the Escrow Agreement.
2.3 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the Closing Transactions is subject to the satisfaction (or waiver
by Buyer in writing) of the following conditions as of the time of the
Closing:
(a) Each representation and warranty set forth in Article IV will
be true and correct in all respects at and as of the time of the Closing
as though then made;
(b) Seller will have performed and complied in all material
respects with all of the covenants and agreements required to be
performed by Seller under this Agreement at or prior to the Closing, and
the title insurance commitment and surveys described in Section 3.7 will
have been obtained and will be in effect;
(c) No action or proceeding before any Governmental Entity will
be pending or threatened wherein an unfavorable judgment, decree,
injunction or order could prevent the consummation of the Closing
Transactions or result in the Closing Transactions being declared
unlawful or rescinded, or have a Material Adverse Effect;
(d) There will have occurred no Material Adverse Effect;
(e) The Final Approval Date will have occurred and all Mandatory
Consents will have been obtained and be in full force and effect;
(f) All filings (if any) required by the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act"), in
connection with the Closing Transactions will have been made, and any
waiting period required by the HSR Act in connection with the Closing
Transactions will have expired or been terminated;
(g) Buyer will have received opinions, dated the Closing Date, of
one or more legal counsel to Seller as to the matters set forth on the
attached Exhibit C;
(h) The First National Bank of Chicago, or another financial
institution which is reasonably acceptable to Buyer and Seller, will
have executed and delivered to Buyer and Seller the Escrow Agreement;
(i) On or prior to the Closing Date, Seller will have delivered
to Buyer all of the following (dated as of the Closing Date, except as
otherwise indicated):
(1) Copies of all Consents which have been obtained prior
to the Closing;
(2) A release and termination of each Lien on any Asset
which is not a Permitted Lien;
(3) A certificate, dated not earlier than the tenth day
prior to the Closing Date, of the secretary of state of the state
under the laws of which Seller is organized and each state in
which Seller is required to be qualified to do business stating
that Seller is in good standing or has comparable active status in
such state;
(4) A certificate of Seller certifying that each of the
conditions set forth in Sections 2.3(a), 2.3(b) and 2.3(d) has
been and is satisfied as of the time of the Closing; and
(5) Such other documents or instruments as Buyer reasonably
requests and are reasonably necessary to effect the transactions
contemplated by this Agreement; and
(j) All proceedings to be taken by Seller in connection with the
consummation of the Closing Transactions and the other transactions
contemplated by this Agreement and all certificates, opinions,
instruments and other documents required to be delivered to Buyer to
effect the transactions contemplated by this Agreement will be
reasonably satisfactory in form and substance to Buyer.
2.4 Conditions to Seller's Obligations. The obligation of Seller to
consummate the Closing Transactions is subject to the satisfaction (or waiver
by Seller in writing) of the following conditions as of the Closing Date:
(a) Each of the representations and warranties set forth in
Article V will be true and correct in all material respects at and as of
the time of the Closing as though then made;
(b) Buyer will have performed and complied in all material
respects with all of the covenants and agreements required to be
performed by Buyer under this Agreement at or prior to the Closing;
(c) The FCC Approval Date will have occurred;
(d) All filings (if any) required by the HSR Act in connection
with the Closing Transactions will have been made, and any waiting
period required by the HSR Act in connection with the Closing
Transactions will have expired or been terminated;
(e) No action or proceeding before any Governmental Entity will
be pending or threatened wherein an unfavorable judgment, decree,
injunction or order could prevent the consummation of the Closing
Transactions or result in the Closing Transactions being declared
unlawful or rescinded;
(f) Seller will have received opinions, dated the Closing Date,
of one or more legal counsel to Buyer as to the matters set forth on the
attached Exhibit D;
(g) The First National Bank of Chicago, or another financial
institution which is reasonably acceptable to Seller and Buyer, will
have executed and delivered to Buyer and Seller the Escrow Agreement;
(h) On or prior to the Closing Date, Buyer will have delivered to
Seller all of the following:
(1) Certificates, each dated not earlier than the tenth
business day prior to the Closing Date, of the secretaries of
state of the states of Delaware and Wisconsin, to the effect that
Buyer is in good standing or has comparable active status in each
such state;
(2) A certificate of Buyer dated as of the Closing Date
certifying that each of the conditions set forth in Sections
2.4(a) and 2.4(b) has been and is satisfied as of the time of the
Closing; and
(3) Such other documents or instruments as Seller
reasonably requests and are reasonably necessary to effect the
transactions contemplated by this Agreement; and
(i) All proceedings to be taken by Buyer in connection with the
consummation of the Closing Transactions and the other transactions
contemplated by this Agreement and all certificates, opinions,
instruments and other documents required to be delivered to Seller to
effect the transactions contemplated by this Agreement will be
reasonably satisfactory in form and substance to Seller.
ARTICLE III
PRE-CLOSING COVENANTS
---------------------
3.1 Operation and Maintenance of the Business. Prior to the Closing,
unless Buyer otherwise consents in writing (which consent Buyer will not
withhold unreasonably, with the reasonableness of Buyer's decision to withhold
any consent judged in light of the respective assets and rights to be acquired
and retained by Buyer and Seller hereunder, the respective liabilities and
obligations to be assumed and retained by Buyer and Seller hereunder, and the
likely respective benefits and burdens to Buyer and Seller of the proposed
action or non-action in question), Seller will:
(a) conduct its business and operations only in the ordinary
course of business (including with respect to maintenance of working
capital balances, collection of accounts receivable and payment of
accounts payable);
(b) cause its current insurance (or reinsurance) policies not to
be cancelled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage equal to or greater than the
coverage under the cancelled, terminated or lapsed policies are in full
force and effect;
(c) use commercially reasonable efforts to keep in full force and
effect its existence and all rights, franchises, Proprietary Rights and
contractual rights relating or pertaining to its business, including all
FCC Authorizations and the Network Affiliation Agreements;
(d) carry on its business in a manner consistent with Seller's
past practices and use reasonable efforts to keep its present business
organization, including the present business operations, physical
facilities, working conditions and employees and its present
relationships with lessors, licensors, suppliers, customers, independent
contractors and others having business relations with it;
(e) maintain the Assets in such state of repair as is reasonably
necessary for the conduct of its business consistent with then-present
needs and past practices, including replacement in accordance with
reasonably prudent business practices of any inoperable, worn out or
obsolete Assets with assets of quality consistent with reasonably
prudent business practices and then-current needs and, in the event of a
condemnation, casualty, loss or other damage to any of the Assets prior
to the Closing Date, whether or not Seller is insured, use commercially
reasonable efforts either to repair or replace such condemned or damaged
property or to use the proceeds of such condemnation or insurance in
such other manner as mutually agreed upon by Buyer and Seller;
(f) make capital and promotional expenditures in accordance with
its past custom and practice;
(g) maintain its books, accounts and records in accordance with
past custom and practice as used in the preparation of the Latest
Balance Sheet and the accompanying interim financial statements; and
(h) comply in all material respects with all applicable Legal
Requirements, and all contractual obligations, applicable to its
operations and business, and pay all applicable Taxes which are due and
payable (other than any such Taxes which are being contested in good
faith).
3.2 Negative Covenants of Seller. Prior to the Closing, without
Buyer's prior written consent (which consent Buyer will not withhold
unreasonably, with the reasonableness of Buyer's decision to withhold any
consent judged in light of the respective assets and rights to be acquired and
retained by Buyer and Seller hereunder, the respective liabilities and
obligations to be assumed and retained by Buyer and Seller hereunder, and the
likely respective benefits and burdens to Buyer and Seller of the proposed
action or non-action in question), Seller will not:
(a) take any action that would require disclosure under Section
4.6(b), 4.6(c), 4.6(d) or 4.6(e);
(b) enter into any Program Contract for which payment is to be
made in whole or in part by the provision of advertising time or
otherwise not in cash (a "Barter Program Contract");
(c) enter into any Program Contract which is not a Barter Program
Contract and under which any payment could be required to be made after
the Adjustment Time, unless both (i) the aggregate amount which will
become payable under such Program Contract does not exceed $10,000, and
(ii) the aggregate amount which will become payable under such Program
Contract and all other Program Contracts entered into after the date of
this Agreement and in reliance on clause (i) above and this clause (ii)
does not exceed $50,000;
(d) enter into any Trade arrangement, or increase the amount of
any liability or obligation under any existing Trade arrangement;
(e) other than as indicated in programming schedules provided to
Buyer prior to the date of this Agreement, broadcast any Double-Run
Program; or
(f) enter into any contract, agreement or transaction (other than
any Program Contract permitted to be entered into pursuant to Section
3.2(c)), except for any Excludable Contract which is entered into in the
ordinary course of business, at arm's length, with unaffiliated Persons.
3.3 Information.
(a) Interim Reports. Subject to Section 8.6(c), Seller will provide to
Buyer, for informational purposes only and in no way as a representation or
warranty of Seller, copies of all financial statements, budgets or other
summaries of actual or projected financial information, if any, as and when
the same are prepared on a monthly, quarterly, annual or other basis by
Seller for internal management or reporting purposes.
(b) Buyer's Access. Without limiting the foregoing but subject to
Section 8.6(c), from time to time at Buyer's request upon reasonable notice
and at reasonable times, Seller will provide to representatives of Buyer and
its financing parties and each of their agents, employees and accounting, tax,
legal and other advisors (collectively, the "Investigating Parties"):
(1) access to the Assets,
(2) access to all accounts, insurance policies, Tax Returns,
Contracts, and other books and records concerning the Station, the
Assets, Seller and its business and operations and such other relevant
information and materials as may be reasonably requested (including the
ability to make copies and abstracts thereof), and
(3) the opportunity to discuss the affairs, finances and accounts
of Seller with those directors (or equivalent officials), senior
management employees, key sales representatives and present and former
independent accountants of Seller which would reasonably be presumed to
have information which would be relevant for the purposes of conducting
Buyer's and such other parties' business, accounting, financial,
environmental, legal and other due diligence review regarding the Assets
and the Station and preparing for the financing and consummation of the
Closing Transactions and the conduct of the Station's business and
operation thereafter,
in each case so long as such access does not unreasonably interfere with the
business and operations of the Station.
(c) Exclusivity. Until this Agreement is terminated by its terms,
Seller will not (and Seller will not cause or permit any affiliate, director,
officer, employee, stockholder or agent of Seller to),
(1) solicit, initiate or encourage the submission of any proposal
or offer from any Person (including any of them) relating to any (A)
liquidation, dissolution or recapitalization of, (B) merger or
consolidation with or into, (C) acquisition or purchase of any material
asset (or any material portion of the assets) of, or any equity interest
in, or (D) similar transaction or business combination involving, Seller
or any Assets (other than dispositions of obsolete or worn-out assets
which are disposed of in the ordinary course of business and
dispositions of assets which are replaced with assets of equal or
greater value and utility) or
(2) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any other Person
to do or seek any of the foregoing.
Until this Agreement is terminated by its terms, Seller will notify Buyer if
any Person makes any proposal or offer with respect to any of the foregoing.
3.4 Consents Generally. Seller will use commercially reasonable
efforts (without being required to make any payment not specifically required
by the terms of any related Contract or Legal Requirement or agree to any
material modification or waiver of any term of any Contract or any other
right) to (a) obtain or cause to be obtained prior to the Closing Date all
Consents (other than pursuant to any Excludable Contract), and (b) cause each
such Consent to be effective as of the Closing Date (whether it is granted or
entered into prior to or after the Closing), and Buyer will use commercially
reasonable efforts not to interfere with such efforts. Seller will not seek,
as a term or condition of any Consent, a release from liabilities or
obligations of Seller.
3.5 Application(s) for FCC Consent. As soon as practicable after the
date of this Agreement, but in any event on or prior to March 13, 1996, each
Party will complete its portion of application(s) to the FCC for the FCC
Consents and, together with the other Persons who are required to join in such
filings, file such application(s) with the FCC. Each Party will diligently
take or cooperate in the taking of all reasonable steps that are necessary,
proper or desirable to expedite the preparation and filing of such
application(s) and their prosecution to Final Orders. Seller will provide
Buyer, and Buyer will provide Seller, with a copy of any pleading, order or
other document served on such Person relating to any such application(s),
unless such pleading, order or other document indicates on its face that it
was served upon or delivered to Buyer or Seller, as the case may be. Neither
Buyer nor Seller will, and each of them will use its best efforts not to cause
or permit any of its officers, directors, partners or other Affiliates to,
take any action which could reasonably be expected to materially and adversely
affect the likelihood of the grant of any FCC Consent.
3.6 Notice and Cooperation Generally.
(a) Notice of Breach. Promptly after it obtains knowledge thereof, but
in all events prior to the Closing, Buyer will inform Seller, and Seller will
inform Buyer, of any fact or circumstance which, if it existed on the Closing
Date, would constitute a breach of any representation or warranty of itself
set forth in this Agreement or any breach of any of its covenants or agreements
set forth in this Agreement, or any threatened or instituted proceeding of a
type described in Section 2.3(c) or Section 2.4(c). No such knowledge or
notice will affect any Party's right to indemnification or other remedy
provided for in this Agreement in respect of any such matter of which it
obtains knowledge or receives such notice.
(b) Notice of Certain Other Events. Without limiting the foregoing,
Seller will give prompt written notice to Buyer (i) if any material portion of
the Assets suffers damage on account of fire, explosion, or other cause of any
nature which is sufficient to prevent or materially affect the business or
operation of the Station in any material respect, (ii) if the regular
broadcast transmission of the Station in the normal and usual manner in which
it heretofore has been operating is interrupted or interfered with in any
material manner, (iii) if Seller receives a National Labor Relations Board
union election petition relating to employees of the Station, (iv) if the
Station receives notice from any Market Cable System carrying the Station's
signal of such Market Cable System's intention to delete the Station from
carriage or change the Station's channel position on such Market Cable System,
or (v) any party thereto takes any action or makes any request (or gives any
notice to the effect that it intends to take any action or make any request)
with respect to the cancellation, amendment, termination or other modification
of any Network Affiliation Agreement.
(c) Efforts to Close. Each Party will use commercially reasonable
efforts to cause the conditions to Buyer's and Seller's obligations to
consummate the Closing Transactions to be satisfied (including the
preparation, execution and delivery of all agreements and instruments
contemplated hereunder to be executed and delivered by such Party in
connection with or prior to the Closing).
3.7 Real Estate Matters.
(a) Lease-Related Materials. Prior to the Closing, Seller will obtain,
at Seller's expense, with respect to each parcel of Leased Realty, the
following documents, in such forms as Buyer may reasonably request: (i)
estoppel letters and memoranda of lease in recordable form from the lessor
and/or sublessor(s) thereof, and (ii) non-disturbance agreements from the
lender(s) of any such lessor and/or sublessor(s).
(b) Title Insurance. Prior to the Closing, Seller will use reasonable
efforts to assist Buyer, at Seller's expense, to obtain, for the benefit of
Buyer from and after the Closing and at Seller's expense, all documents
necessary (including estoppel certificates, owner's affidavits, indemnities
and GAP undertakings) for a final commitment for an ALTA Owners or Leasehold
Policy of Title Insurance, as the case may be, Form B-1970, for each parcel of
Owned Realty or Leased Realty, issued by a title insurer designated by Buyer
(the "Title Insurer"), in such amount as Buyer reasonably determines to be the
fair market value thereof (including all Improvements thereon), insuring
Buyer's interest in such parcel, subject only to the Permitted Liens, and with
such other endorsements and other terms and conditions as Buyer may reasonably
request.
(c) Surveys. At Buyer's request, Seller will provide all documentation
and use all commercially reasonable efforts necessary to procure, at Seller's
expense, for the benefit of Buyer from and after the Closing, in preparation
for the Closing, current surveys of each parcel of Owned Realty or Leased
Realty disclosing no survey defects or encroachments which materially interfere
with the current business and operation of the Station, prepared by a licensed
surveyor and conforming to 1992 ALTA/ACSM Minimum Detail Requirements for Urban
Land Title Surveys, and such standards as the Title Insurer may reasonably
require as a condition to the removal of any survey exceptions from the
commitment for the title insurance policy described in Section 3.7(b), and
certified to Buyer, Buyer's lenders and the Title Insurer, in a form
sufficient to permit the issuance of the title policies described in Section
3.7(b).
3.8 Copies of New Contracts. Promptly after it is entered into, Seller
will deliver to Buyer a true and correct copy of any written Contract (other
than any Excludable Contract), and a complete and correct summary of the
material terms and conditions of any oral Contract (other than any Excludable
Contract), which is entered into by Seller after the date of this Agreement
and prior to the Closing, whether or not Buyer's consent to the entry into
such Contract is required pursuant to Section 3.1 or Section 3.2.
3.9 HSR Act. Each Party will use reasonable efforts to prepare and, at
such time as Buyer designates, file with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "DOJ"), any materials and information required to
be filed with or provided to the FTC or the DOJ pursuant to the HSR Act with
respect to the transactions contemplated by this Agreement. Buyer will pay
the filing fees associated with any such filing. Buyer and Seller each will
promptly supply any additional information which reasonably may be required or
requested by the FTC or the DOJ. Buyer and Seller each will take all such
actions and will file and use reasonable efforts to have declared effective or
approved, all documents and notifications with any governmental or regulatory
bodies, as may be necessary or may reasonably be requested under federal
antitrust laws for the consummation of the transactions contemplated by this
Agreement.
3.10 No Premature Assumption of Control. Nothing contained in this
Agreement will give Buyer any right to control the programming, operations,
or any other matter relating to the Station prior to the Closing, and Seller
will have complete control of the programming, operations and all other
matters relating to the Station up to the time of the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLER
---------
As a material inducement to Buyer to enter into this Agreement, Seller
hereby makes the representations and warranties set forth in this Article IV
as of the date of this Agreement. Seller agrees that, if the Closing occurs,
then as of the time of the Closing each representation and warranty set forth
in this Article IV will be deemed to be remade by Seller as of the time of the
Closing as a material inducement to Buyer to consummate the Closing
Transactions. Buyer agrees that Buyer will have no remedy under Section
7.2(a) in respect of any inaccuracy which exists as of the date of this
Agreement or any other date in any representation or warranty of Seller which
is so remade if such inaccuracy does not exist as of the time of the Closing.
Buyer further agrees that, if this Agreement is terminated prior to the
Closing, Buyer will have no remedy under Section 6.2 or any other provision of
this Agreement in respect of any inaccuracy which exists as of the date of
this Agreement or any other date in any representation or warranty of Seller
if such inaccuracy does not exist at the time of such termination.
4.1 Organization and Power. Seller is a limited partnership, validly
existing and in good standing (or has comparable active status) under the laws
of the State of Wisconsin and is qualified to do business in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified and in which the failure to so qualify could
reasonably be likely to have a Material Adverse Effect. Seller has full
partnership power necessary to own and operate its properties and carry on its
business as now conducted and as proposed by Seller to be conducted.
4.2 Authorization of Transactions. Seller has full partnership power
and authority to execute and deliver this Agreement and all other Transaction
Documents to which Seller is a party and to perform its obligations hereunder
and thereunder. The appropriate partner of Seller has duly approved this
Agreement and all other Transaction Documents to which Seller is a party and
has duly authorized Seller's execution and delivery of this Agreement and such
Transaction Documents and the performance of Seller's obligations hereunder
and thereunder. No other proceeding or action on the part of Seller or any of
its partners is necessary to approve and authorize Seller's execution and
delivery of this Agreement or any other Transaction Document to which Seller
is a party or the performance of Seller's obligations hereunder or thereunder.
This Agreement and all other Transaction Documents to which Seller is a party
have been duly executed and delivered by Seller and constitute the valid and
binding agreements of Seller, enforceable against Seller in accordance with
their terms, except as enforceability hereof or thereof may be limited by
bankruptcy, insolvency or other laws affecting creditor's rights generally and
limitations on the availability of equitable remedies.
4.3 Subsidiaries; Investments. The Assets do not include any shares of
capital stock or any other security, interest or investment in, or loan to
(other than extensions of trade credit in the ordinary course of business),
any other Person or any right which is exercisable or exchangeable for or
convertible into any capital stock or other security, interest or investment
in any other Person.
4.4 Absence of Conflicts. Except for the FCC Consents, Consents
required under the Network Affiliation Agreements or the HSR Act, or as set
forth in Schedule 4.4, neither the execution, delivery and performance of this
Agreement or any other Transaction Document by Seller nor the consummation by
Seller of the transactions contemplated hereby or thereby (a) does or will (i)
conflict with or result in any breach of any of the provisions of, (ii)
constitute a default under, (iii) result in a violation of, (iv) give any
third party the right to terminate or to accelerate any obligation under, or
(v) result in the creation of any Lien upon any Asset, in each case under the
provisions of the partnership agreement or certificate of limited partnership
of Seller or any indenture, mortgage, lease, loan agreement or other
agreement, instrument or Contract or any Legal Requirement by which Seller is
bound or by which Seller or any Asset is affected, or to which Seller or any
Asset is subject, or (b) without limiting the foregoing, requires any Consent
of any Governmental Entity or any other Person.
4.5 Financial Statements. Attached to this Agreement as Schedule 4.5
are the following (collectively, the "Financial Statements"):
(a) the audited balance sheets of Seller and the related
statements of income and cash flows for its fiscal years ending December
in each of 1992, 1993 and 1994;
(b) the unaudited balance sheet of Seller (the "Latest Balance
Sheet") and the related statements of income and cash flows for the
twelve-month period ending on December 31, 1995;
Each such financial statement (in each case including the notes thereto, if
any) has been prepared in accordance with generally accepted accounting
principles, consistently applied, subject (in the case of the statements
described in clause (b) above) to the lack of footnote disclosure and changes
resulting from normal yearend adjustments, none of which changes would, if
properly presented, in the aggregate, reflect a Material Adverse Effect.
4.6 Certain Developments. Other than pursuant to this Agreement, since
the date of the Latest Balance Sheet, Seller has not:
(a) suffered any theft, damage, destruction or casualty loss to
any material Asset or any material portion of the Assets, or any
substantial destruction of Seller's books and records (in each case
whether or not covered by insurance);
(b) sold, leased, assigned or transferred any material Asset or
any material portion of the Assets (other than dispositions of obsolete
or worn-out assets disposed of in the ordinary course of business and
dispositions of assets which have been replaced with assets of equal or
greater value and utility);
(c) waived any right of material value;
(d) entered into any other material transaction other than in the
ordinary course of business, or materially changed any material business
practice; or
(e) made or granted any bonus or any wage, salary or compensation
increase in excess of $5,000 per year to any employee or independent
contractor, except pursuant to the express terms of any written Contract
which is described on Schedule 4.10A or as otherwise described on
Schedule 4.10A under any oral Contract.
4.7 Title to, Condition and Sufficiency of Assets.
(a) Owned Properties. The real property described on Schedule 7A (the
"Owned Realty") constitutes all of the fee simple interests in real property
owned by Seller. With respect to each parcel of Owned Realty: (i) such
parcel is free and clear of all Liens, other than Permitted Liens, and Seller
owns good and marketable title thereto; (ii) there are no leases, subleases,
licenses, concessions, or other agreements, written or oral, granting to any
Person the right of use or occupancy of any portion of such parcel; and (iii)
there are no outstanding options or rights of first refusal to purchase such
parcel or any portion thereof or interest therein.
(b) Leased Properties. The leases and subleases described on
Schedule 4.7B constitute all of the Leases. Each Lease is in full force and
effect and Seller holds a valid and existing leasehold or subleasehold
interest thereunder in the real property which is subject thereto
(collectively, the "Leased Realty"). The Owned Realty and the Leased Realty
constitute all of the interests in real property held or used by Seller.
Seller has delivered to Buyer complete and accurate copies of each of the
Leases, in each case including all modifications and amendments thereto. With
respect to each Lease: (i) such Lease is legal, valid, binding, enforceable
and in full force and effect; (ii) subject to obtaining any Consent described
on Schedule 4.4, the consummation of the Closing Transactions will not cause
such Lease to cease to be legal, valid, binding, enforceable and in full force
and effect on substantially the same terms as are presently in effect; (iii)
Seller is not in breach or default in any material respect under, and no event
has occurred which, with notice or lapse of time, would constitute such a
breach or default of Seller or permit termination, modification or
acceleration of, such Lease; (iv) to Seller's knowledge, no other party to
such Lease is in breach or default in any material respect under, and no event
has occurred which, with notice or lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration of, such
Lease; (v) Seller has not (and, to Seller's knowledge, no other party to such
Lease has) repudiated any provision thereof; (vi) there are no disputes, oral
agreements, or forbearances in effect as to such Lease; (vii) such Lease has
not been modified in any respect, except to the extent that such modifications
are disclosed by the documents delivered to Buyer; and (viii) Seller has not
assigned, transferred, conveyed, mortgaged, deeded in trust or caused any Lien
(other than any Permitted Lien) to exist with respect to any interest of
Seller in such Lease.
(c) No Proceedings. There is no proceeding in eminent domain or any
similar proceeding pending, or (to Seller's knowledge) threatened, affecting
Seller's interest in any Owned Realty or Leased Realty. There exists no writ,
injunction, decree, order or judgment outstanding, nor any litigation,
pending, or (to Seller's knowledge) threatened, relating to the ownership,
lease, use, occupancy or operation by Seller of any Owned Realty or Leased
Realty.
(d) Current Use. Except as set forth on Schedule 4.7D: (i) the
current use by Seller of the Realty does not violate in any material respect
any Legal Requirement, instrument of record or agreement affecting any Owned
Realty or Leased Realty, and (ii) there is no violation in any material
respect of any applicable covenant, condition, restriction, easement or
agreement, in each case in any manner which could reasonably be likely to have
a Material Adverse Effect.
(e) Condition and Operation of Improvements. As to each parcel of
Owned Realty and, to Seller's knowledge, as to each parcel of Leased Realty:
(i) all components of all buildings, structures and other improvements
included upon or within such Owned Realty or Leased Realty (the
"Improvements"), including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, air pollution emission capture and
abatement, plumbing, electrical, mechanical, sewer, waste water and paving and
parking equipment systems and facilities included therein, are in reasonably
adequate condition to operate such facilities as currently used and proposed
by Seller to be used, occupied or operated, and there are no facts or
conditions affecting any of the Improvements which would, individually or in
the aggregate, interfere in any significant respect with the use, occupancy or
operation thereof as currently used or proposed by Seller to be used, occupied
or operated; (ii) there are no structural deficiencies in any buildings
located upon any Owned Realty or Leased Realty; and (iii) no Improvement or
portion thereof is dependent for its access, operation or utility on any land,
building or other improvement not included in any Owned Realty or Leased
Realty.
(f) Ownership of Assets. Except as set forth on Schedule 4.7F, Seller
owns good and (in the case of the Owned Realty) marketable title in and to, or
a valid leasehold interest in, all of the Assets, free and clear of all Liens
(other than Permitted Liens).
(g) Condition of the Assets. The Assets (other than Assets, if any,
that are not necessary for or material to the business or operation of the
Station) are in a condition which is reasonably sufficient for the conduct of
the business and operations of the Station in the ordinary course and there
are no known latent defects with respect thereto. The Assets include all
buildings, machinery, equipment and other tangible assets and real property
interests, intangible assets and other assets, rights and properties
reasonably necessary for or material to the conduct of the business and
operation of the Station as currently conducted.
4.8 FCC Matters.
(a) Generally. Schedule 4.8A contains a complete list of all material
FCC Authorizations. Taken together, the FCC Authorizations constitute all of
the licenses and authorizations required under the Communications Act and the
FCC Regulations for the operation of the Station and the conduct of the
business of Seller as now currently conducted and as proposed by Seller to be
conducted, and no further FCC Authorization is necessary for the continuation
of the operation of the Station as now currently conducted. Each FCC
Authorization described on Schedule 4.8A is in full force and effect and is
not subject to or scheduled for renewal prior to the date specified for such
FCC Authorization on Schedule 4.8A. Each FCC Authorization is valid for the
full term thereof, and Seller has no reason to believe that any FCC
Authorization 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). There is not pending (or, to Seller's knowledge,
threatened) any action by or before the FCC to revoke, cancel, rescind,
modify, or refuse to renew in the ordinary course any FCC Authorization, and
there is not now pending, issued or outstanding (or, to Seller's knowledge,
threatened) by or before the FCC, any investigation, order to show cause,
cease and desist order, notice of violation, notice of apparent liability, or
notice of forfeiture, petition or complaint with respect to Seller, the
Station or any FCC Authorization. The Station is operating in compliance in
all material respects with the FCC Authorizations, the Communications Act and
the FCC Regulations. To Seller's knowledge, the Station is not 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. Seller has not, since January 1, 1993, received
any written notice to the effect that it or the Station is causing
objectionable interference to the transmissions of any other television
station or communications facility or received any written complaints with
respect thereto. To Seller's knowledge, no other television station or
communications facility is causing objectionable interference with the
Station's transmissions or the public's reception of the Station's
transmissions.
(b) Cable Matters. Schedule 4.8B sets forth (or has appended to it)
the items described in clauses (i) through (viii) below:
(i) a list of all U.S. cable television systems which carry the
Station's signal;
(ii) a list of all Market Cable Systems to which the Station has
provided a must-carry notice or retransmission consent notice in
accordance with the provisions of the Cable Television Consumer
Protection and Competition Act of 1992 and the FCC Regulations
(collectively, the "Cable Act Requirements"), and a list of all Market
Cable Systems to which the Station has not provided any such must-carry
or retransmission consent notice;
(iii) a list of all retransmission consent and/or copyright
indemnification agreements, if any, entered into by Seller (other than
agreements entered into by Fox Broadcasting Company, as agent for the
Station, copies of which have not been provided to Seller) with respect
to the Station;
(iv) a list of all retransmission consent notices referred to in
clause (ii) above, if any, which were not delivered to the Market Cable
System in question on or before June 17, 1993;
(v) a list of all Market Cable Systems, if any, which are
carrying the Station's signal and which have notified Seller of such
Market Cable System's intention to delete the Station from carriage or
to change the Station's channel position on such cable system, other
than pursuant to any agreement described in clause (iii) above;
(vi) a list of all notices, if any, received by Seller from any
Market Cable System alleging that the Station does not deliver an
adequate signal level, as defined in Section 76.55(c)(3) of the FCC
Regulations, to such Market Cable System's principal headend (other than
any such notice as to which such failure has been remedied or been
determined not to exist), and all further correspondence between Seller
and any such Market Cable System relating to such notice;
(vii) a list of all pending petitions for special relief to
include any additional community or area as part of the Station's
television market, as defined in Section 76.55(e) of the FCC
Regulations, if any; and
(viii) a list of all pending petitions for special relief
requesting the deletion of any community or area from the Station's
television market, if any.
Seller has furnished to Buyer true and correct copies of all notices,
agreements, correspondence, petitions and other items described in clauses
(iii) through (viii) of this Section 4.8(b).
4.9 Taxes. Seller has timely filed all federal, state, local and
foreign income, information and other Tax Returns which are required to be
filed by Seller with respect to Taxes; all such Tax Returns have been prepared
in compliance with all applicable Legal Requirements and are true, complete
and accurate in all material respects; all Taxes imposed upon Seller or upon
any of the assets, income or franchises of Seller have been timely paid (or
are being contested in good faith, in which case Seller has disclosed the same
to Buyer in writing and has made arrangements which are reasonably
satisfactory to Buyer for the payment thereof without recourse to Buyer or any
Asset) or, if not yet due and payable, will be timely paid (or will be
contested in good faith, in which case Seller will disclose the same to Buyer
in writing and will make arrangements which are reasonably satisfactory to
Buyer for the payment thereof without recourse to Buyer or any Asset) and are
adequately accrued on Seller's books and records; there are no actual or
proposed Tax deficiencies, assessments or adjustments with respect to Seller
or any assets or operations of Seller; no consent has been given with respect
to Seller to extend the time in which any Tax may be assessed or collected by
any Taxing authority; Seller has not extended the date on which any Tax Return
was or is to be filed; there are no ongoing or pending Tax audits by any
Taxing authority against Seller; Seller is not and never has been a member of
an affiliated group (as defined in Section 1504(a) of the Tax Code) which
files a consolidated return; no written claim has ever been received by Seller
from a taxing authority in a jurisdiction where Seller does not pay Taxes or
file Tax Returns to the effect that Seller is or may be subject to Taxes
assessed by such jurisdiction; and Seller is not party to or bound by any
agreement relating to the allocation or payment of Taxes with any Person and
does not have any current or potential contractual or other obligation to
indemnify any other Person with Taxes.
4.10 Contracts and Commitments.
(a) Listing. Except for the Transaction Documents, the Network
Affiliation Agreements, any Contract described on Schedule 4.10A, any
Excludable Contract, or any customary licensing agreement entered into with
BMI, ASCAP or a similar organization in the ordinary course of business after
the date of this Agreement, Seller is not a party to or bound by, and neither
Seller nor any Asset is subject to, any Contract, whether written or oral,
including any:
(i) collective bargaining agreement or contract with any labor
union or any bonus, pension, profit sharing, retirement or any other
form of deferred compensation plan or any hospitalization insurance or
similar plan or practice;
(ii) contract for the employment or engagement of any individual
employee or other Person (including as an independent contractor or on a
consulting basis) other than at the will of Seller, or any agreement to
provide severance benefits upon any termination of employment or other
engagement;
(iii) agreement, indenture or other Contract placing a Lien
(other than any Permitted Lien) on any Asset;
(iv) agreement with respect to the lending or investing of funds
by Seller;
(v) network affiliation, license or royalty agreement;
(vi) Time Sales Contract;
(vii) Program Contract;
(viii) guaranty of any obligation of any other Person, other than
endorsements made for collection made in the ordinary course of
business;
(ix) sales representation agreement;
(x) agreement with any rating service or intellectual property
licensing organization;
(xi) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually or entered into outside of the
ordinary course of business;
(xii) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned
or controlled by it;
(xiii) agreement, contract or understanding pursuant to which
Seller subcontracts work to third parties; or
(xiv) other agreement material to the business or operation of
the Station, whether or not entered into in the ordinary course of
business.
(b) Absence of Breach, etc. Each of the items which is described or
required to be described on Schedule 4.10A is in full force and effect; no
item which is described or required to described on Schedule 4.10A has been
breached in any material respect, cancelled or repudiated by Seller or (to
Seller's knowledge) by any other party thereto; no such other party has
indicated in writing or orally to Seller that it will stop or decrease the
rate of business done with Seller or the Station or that it desires to
renegotiate its arrangements with Seller; Seller has performed in all material
respects all obligations required to be performed by it in connection with the
items which are described or required to be described on Schedule 4.10A and is
not in receipt of any claim of default under any such item; and Seller has no
present expectation or intention of not fully performing any obligation
pursuant to any item which is described or required to be described on
Schedule 4.10A.
(c) Available Program Runs. With respect to each Program Contract, the
"Available Runs" specified on Schedule 4.10C is the number of unused
exhibitions pursuant to the cash portion, if any, of such Program Contract as
of the corresponding date specified on such Schedule.
(d) Copies. Seller has furnished to Buyer a true and correct copy of
all written contracts and other items which are described or required to be
described on Schedule 4.10A, in each case together with all amendments,
waivers or other changes thereto. Schedule 4.10A contains an accurate and
complete description of all material terms of all oral contracts and other
oral items which are described or required to be described on such Schedule.
4.11 Proprietary Rights.
(a) Listing. Schedule 4.11A sets forth a complete and correct list of:
(i) all registered Proprietary Rights and all pending applications for
registration of Proprietary Rights owned, filed or used by Seller, (ii) all
call letters, if any, used by Seller with respect to the Station other than
"WMSN", and (iii) all other licenses or similar agreements or arrangements to
which Seller is a party either as licensee or licensor for the Proprietary
Rights.
(b) Ownership; Infringement. Except as set forth on Schedule 4.11B,
(i) Seller owns and possesses all right, title and interest in and to, or has
a valid and enforceable right to use, the call letters "WMSN" and each of the
call letters and registered Proprietary Rights described or required to be
described on Schedule 4.11A, free and clear of all Liens (other than Permitted
Liens), and no claim by any third party contesting the validity,
enforceability, use or ownership of any of the foregoing has been made, is
currently outstanding or, to Seller's knowledge, is threatened, (ii) no loss
or expiration of any material Proprietary Right of any such type or material
group of such Proprietary Rights is pending, reasonably foreseeable or, to
Seller's knowledge, threatened, (iii) Seller has not received any notice of,
nor is Seller aware of any facts which indicate a likelihood of, any
infringement or misappropriation by, or any conflict with, any third party
with respect to any such Proprietary Right, including any demand or request
that Seller license rights from a third party, (iv) Seller has not in any
material respect infringed, misappropriated or otherwise conflicted with any
rights of any third party and Seller is not aware of any infringement,
misappropriation or conflict which will occur as a result of the continued
operation of Seller's business as currently conducted or as proposed by Seller
to be conducted, and (vi) to Seller's knowledge, the call letters "WMSN" and
the call letters and registered Proprietary Rights described or required to be
described on Schedule 4.11A have not in any material respect been infringed,
misappropriated or conflicted by any third party.
(c) Protective Measures. Seller has taken all reasonably necessary
actions to maintain and protect the call letters "WMSN" and all Proprietary
Rights described or required to be described on Schedule 4.11A so as to not
adversely affect the validity or enforcement of such Proprietary Rights, it
being understood that Seller has not registered such call letters or
Proprietary Rights with any Governmental Entity except as described on
Schedule 4.11A. To Seller's knowledge, the owners of the Proprietary Rights
licensed to Seller have taken all reasonably necessary and desirable actions
to maintain and protect such Proprietary Rights.
4.12 Litigation; Proceedings. Except for matters affecting the
broadcast television industry generally, there are no actions, suits,
proceedings, orders, judgments, decrees or investigations pending (or, to
Seller's knowledge, threatened) against or affecting Seller at law or in
equity, or before or by any Governmental Entity, and, to Seller's knowledge,
there is no basis for any of the foregoing.
4.13 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf
of Seller.
4.14 Governmental Licenses and Permits. Schedule 4.14 contains a
complete listing and summary description of all material permits, licenses,
franchises, certificates, approvals and other authorizations of foreign,
federal, state and local governments or other similar rights, other than the
FCC Authorizations (collectively, the "Non-FCC Authorizations"), owned or
possessed by Seller or used by Seller in the conduct of its business. Seller
owns or possesses all right, title and interest in and to all of the Non-FCC
Authorizations which are necessary or material to conduct its business as
currently conducted or proposed by Seller to be conducted. No loss or
expiration of any Non-FCC Authorization is pending, reasonably foreseeable or,
to Seller's knowledge, threatened (including as a result of the transactions
contemplated by this Agreement) other than by reason of expiration in
accordance with the terms thereof.
4.15 Employees. To Seller's knowledge as of the date of this
Agreement, no key executive employee and no group of employees or independent
contractors of Seller has any plans to terminate his, her or its employment or
relationship as an independent contractor with Seller. Seller has complied in
all material respects with all applicable Legal Requirements relating to the
employment of personnel and labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes, the Worker Adjustment and Retraining Act, and
the Immigration Reform and Control Act of 1986. Except as described on
Schedule 4.15, Seller has not experienced any strike, grievance, unfair labor
practice claim or other material employee or labor dispute. Seller has not
engaged in any unfair labor practice. To Seller's knowledge, there is no
organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of Seller. Schedule 4.15 sets forth
the name and the annual or, as the case may be, hourly rate of compensation
(including salary, bonuses and commissions) as of the date of this Agreement
for each Person engaged by Seller (including independent contractors) who
received in 1995 or who will receive in 1996 (determined as of the date of
this Agreement, at then-current rates of compensation, taking into account any
then-anticipated increases therein) taxable compensation from Seller in excess
of $50,000.
4.16 Employee Benefit Plans. Except as set forth on Schedule 4.16,
Seller has no obligation to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) (a) any
"multiemployer plan" (as that term is defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (b) any plan or
arrangement, whether or not terminated, which provides medical, health, life
insurance or other welfaretype benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the Tax Code or as required
under applicable state law), (c) any employee plan which is a taxqualified
"defined benefit plan" (as that term is defined in Section 3(35) of ERISA),
whether or not terminated, or (d) any employee plan which is a taxqualified
"defined contribution plan" (as that term is defined in Section 3(34) of
ERISA), whether or not terminated.
4.17 Affiliate Transactions. Other than as described on Schedule 4.17,
no Insider (a) is a party to any agreement, contract, commitment or
transaction with Seller or which pertains to the business or operation of the
Station (other than in such Insider's capacity as an employee of Seller, the
compensation for which is reflected on Schedule 4.15), or (b) has any interest
in any Asset, other than indirectly, as a partner of Seller.
4.18 Compliance with Laws. Except as set forth on Schedule 4.18,
Seller and each of its independent contractors, agents and employees have
complied in all material respects with all applicable Legal Requirements which
affect the business or operations of the Station (including Seller's
broadcasting, production, promotion, marketing and sales activities) or any
Assets and to which Seller or any Asset is subject, and no claim has been
filed during the previous five years against Seller alleging a violation in
any material respect of any such Legal Requirement. Except as set forth on
Schedule 4.18, Seller is not now subject (nor has Seller been subject during
the previous five years) to any investigation, penalty assessment, or audit
(in each case of which Seller has been made or became aware) by any
Governmental Entity or to any other allegation that Seller (including any
agent, representative or broker acting on behalf of Seller) violated the
regulations of any such Governmental Entity or made a material false statement
or omission to any Governmental Entity.
4.19 Environmental Matters.
(a) Compliance Generally. Seller has complied in all material
respects, and is in compliance in all material respects, with all
Environmental and Safety Requirements.
(b) Permits. Seller has obtained and complied in all material respects
with, and is in compliance in all material respects with, all permits,
licenses and other authorizations that are required pursuant to Environmental
and Safety Requirements for the occupation of its facilities and the operation
of its business, and such permits, licenses and other authorizations may be
relied upon for continued lawful conduct of the business and operations of the
Station immediately after the Closing Transactions without transfer,
reissuance, or other approval or action by any Governmental Entity or other
Person.
(c) Claims. Seller has not received any claim, complaint, citation,
report or other notice regarding any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, arising under
Environmental and Safety Requirements.
(d) Storage Tanks. Except for the above-ground liquified petroleum
tank located at the transmitter site leased by Seller as lessee, no
above-ground or underground storage tank exists at any property owned, used,
leased or occupied or formerly owned, used, leased or occupied in connection
with the business or operation of the Station.
(e) Operations. To Seller's knowledge, no facts, events or conditions
relating to the past or present facilities, properties or operations of Seller
will prevent, hinder or limit continued compliance in all material respects
with Environmental and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to Environmental
and Safety Requirements, including any Environmental and Safety Requirement
relating to onsite or offsite releases or threatened releases of hazardous or
otherwise regulated materials, substances or wastes, personal injury, property
damage or natural resources damage; provided that nothing in this Section
4.19(e) will constitute a representation or warranty as to the necessity to
comply with or to the effect of Environmental and Safety Requirements due to
construction, remodeling, or other changes to or additions in operations which
may be undertaken by Buyer after the Closing with respect to the Station and
which are not contemplated to be undertaken by Seller as its business is
presently conducted or proposed to be conducted.
(f) Transaction-Triggered Requirements. Neither the execution and
delivery of this Agreement nor the consummation of the Closing Transactions
imposes any obligations for site investigation or cleanup, or notification to
or consent of Governmental Entity or any other Person, pursuant to any
"transaction-triggered" Environmental and Safety Requirement.
(g) Liability for Others. Seller has not, either expressly or by
operation of law, assumed or undertaken any liability or corrective or
remedial obligation of any other Person relating to Environmental and Safety
Requirements.
(h) Environmental Liens. No Environmental Lien has attached to any
property owned, leased or operated by Seller arising out of any action or
omission of Seller or, to Seller's knowledge, any other Person.
4.20 Disclosure. With respect to Seller, the Assets and the Station,
neither this Agreement, nor any of the schedules or Exhibits hereto, contains
any untrue statement of a material fact or, when considered as a whole, omits
a material fact necessary to make the statements contained herein or therein,
in light of the circumstances in which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As a material inducement to Seller to enter into this Agreement, Buyer
hereby makes the representations and warranties set forth in this Article V as
of the date of this Agreement. Buyer agrees that, if the Closing occurs, then
as of the time of the Closing each representation and warranty set forth in
this Article V will be deemed to be remade by Buyer as of the time of the
Closing as a material inducement to Seller to consummate the Closing
Transactions. Seller agrees that Seller will have no remedy under Section
7.2(b) in respect of any inaccuracy which exists as of the date of this
Agreement or any other date in any representation or warranty of Buyer which
is so remade if such inaccuracy does not exist as of the time of the Closing.
Seller further agrees that, if this Agreement is terminated prior to the
Closing, Seller will have no remedy under Section 6.2 or any other provision
of this Agreement in respect of any inaccuracy which exists as of the date of
this Agreement or any other date in any representation or warranty of Buyer if
such inaccuracy does not exist at the time of such termination.
5.1 Organization and Power. Buyer (if Buyer is not a natural person)
is a corporation, partnership or other entity which is validly existing and
in good standing (or has comparable active status) under the laws of the
jurisdiction of its purported organization and is qualified to do business in
every jurisdiction in which the execution, delivery and performance of its
obligations under this Agreement requires it to be so qualified. Buyer has
full power and authority (or, if Buyer is a natural person, legal capacity) to
execute, deliver and perform its obligations under this Agreement and the
other Transaction Documents to which Buyer is a party.
5.2 Authorization of Transaction. No other proceedings or actions on
the part of Buyer are necessary to approve and authorize Buyer's execution
and delivery of this Agreement or any other Transaction Documents to which
Buyer is a party or the performance of Buyer's obligations hereunder or
thereunder. This Agreement constitutes, and each of the other Transaction
Documents to which Buyer is a party will when executed constitute, a valid and
binding obligation of Buyer, enforceable in accordance with their terms,
except as enforceability hereof may be limited by bankruptcy, insolvency or
other laws affecting creditor's rights generally and limitations on the
availability of equitable remedies.
5.3 Absence of Conflicts. Assuming the accuracy of the representations
and warranties set forth in Section 4.4, and except for the FCC Consents and
under the HSR Act, neither the execution, delivery and performance of this
Agreement or any other Transaction Document by Buyer nor the consummation by
Buyer of the transactions contemplated hereby or thereby, (a) does or will (i)
conflict with or result in a breach of any of the provisions of, (ii)
constitute a default under, (iii) result in the violation of, (iv) give any
third party the right to terminate or to accelerate any obligation under, or
(v) require any consent, order, approval, authorization or other action of, or
any filing with or notice to, any Governmental Entity or other Person, in each
case under the certificate or incorporation or bylaws of Buyer or under the
provisions of any indenture, mortgage, lease, loan agreement or other
agreement or instrument to which Buyer is bound or by which it or any of its
assets are affected, or any Legal Requirement to which Buyer or any of its
assets is subject, or (b) without limiting the foregoing, require any Consent
of any Governmental Entity or any other Person other than as described on
Schedule 4.4.
5.4 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf
of Buyer.
5.5 Litigation. There are no actions, suits, proceedings, orders or
investigations pending (or, to Buyer's knowledge, threatened) against or
affecting Buyer at law or in equity, or before or by any Governmental Entity,
which could reasonably be expected to adversely affect Buyer's performance
under this Agreement or the other agreements contemplated hereby to which
Buyer is a party or the consummation of the transactions contemplated hereby
or thereby.
5.6 Qualification as a Licensee. Buyer is now and will, from and after
the date upon which Buyer executes the application(s) described in Section
3.5, be legally, financially and otherwise qualified under the Communications
Act and the FCC Regulations to purchase and be the transferee or assignee of
the Assets and the owner and operator of the Assets and the Station, and at
the time of such execution Buyer will be able to make all necessary
representations, including financial representations, which are required to be
made by Buyer in such application(s). No fact exists that would under the
Communications Act or the FCC Regulations disqualify Buyer as the transferee
or assignee of the Assets or as owner and operator of the Assets and the
Station.
5.7 Disclosure. With respect to Buyer, this Article V does not contain
any untrue statement of a material fact or, when considered as a whole, omit a
material fact necessary to make the statements contained herein, in light of
the circumstances in which they were made, not misleading.
ARTICLE VI
TERMINATION
-----------
6.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by Seller, by written notice to Buyer on or prior to May 3,
1996, if Buyer has not delivered to Seller on or prior to April 29, 1996
a written indication from the Fox Broadcasting Company to the effect
that, subject to such conditions as the Fox Broadcasting Company may
specify, the Fox Broadcasting Company will consent to the assignment to
Buyer of Seller's rights under the Network Affiliation Agreement
(c) by Seller, by written notice to Buyer, on any date determined
for the Closing in accordance with Section 2.2(a) if each condition set
forth in Section 2.3 and Section 2.4 has been satisfied (or will be
satisfied by the delivery of documents by the Parties at the Closing) or
waived in writing on such date and Buyer has nonetheless refused to
consummate the Closing Transactions; and
(d) by Buyer, by written notice to Seller, on any date determined
for the Closing in accordance with Section 2.2(a) if each condition set
forth in Section 2.3 and Section 2.4 has been satisfied (or will be
satisfied by the delivery of documents by the Parties at the Closing) or
waived in writing on such date and Seller has nonetheless refused to
consummate the Closing Transactions.
Unless the Closing has occurred, this Agreement will terminate without any
action by any Person at 5:00 P.M., New York, New York, time, on the
Termination Date. The "Termination Date" will be the earlier of (i) the date
upon which the denial of any FCC Consent becomes a Final Order and (ii)
November 28, 1996; provided that, if the Final Approval Date does not occur
prior to November 1, 1996, then the Termination Date will be the earliest of
(A) the date upon which the denial of any FCC Consent becomes a Final Order,
(B) the twentieth business day after the Final Approval Date, and (C) the
first anniversary of the date of this Agreement.
Notwithstanding the foregoing, (1) Buyer may not rely on the failure of any
condition precedent set forth in Section 2.3 to be satisfied if such failure
was caused by Buyer's failure to act in good faith or a breach of or failure
to perform any of its representations, warranties, covenants or other
obligations in accordance with the terms of this Agreement, (2) Seller hereby
agrees to cooperate as Buyer may reasonably request to assist Buyer's efforts
to obtain the indication of the Fox Broadcasting Company described in Section
6.1(b), and Seller may not rely on Buyer's failure to timely deliver such
indication if Seller fails to provide such cooperation, and (3) Seller may not
rely on the failure of any condition precedent set forth in Section 2.4 to be
satisfied if such failure was caused by Seller's failure to act in good faith
or a breach of or failure to perform any of its representations, warranties,
covenants or other obligations in accordance with the terms of this Agreement.
6.2 Effect of Termination. If this Agreement is terminated as provided
in Section 6.1, then this Agreement will forthwith become void and there will
be no liability on the part of any Party to any other Party or any other
Person in respect thereof; provided that
(a) the obligations of the Parties described in Sections 8.2,
8.5, 8.6(c), 8.6(d) and 8.6(e) will survive any such
termination,
(b) no such termination will relieve Buyer from liability for any
misrepresentation or breach of any representation, warranty,
covenant or agreement set forth in this Agreement prior to
such termination, and
(c) no such termination of this Agreement will relieve Seller
from liability for any misrepresentation or breach of any
representation, warranty, covenant or agreement set forth in
this Agreement prior to such termination.
ARTICLE VII
INDEMNIFICATION AND RELATED MATTERS
------------------------------------
7.1 Survival; Absence of Other Representations. All representations,
warranties, covenants and agreements set forth in this Agreement or in any
writing or certificate delivered in connection with this Agreement will
survive the Closing and the consummation of the Closing Transactions and will
not be affected by any examination made for or on behalf of, or any notice to,
Seller or Buyer, the knowledge of Buyer, Seller or any of their respective
officers, directors, stockholders, partners, employees, agents or other
representatives, or the acceptance of any certificate or opinion; provided
that all claims (other than for fraud) made in respect of any such
representations, warranties, covenants or agreements will be subject to any
applicable limitations set forth in this Article VII. Neither Party has made
or will make in connection with this Agreement any representation or warranty,
express or implied, other than as set forth in this Agreement, the schedules
hereto, and the certificates delivered pursuant hereto.
7.2 Indemnification.
(a) By Seller. Subject to the limitations set forth in this Section
7.2(a), after the Closing, Seller will indemnify Buyer and hold Buyer harmless
from and against any loss, liability, deficiency, damage or expense (including
reasonable legal expenses and costs and any cost or expense arising from or
incurred in connection with any action, suit, proceeding, claim or judgement
relating to any matter described in clause (i), (ii), (iii), (iv) or (v)
below, or in enforcing the indemnity provided by this Section 7.2), net of any
Tax benefit or insurance recovery that the indemnified Person actually
realizes, but excluding any special or consequential damages (any such net
amount being a "Loss"), which Buyer may suffer, sustain or become subject to,
as a result of:
(i) any breach by Seller of any representation or warranty set
forth in this Agreement (including any representation or warranty deemed
to be remade by Seller as of the Closing pursuant to the first paragraph
of Article IV) or any certificate delivered by Seller in connection with
the Closing;
(ii) any litigation, investigation, proceeding, or other claim by
any Governmental Entity or any Person not claiming by, through or under
Buyer, to the extent that the same actually arises from or relates to
the business or operation of Seller, or the Station or the Assets prior
to the Closing, or any fact or circumstance concerning any of them or
any Asset and in existence at any time prior to the Closing or which, if
successful, would give rise to or evidence the existence of or relate to
a breach of any representation, warranty, certification, covenant or
other agreement of Seller;
(iii) any liability or obligation of Seller which is not an
Assumed Liability;
(iv) the failure or alleged failure to obtain any Consent with
respect to any Consent-Denied Contract; or
(v) any liability or obligation of Seller to Buyer pursuant to
Section 1.5;
provided that Seller's liability pursuant to this Section 7.2(a) will be
subject to the following limitations:
(A) Seller will not be liable for any Loss described in clause
(i) above unless and until the aggregate amount of all Losses described
in clause (i) above exceed $500,000 (the "Threshold Amount"), in which
event Seller will be liable for all Losses described in clause (i) (and
not only for Losses described in clause (i) above to the extent that
they exceed the Threshold Amount),
(B) Seller will not be liable for any Loss described in any of
clauses (i) through (v) above, unless Buyer gives Seller written notice
asserting the misrepresentation, breach or other matter in question on
or prior to April 30, 1998,
(C) Buyer will not be entitled to indemnification in respect of
any matter which arises after the date of this Agreement and which
constitutes a misrepresentation or breach of a representation or
warranty set forth in Section 4.8(b) as remade at the time of the
Closing, if such matter is disclosed in a writing delivered to Buyer at
the Closing (it being understood that this clause (C) will have no
effect on any misrepresentation or any breach of any representation or
warranty set forth in Section 4.8(b) which exists of the date of this
Agreement), and
(D) Seller will not be liable for any Loss described in clause
(i) above to the extent that the aggregate amount of all Losses
described in clause (i) above exceeds $13,500,000.
It is understood and agreed by Buyer that, except as expressly provided in
this Section 7.2(a), after the Closing Seller will not have any obligation or
liability to Buyer, and Buyer will have no claim or recourse against Seller,
as a result of the breach prior to the Closing of any representation,
warranty, covenant or agreement of Seller contained herein or otherwise
arising out of or in connection with the Closing Transactions, other than for
fraud, it being understood and agreed that the remedies provided for in this
Section 7.2(a) will be the sole and exclusive remedies for any such claim by
Buyer for any such matters, whether such claims are framed in contract, tort
or otherwise.
(b) By Buyer. After the Closing, Buyer will indemnify Seller and hold
Seller harmless from and against any Loss which Seller may suffer, sustain or
become subject to, as the result of
(i) any breach by Buyer of any representation, warranty, covenant
or agreement of Buyer set forth in this Agreement (including any
representation or warranty deemed to be remade by Buyer as of the
Closing pursuant to the first paragraph of Article V) or any certificate
delivered by Buyer in connection with the Closing;
(ii) any litigation, investigation, proceeding, or other claim by
any Governmental Entity or any Person not claiming by, through or under
Seller or any affiliate of Seller, to the extent that the same actually
arises from or relates to the business or operation of Buyer, or the
Station or the Assets after the Closing, or any fact or circumstance
concerning any of them or any Asset and in existence at any time after
the Closing and not arising out of or relating to any item described in
any of clauses (i), (ii), (iii), (iv) or (v) of Section 7.2(a).
It is understood and agreed by Seller that, except as expressly provided in
this Section 7.2(b), after the Closing Buyer will have no obligation or
liability to Seller, and Seller will have no claim or recourse against Buyer,
as a result of the breach prior to the Closing of any representation,
warranty, covenant or agreement of Buyer contained herein or otherwise arising
out of or in connection with the Closing Transactions or the operations of
Buyer, other than for fraud, it being understood and agreed that the remedies
provided for in this Section 7.2(b) will be the sole and exclusive remedies
for any such claim by Seller for any such matters, whether such claims are
framed in contract, tort or otherwise.
7.3 Indemnification Procedures.
(a) Notice of Claim. Any Party making a claim for indemnification under
Section 7.2 (the "Indemnified Party") will notify the Party from whom
indemnification is claimed (the "Indemnifying Party") of the claim in writing
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party) or discovering
the liability, obligation or facts giving rise to such claim for
indemnification. Such notice will describe the claim, the amount thereof (to
the extent then known and quantifiable), and the basis therefor, in each case
to the extent known to the Indemnified Party. The failure to so notify the
Indemnifying Party will not relieve the Indemnifying Party of its obligations
under Section 7.2, except to the extent that such failure actually prejudices
the Indemnifying Party.
(b) Assumption of Defense. With respect to any third party claim which
gives rise or is alleged to give rise to a claim for indemnity under Section
7.2 and which involves only the payment of money damages to such third party
and which does not concern any FCC Authorization, the Indemnifying Party,
at its option (subject to the limitations set forth below), will be entitled
to assume responsibility for and control the defense of such claim and to
appoint a competent and reputable counsel reasonably acceptable to the
Indemnified Party to act as lead counsel of such defense. Prior to the
Indemnifying Party assuming control of such defense, the Indemnifying Party
must first furnish the Indemnified Party with evidence which, in the
Indemnified Party's reasonable judgment, establishes that the Indemnifying
Party is and will be able to satisfy any such liability.
(c) Limits of Assumption of Defense. An Indemnifying Party's rights
under Section 7.3(b) will be subject to the following additional limitations:
(i) with respect to any claim the defense of which the
Indemnifying Party has assumed, the Indemnified Party will be entitled
to participate in the defense of such claim and to employ counsel of its
choice for such purpose, and the fees and expenses of such separate
counsel will be borne by the Indemnified Party (except that the
reasonable fees and expenses of such separate counsel incurred prior to
the date the Indemnifying Party effectively assumes control of such
defense will be borne by the Indemnifying Party);
(ii) the Indemnifying Party will not be entitled to assume
control of such defense if (A) the claim for indemnification relates to
or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation, (B) the Indemnified Party
reasonably concludes that, in light of any actual or potential conflict
of interest, it would be inappropriate for legal counsel selected by the
Indemnifying Party to represent the Indemnified Party, (C) the
Indemnified Party reasonably believes that an adverse determination with
respect to the action, lawsuit, investigation, proceeding or other claim
giving rise to such claim for indemnification would be detrimental to or
injure the Indemnified Party's reputation or future business prospects
(or, in the case of a claim by Buyer, the Station's reputation or
business prospects), or (D) upon petition by the Indemnified Party, an
appropriate court rules that the Indemnifying Party failed or is failing
to vigorously prosecute or defend such claim; and
(iii) if the Indemnifying Party assumes control of the defense of
any such claim, then the Indemnifying Party will obtain the prior
written consent of the Indemnified Party before entering into any
settlement of such claim, if such settlement does not expressly and
unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
If the Indemnifying Party has the right, but does not, assume control of the
defense of any claim in accordance with this Section 7.3, then the
Indemnifying Party may nonetheless participate (at its own expense) in the
defense of such claim and the Indemnified Party will consult with the
Indemnifying Party in respect of such defense, and the Indemnified Party will
not enter into any settlement of such claim which could result in
indemnification liability under Section 7.2(a) or 7.2(b) unless the
Indemnified Party gives the Indemnifying Party prior written notice of such
settlement. If the Indemnifying Party does not thereupon assume the defense
of such claim as described in Section 7.3(b) (including by complying with the
second sentence of Section 7.3(b)) within ten business days after such notice
is given, then the Indemnified Party may enter into such settlement, and such
settlement will be binding upon Buyer and Seller for purposes of determining
whether any amount of indemnification is payable pursuant to Section 7.2,
subject to any applicable limitations set forth in Section 7.2. As used in
this Article VII, the term "settlement" refers to any settlement, compromise,
consent or similar decree, or election to permit default judgment to be
entered, in respect of any claim.
7.4 Treatment of Indemnification Payments. Each Party will treat all
payments made pursuant to Section 7.2 as adjustments of the Cash Purchase
Price for all purposes. Each Party agrees to use reasonable efforts to seek
recovery under any insurance coverage which such Party may have in respect of
any Loss; provided that a Party's Loss will include any increased premium
which results from seeking such recovery or the occurrence or existence of any
fact or circumstance to which such Loss relates.
ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
8.1 Buyer's Retention of Retained Records; Continuing Assistance.
(a) Notwithstanding Section 1.2(e), from and after the Closing Buyer
will take and retain (on Seller's behalf in accordance with the provisions of
this Section 8.1) possession of those Retained Records which are located at the
Station's main studio facility on the Closing Date. At any time after the
Closing, Seller may request in writing that Buyer deliver any or all of such
Retained Records to Seller in any manner which Seller may reasonably request,
and Buyer will do so at Seller's expense. From and after the first anniversary
of the Closing Date, Buyer may destroy any Retained Records in Buyer's
possession, so long as Buyer gives Seller not less than 20 business days' prior
written notice of such destruction specifying in reasonable detail the Retained
Records proposed to be destroyed; provided that, prior to such destruction,
Seller may request that the Retained Records proposed to be destroyed by Buyer
instead be delivered by Seller, in which case Buyer will deliver such Retained
Records, at Seller's expense, in any manner which Seller may reasonably
indicate in such notice to Buyer. Buyer will have no duty to Seller in respect
of the Retained Records which are from time to time in Buyer's possession other
than to (i) permit access to such Retained Records in accordance with Section
8.1(b), (ii) deliver to Seller prior notice of the intentional destruction of
such Retained Records by Buyer as described in the preceding sentence, and
(iii) deliver Retained Records to Seller as described in the preceding two
sentences.
(b) Seller and Buyer will provide each other (and the other's legal and
accounting advisors) with such reasonable cooperation and information
(including permitting Seller to have access to and to make copies and extracts
from the Transferred Records and the Retained Records then in Buyer's
possession, in the case of Buyer, and permitting Buyer to have access to and to
make copies and extracts from the Retained Records then in Seller's possession,
in the case of Seller) as any of them reasonably may request of the other of
them with respect to any matter pertaining to this Agreement, any Closing
Transaction, the Station or any Asset or Assumed Liability, including with
respect to (a) preparation of any Tax Return of Buyer or Seller with respect to
the Station's operations, (b) determining any Taxes or right to a refund of
Taxes of Buyer or Seller with respect to the Station's operations, (c)
responding to any examination of Tax Returns of Buyer or Seller with respect
to the Station's operations, (d) defending or prosecuting any audit or
administrative or judicial proceeding in respect of Taxes assessed or proposed
to be assessed against Buyer or Seller with respect to the Station's
operations, (e) Buyer's or Seller's Tax planning, (f) determining the amount
of any adjustment or amount which may be payable pursuant to Section 1.5 or
otherwise pursuant to this Agreement or any other matter pertaining to this
Agreement (including disputing, and determining whether to dispute, the
matters set forth in the Closing Balance Sheet and in connection with
determining the Final Adjustment Amount), and (g) the conduct of the business
or operation of the Station by Buyer after the Closing. The requesting Party
will reimburse the Party of whom any such request is made for all out-of-
pocket expenses incurred by such second Party in performing its obligations
under this Section 8.1(b). Without limiting the foregoing, at Seller's
expense (including reimbursement by Seller of Buyer's related out-of-pocket
expenses, including the reasonably allocable amount of compensation, benefits,
taxes and other costs relating to Buyer's personnel) and at Seller's request,
Buyer will make its accounting and bookkeeping personnel available to assist
Seller (at Seller's direction, during Buyer's normal business hours) in the
preparation of Seller's Tax returns and financial statements for periods
ending on or prior to December 31, 1996; provided that the same does not
unreasonably interfere with the conduct of the business of the Station by
Buyer and such assistance does not exceed 20 person-hours during any calendar
month.
8.2 Press Releases and Announcements. Except for any public disclosure
which either Party in good faith believes is required by any Legal Requirement
(in which case, if practicable, the disclosing Party will give the other Party
an opportunity to review and comment upon such disclosure before it is made):
(a) prior to the Closing, no press releases related to this
Agreement or any Closing Transaction or other announcements generally to
the employees, customers or other Persons having business relationships
with Seller (it being understood that Buyer will have the right to
contact such Persons in connection with its investigation of the
business of Seller and the Station as provided in Section 3.3(b) and as
Seller may otherwise consent (which consent Seller will not unreasonably
withhold)) will be issued or made without the mutual approval of Seller
and Buyer;
(b) after the Closing, Seller will not make any press release or
other public announcement of or with respect to the Station, this
Agreement or any Closing Transaction without Buyer's consent (which
consent Buyer will not unreasonably withhold); and
(c) after the Closing, Buyer will not make any press release or
other public announcement of or with respect to this Agreement or any
Closing Transaction without Seller's consent (which consent Seller will
not unreasonably withhold).
8.3 Further Transfers. Buyer and Seller each will execute and deliver
such further instruments of conveyance and transfer and take such additional
actions as the other Party may reasonably request to effect, consummate,
confirm or evidence the transfer to Buyer of the Assets, the assumption by
Buyer of the Assumed Liabilities and the other transactions contemplated
hereby.
8.4 Specific Performance. Seller acknowledges that the Station and its
business and operations are unique, and recognizes and affirms that in the
event of a breach of this Agreement by Seller, money damages may be inadequate
and Buyer may have no adequate remedy at law. Accordingly, Seller agrees that
Buyer will have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and Seller's obligations hereunder
not only by an action or actions for damages but also by an action or actions
for specific performance, injunctive and/or other equitable relief.
8.5 Expenses. Except as otherwise expressly provided herein, Seller
and Buyer each will pay all of its own fees, costs and expenses (including
fees, costs and expenses of legal counsel, investment bankers, accountants,
brokers or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the preparation, negotiation, execution
and delivery of this Agreement and the other Transaction Documents, the
performance of its obligations hereunder and thereunder, and the consummation
of the transactions contemplated hereby and thereby; it being understood that
no such fees, costs or expenses of Seller will constitute an Assumed Liability.
Seller will prepare and file, on or before the due dates thereof, any required
forms with respect to any transfer, stamp, conveyance, recording or other
similar Taxes, fees, duties or governmental charges (collectively, "Transfer
Taxes") imposed by any Taxing jurisdiction by reason of the transactions
contemplated by this Agreement. Buyer agrees to cooperate with Seller in
connection with the preparation and filing of any forms relating to Transfer
Taxes. It is expressly understood that Buyer will pay the filing fees required
to be paid in connection with the applications and filings described in
Sections 3.5 and 3.9. Buyer will be responsible for all Transfer Taxes imposed
on Buyer, Seller or any Asset by reason of any transaction contemplated by this
Agreement. If valuations of any property or leases are required to determine
the amount of any Transfer Taxes, Seller and Buyer will reasonably determine
such valuations, and the Parties agree that they will not take (or cause to
be taken) any position inconsistent with such valuations in connection with any
Tax Return or otherwise.
8.6 Non-Solicitation and Confidentiality.
(a) Non-Solicitation. In consideration of the transactions contemplated
hereby and the payment of the Cash Purchase Price and the assumption of the
Assumed Liabilities, during the period beginning on the Closing Date and ending
on the second anniversary of the Closing Date (the "Non-Solicitation Period"),
Seller will not directly or indirectly contact, approach or solicit for the
purpose of offering employment to or hiring (whether as an employee,
consultant, agent, independent contractor or otherwise) or actually hire any
person who is employed by Seller either on the date of this Agreement or on the
Closing Date and who is employed by Buyer at the time of such contact, approach
or solicitation, or induce or attempt to induce any customer or other business
relation of the Station into any business relationship which might materially
harm Buyer or the Station; provided that (i) this Section 8.6(a) will not apply
to James Arnold unless James Arnold accepts employment by Buyer or an affiliate
thereof prior to or at the time of the Closing, and (ii) if James Arnold
accepts employment by Buyer or an affiliate thereof prior to or at the time of
the Closing, then Seller may nonetheless solicit, engage or hire James Arnold,
so long as James Arnold will not be involved directly or indirectly on behalf
of Seller in the management or operation of a broadcast television station in
the Madison, Wisconsin, DMA (as defined by A.C. Neilsen Company) and the
employment or engagement in question does not commence until after the earlier
of the end of the initial term of James Arnold's employment by Buyer or such
Affiliate and the first anniversary of the Closing Date. If the final judgment
of a court of competent jurisdiction declares that any term or provision of
this Section 8.6(a) is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability will have the
power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement will be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(b) Confidentiality by Seller. For a period of two years after the
Closing, Seller will treat and hold as confidential all information concerning
the business and affairs of the Station which is of a type that in accordance
with Seller's past practices has been treated as confidential or proprietary
("Confidential Information"), refrain from using any Confidential Information
except in connection with this Agreement, and deliver promptly to Buyer or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of Confidential Information which are in Seller's possession or under
Seller's control. If Seller is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 8.6(b). If, in the absence of
a protective order or the receipt of a waiver hereunder, Seller is, on the
advice of counsel, compelled to disclose any Confidential Information in
connection with any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process, then Seller may disclose such
Confidential Information in connection therewith; provided that Seller will
use commercially reasonable efforts to obtain, at the request and expense of
Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of such Confidential Information as Buyer may
designate.
(c) Confidentiality by Buyer. Buyer will treat and hold as confidential
all information concerning the business and affairs of the Station which to
Buyer's knowledge is Confidential Information, refrain from using any such
Confidential Information except as contemplated by Section 3.3(b) or otherwise
in connection with this Agreement, and, after any termination of this Agreement
pursuant to Section 6.1, deliver promptly to Seller or destroy, at the request
and option of Seller, all tangible embodiments (and all copies) of any such
Confidential Information which are in Buyer's possession or under Buyer's
control. If Buyer is requested or required prior to the Closing (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any such Confidential Information, Buyer will notify Seller promptly
of the request or requirement so that Seller may seek an appropriate protective
order or waive compliance with the provisions of this Section 8.6(c). If, in
the absence of a protective order or the receipt of a waiver hereunder, Buyer
is, on the advice of counsel, compelled to disclose any such Confidential
Information in connection with any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process, then Buyer may disclose such
Confidential Information in connection therewith; provided that Buyer will use
commercially reasonable efforts to obtain, at the request and expense of
Seller, an order or other assurance that confidential treatment will be
accorded to such portion of such Confidential Information as Seller may
designate.
(d) Remedy for Seller's Breach. Seller acknowledges and agrees that in
the event of a breach by Seller of any of the provisions of this Section 8.6,
monetary damages will not constitute a sufficient remedy. Consequently, in the
event of any such breach, Buyer and/or its successors or assigns may, in
addition to other rights and remedies existing in their favor, apply to any
court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof, in each case without the requirement of posting a
bond or proving actual damages.
(e) Remedy for Buyer's Breach. Buyer acknowledges and agrees that in
the event of a breach by Buyer of any of the provisions of this Section 8.6,
monetary damages will not constitute a sufficient remedy. Consequently, in the
event of any such breach, Seller and/or its successors or assigns may, in
addition to other rights and remedies existing in their favor, apply to any
court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof, in each case without the requirement of posting a
bond or proving actual damages.
(f) Similar Agreements. As a condition to its obligations to effect the
Closing Transactions, Buyer may require that any partner of Seller or any
Affiliate of any such partner (other than any limited partner of Seller or any
Affiliate of any such limited partner) execute an agreement which binds such
Person to the same extent that Seller is bound by this Section 8.6. As a
material inducement to Buyer to exclude the limited partners of Seller and the
Affiliates of the limited partners of Seller from the requirements of the
first sentence of this Section 8.6(f), Seller represents and warrants that on
the date of this Agreement no such Person possesses, and at no time on or
prior to the Closing Date will any such Person possess or be given access to,
any Confidential Information.
8.7 Billing and Collection of Seller's Receivables.
(a) Billing by Buyer. From and after the Closing Date, on behalf of
Seller, Buyer will (in accordance with its standard billing procedures) issue
invoices for advertising time sold and provided by the Station prior to the
Adjustment Time and not invoiced by Seller prior to the Closing.
(b) Collection and Application by Buyer. On the Closing Date, Seller
will assign to Buyer, for purposes of collection only, all Seller's
Receivables. From and after the Closing Date, Buyer will (i) use reasonable
efforts in accordance with its normal business practices (not including
resorting to or threatening litigation) to collect Seller's Receivables, (ii)
apply the proceeds of such collections, to the extent necessary, to satisfy
accounts payable and other liabilities of Seller which exist on the Closing
Date and which are not Assumed Liabilities (to the extent known to Buyer), and
(iii) remit to Seller, as soon as practicable (and in any event not later than
the fifteenth business day) after the end of each calendar month, the full
amount so collected during such month and not applied by Buyer as described in
clause (ii) above, together with a report specifying the application of each
payment by any Person from whom any Seller's Receivable is due (a "Seller's
Debtor") during such month and the application (if any) of collections from
such prior month as described in clause (ii) above.
(c) Application of Collections. Collections from any Person which is a
Seller's Debtor will be applied in the chronological order of Buyer's and
Seller's billings to such Seller's Debtor (i.e., to the oldest unpaid billing
first) except to the extent, and only to the extent, that (i) such Seller's
Debtor disputes in writing its obligation to pay such billing or (ii) such
Seller's Debtor indicates in writing that such payment is to be applied in
another, specified manner. Buyer will take no action to encourage a Seller's
Debtor to dispute its obligation to pay any billing which relates to a Seller's
Receivable or encourage a Seller's Debtor to specify that any payment from such
Seller's Debtor is to be applied to billings to such Seller's Debtor other than
in their chronological order.
(d) Non-Interference. So long as Buyer is in compliance with this
Section 8.7, neither Seller nor its agents will make any direct solicitation
of any Seller's Debtor for purposes of collecting any Seller's Receivable,
except as may be agreed to by Buyer and except with respect to Delinquent
Accounts. "Delinquent Accounts" means those Seller's Receivables which may be
or become more than 180 days past due and those accounts with respect to which
Buyer has received written notice of a dispute from the related debtor (a copy
of which notice Buyer will promptly forward to Seller). Buyer will not
discourage any Seller's Debtor from paying, or otherwise interfere with
Seller's efforts in accordance with this Section 8.7(d) to collect, any
Delinquent Account; provided that Buyer will not be prohibited from ceasing or
altering its method of doing business with any such Seller's Debtor or pursuing
or taking any action in connection with the collection of any amount which may
be owing by any such Seller's Debtor to Buyer or any of Buyer's Affiliates.
(e) Termination. Promptly after the date which is nine months after the
Closing Date, Buyer will furnish Seller with all files concerning any
uncollected Seller's Receivables, and (i) Buyer will have no further
responsibilities pursuant to this Section 8.7 with respect to any Seller's
Receivable except to remit promptly to Seller any amounts subsequently
received by Buyer on account of any Seller's Receivable, and (ii) Seller will
have no further obligation pursuant to Section 8.7(d).
(f) Access. Buyer will furnish Seller and its agents with all
information (including reasonable access to Buyer's books and records) which
Seller reasonably requests in order to monitor, confirm or dispute Buyer's
compliance with this Section 8.7.
8.8 Seller's Name. Immediately after the Closing, Seller will change its
partnership name to a name which does not include, and which is not confusingly
similar to, "Channel 47," "WMSN" or "Fox 47."
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived; provided that any such amendment or
waiver (a) will be binding upon Seller only if such amendment or waiver is set
forth in a writing executed by Seller, and (b) will be binding upon Buyer only
if such amendment or waiver is set forth in a writing executed by Buyer. No
course of dealing between or among any Persons having any interest in this
Agreement will be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement. No failure by any Party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute a waiver
of any such breach or any other covenant, duty, agreement or condition.
9.2 Notices. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered or delivered by express courier service.
Notices, demands and communications to Seller or Buyer will, unless another
address is specified in writing, be sent to the address indicated below:
to Seller:
c/o Madison GP, Inc.
1406 North Breezeland Drive
Oconomowoc, WI 53066
Attention: Ronald J. Koeppler, President
with a copy (which copy will
not constitute notice to Seller) to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach
1000 N. Water Street #2100
Milwaukee, WI 53202
Attention: Timothy A. Nettesheim
to Buyer:
Sullivan Broadcasting Company, Inc.
4431 Dyke Bennett Road
Franklin, TN 37064
Attention: J. Daniel Sullivan, President and
Chief Executive Officer
with copies (which copies will
not constitute notice to Buyer) to:
Sullivan Broadcasting of Madison, Inc.
18 Newbury Street
Boston, MA 02116
Attention: David Pulido, Executive Vice
President -- Programming
and Legal Affairs
and
Kirkland & Ellis
153 E. 53rd Street
New York, NY 10022
Attention: John Kuehn
9.3 Binding Agreement; Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns; provided that
(i) neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by Seller without the
prior written consent of Buyer, and
(ii) without the prior written consent of Seller (which consent
Seller will not unreasonably withhold), neither this
Agreement nor any of the rights, interests or obligations
hereunder may be assigned by Buyer prior to the Closing
(other than for collateral purposes) to any Person if, in
Seller's good faith judgement, such assignment is more
likely that not to cause the FCC Approval Date to occur
after November 28, 1996.
Without limiting but subject to the foregoing, at or prior to the Closing
Buyer may assign its rights under this Agreement, in whole or in part, to one
or more other Persons who, together with Buyer, will purchase all or part of
the Assets, so long as any such Person or Buyer assumes at the Closing all
related Assumed Liabilities, and/or Buyer may direct that one or more Assets
to be transferred to a Person other than Buyer. With respect to any rights
assigned to any assignee of Buyer (and any matter related thereto under this
Agreement), such assignee will be deemed to be "Buyer" for purposes of this
Agreement.
9.4 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this Agreement.
9.5 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent.
In the event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties, and no
presumption or burden of proof will arise favoring or disfavoring any Person by
virtue of the authorship of any of the provisions of this Agreement.
9.6 Captions. The captions used in this Agreement are for convenience
of reference only and do not constitute a part of this Agreement and will not
be deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
9.7 Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any
way, including the letter agreement between Seller and ABRY Partners, Inc.
dated November 2, 1995, which letter agreement is hereby expressly terminated.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which taken
together will constitute one and the same instrument.
9.9 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the internal laws of the State of Wisconsin, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Wisconsin or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Wisconsin. In furtherance of
the foregoing, the internal law of the State of Wisconsin will control the
interpretation and construction of this Agreement (and all schedules and
exhibits hereto), even if under that jurisdiction's choice of law or conflict
of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.
9.10 Parties in Interest. Nothing in this Agreement, express or
implied, is intended to confer on any Person other than the Parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
9.11 Generally Accepted Accounting Principles. Where any accounting
determination or calculation is required to be made under this Agreement, such
determination or calculation (unless otherwise provided) will be made in
accordance with GAAP and, to the extent consistent therewith, the accounting
policies employed by Seller.
9.12 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD
OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
9.13 Other Definitional Provisions. The terms "hereof," "herein" and
"hereunder" and terms of similar import will refer to this Agreement as a whole
and not to any particular provision of this Agreement. Section, clause,
Exhibit and Schedule references contained in this Agreement are references to
Sections, clauses, Exhibits and Schedules in or attached to this Agreement,
unless otherwise specified. Each defined term used in this Agreement has a
comparable meaning when used in its plural or singular form. Each gender-
specific term used in this Agreement has a comparable meaning whether used in
a masculine, feminine or gender-neutral form. As used in this Agreement, the
terms "knowledge" or "aware" will include the actual knowledge and awareness
of the individuals specified in clause (i) or (ii) below, as the case may be,
and the knowledge and awareness that such individuals would have obtained
after making reasonable inquiry and exercising reasonable diligence with
respect to the matter in question: (i) in the case of Buyer, J. Daniel
Sullivan, David Pulido and Patrick Bratton, and (ii) in the case of Seller,
Ronald Koeppler, James Arnold, David Ford, Kerry Maki, Keith Triller and John
Noonan. Whenever the term "including" is used in this Agreement (whether or
not that term is followed by the phrase "but not limited to" or "without
limitation" or words of similar effect) in connection with a listing of items
within a particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, the items within that classification. Each reference in
this Agreement to any Legal Requirement will be deemed to include such Legal
Requirement as it hereafter may be amended, supplemented or modified from time
to time and any successor thereto, unless such treatment would be contrary to
the express terms of this Agreement.
* * * *
IN WITNESS WHEREOF, the Parties have executed this Asset Purchase
Agreement as of the date first written above.
SULLIVAN BROADCASTING COMPANY, INC.
By: /s/ David Pulido
----------------------
Its: Exec. V.P.
----------------------
CHANNEL 47 LIMITED PARTNERSHIP
By Madison GP, Inc.
Its Managing General Partner
By: /s/ Daniel J. Sharpe
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Its: President
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EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of April 8, 1996 by and among Richard Montgomery,
("Executive"), Sullivan Broadcasting Company, Inc. (the "Company") and
Sullivan Broadcast Holdings, Inc. (the "Parent").
WITNESSETH:
WHEREAS, the Company and the Parent desire to retain the services of
Executive as Vice President -- Director of Programming of each of them, and
WHEREAS, Executive desires to be employed by the Company on the terms
and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein
and the mutual benefits to be derived from this Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Position and Duties. Subject to the terms and conditions of this
Agreement, during the term of this Agreement the Company shall employ
Executive, and Executive shall serve as Vice President -- Director of
Programming of each of the Company and the Parent. In such
positions, Executive shall perform such duties of a managerial nature
as shall be assigned to Executive from time to time by J. Daniel
Sullivan ("Sullivan"), or his successor as, the President and Chief
Executive Officer (the "President") of the Company and the Parent, as
the case may be. Executive will devote his or her best efforts to
his or her employment with the Company and shall devote substantially
all of his or her entire business time and attention to the
performance of his or her duties under this Agreement.
2. Term of Employment. Except if terminated earlier as provided below,
the Company's employment of Executive under this Agreement shall
begin on the date of this Agreement and shall continue until January
14, 1997 (the "Initial Term"); provided however, that after the
Initial Term, Executive's employment under this Agreement shall
continue on a month-by-month basis unless either the Company or
Executive shall give written notice to the other party of its/his/her
intention not to continue employment under this Agreement beyond the
Initial Term or any time thereafter. It is expressly understood that
neither Company nor Executive shall be under any obligation to
continue or extend the term of employment pursuant to this Agreement
for any period of time beyond the Initial Term set forth above.
3. Termination. The Company's employment of Executive under this
Agreement shall terminate prior to the end of the Initial Term or at
any time thereafter under the following circumstances:
(a) Death. Executive's death, in which case Executive's
employment shall terminate on the date of death.
(b) Disability. If, as a result of Executive's illness, physical
or mental disability or other incapacity, Executive is unable
to perform his or her duties under this Agreement for any
period of three (3) consecutive months, and within thirty (30)
days after written notice of termination is given by the
Company to Executive (which notice may be given before or
after the end of such three-month period) he or she shall not
have returned to the performance of his or her duties
hereunder on a full-time basis, the Company may terminate
Executive's employment hereunder as of the latest of (i) the
expiration of such three-month period or (ii) the thirty-first
(31st) day following the giving by the Company of the written
notice of termination.
(c) Consolidation, Merger or Comparable Transaction. In the event
that, after the Initial Term, if the term of employment
pursuant to this Agreement is continued beyond the Initial
Term, the Parent consolidates with or merges with and into any
other entity, effects a share exchange, sells all or
substantially all of its assets or enters into a comparable
capital transaction pursuant to which the Parent is not the
continuing or surviving corporation or a sale of a majority of
the outstanding voting power of the Parent's equity securities
to a third party occurs such that the beneficial owners of the
Parent have substantially changed, Executive's employment may,
by written notice of termination, be terminated by the Company
simultaneous with the consummation of such consolidation,
merger, share exchange, asset sale, stock sale or comparable
transaction; provided, however, that if as a result of any
such consolidation, merger, share exchange, asset sale, stock
sale or comparable transaction, the Parent's stockholders do
not, directly or indirectly, receive cash and/or marketable
securities having a value of at least fifty percent (50%) of
the value of their common stock of the Parent held immediately
prior to such transaction, then in any such event a
termination of Executive's employment by the Company shall be
deemed and treated as a termination of the employment period
hereunder by the Company other than for Company's Good Reason
under Paragraph 3(d)(ii) for purposes of this Agreement,
including without limitation, for determining termination
benefits under Paragraph 6 hereof.
(d) Voluntary Termination by the Company. The Company may
terminate Executive's employment (i) for "Company's Good
Reason," which for purposes of this Agreement shall mean a
material breach by Executive of any material provision of this
Agreement or violation of a material Company policy, upon
written notice to Executive, or (ii) for any other reason or
for no reason, in each case, subject to payment of the
termination payments, if any, specified in Paragraph 6 hereof.
(e) Termination by Executive With Good Reason. Executive may
terminate his or her employment hereunder at any time for
Executive's Good Reason, with such termination to be effective
as of the date stated in a written notice of termination
delivered by Executive to the Company. For purposes of this
Agreement, "Executive's Good Reason" shall mean a material
breach by the Parent or the Company of a material provision of
this Agreement which has not been cured within thirty (30)
days after written notice of noncompliance has been given by
Executive to the Company.
(f) Voluntary Termination by Executive Without Good Reason.
Executive may terminate his or her employment hereunder for
any reason other than Executive's Good Reason as defined
above, or for no reason, upon four (4) weeks prior written
notice to the Company.
(g) Retirement. The Company may require Executive to retire upon
attaining age 65 if not violative of applicable law; such a
decision shall not be treated as a voluntary termination by
the Company for purposes of Paragraph 3(d) above.
In no event shall the termination of Executive's employment affect
the rights and obligations of the parties set forth in this
Agreement, except as expressly set forth herein. Any termination of
employment by Executive pursuant to Paragraph 3(e), 3(f) or 3(g)
hereof shall be deemed to include a resignation by Executive of all
positions with the Company and its affiliates.
4. Compensation. During the term of this Agreement, Executive shall be
entitled to the following compensation for services rendered to the
Company:
(a) Executive shall be entitled to receive a base salary ("Base
Salary") for the Initial Term at the rate of $150,000 per year
(i.e., $12,500 per month). If the term of employment pursuant
to this Agreement is continued beyond the Initial Term,
Executive shall receive a monthly Base Salary of $12,500 per
month for each month employed after the Initial Term.
(b) At the end of the Company fiscal year during the Initial Term
or if applicable, the end of any Company fiscal year if the
term of employment pursuant to this Agreement is continued
beyond the Initial Term, Executive shall be eligible to
receive an annual bonus (the "Bonus") in an amount for any
fiscal year to be determined by the President of the Company
in his or her sole discretion based upon the overall
performance of the Parent and its subsidiaries and the
satisfaction of the personal goals of Executive as established
by the President. For any fiscal year during which Executive
is not employed by the Company for the entire fiscal year,
Executive shall not be entitled to receive such Bonus.
Executive's Base Salary shall be paid ratably during the term of this
Agreement on a basis consistent with other Company executives, but no
less frequently than once per month. The Bonus provided in Paragraph
4(b), if any, shall be paid in a single payment within thirty (30)
days after the independent certified public accountants regularly
employed by the Company have made available to the Company the
audited financial statements of the appropriate fiscal year (but in
any event within 120 days after the end of such fiscal year). All
payments under this Agreement shall be subject to withholding or
deduction by reason of the Federal Insurance Contribution Act,
Federal income tax, state income tax and similar laws and
regulations.
5. Fringe Benefits. During the term of this Agreement, Executive shall
be entitled to participate in any retirement plan, pension plan, life
insurance plan, health insurance plan or fringe or other comparable
benefit plan which the Company from time to time makes available
generally to other Company employees. Executive shall also be
entitled to three (3) weeks paid vacation for each year for which
Executive is employed by the Company during the term of this
Agreement; provided, however, that no such vacation time shall accrue
or be earned to the extent that such accrual or earning would cause
Executive's accrued or earned, but unused, vacation time to exceed
three (3) weeks. Executive shall be compensated by the Company for
all reasonable business expenses incurred by him or her on behalf of
the Company, including but not limited to expenses for travel, meals,
lodging and entertainment, upon presentation of appropriate
documentation.
6. Termination Payments. Executive (or his or her estate pursuant to
Paragraph 6(a) hereof) shall be entitled to receive the following
payments upon termination of his or her employment hereunder:
(a) In the event of the termination of Executive's employment
pursuant to Paragraph 3(a), 3(c) or 3(f) hereof, or by the
Company pursuant to Paragraph 3(d)(i) for Company's Good
Reason or pursuant to Paragraph 3(g), the Company shall pay to
Executive (or his or her estate, as the case may be) as soon
as practicable following such termination any accrued and
unpaid Base Salary through the date of termination as provided
in Paragraph 4 hereof.
(b) In the event of the termination of Executive's employment
pursuant to Paragraph 3(b) hereof, the Company shall pay to
Executive for a period of three (3) months after the date of
termination the amount of the Base Salary through the end of
such three (3) month period, less any amounts paid to
Executive pursuant to disability insurance, if any, provided
by the Parent or any of its subsidiaries or affiliates.
(c) In the event of termination pursuant to Paragraph 3(d) of
Executive's employment other than for Company's Good Reason,
or pursuant to Paragraph 3(e) for Executive's Good Reason, the
Company shall continue to pay the Base Salary for the
remainder of the Initial Term, or for three (3) months after
the date of termination, whichever is longer.
(d) Without limiting the remedies available to the Company for
breach by Executive of Paragraph 7 hereof, in the event that
Executive violates the provisions of Paragraph 7 after the
termination of his or her employment with the Company in a
manner reasonably determined by the Company to be materially
injurious to the Company (as that term is defined in Paragraph
7), any termination payments provided in this Paragraph 6
remaining unpaid at the time such violation occurs shall be
automatically forfeited.
7. Covenant Not to Compete and Non-Disclosure.
(a) During the term of Executive's employment pursuant to this
Agreement and for a period of one hundred and eighty (180)
days thereafter in the event Executive's employment is
terminated pursuant to Paragraph 3(d) for Company's Good
Reason or pursuant to Paragraph 3(f), Executive covenants and
agrees that he or she will not within the DMA (as determined
by the A.C. Nielsen Company) of any broadcast television
station owned or operated by the Company (or which the Company
has taken substantial steps to acquire or operate), whether
directly or indirectly, with or without compensation, (x)
enter into or engage in the business of television
broadcasting, or (y) be employed by, act as a consultant to,
act as a director of or own beneficially five percent (5%) or
more of any class of equity or debt securities of any
corporation or other commercial enterprise in the business of
television broadcasting, or (z) solicit or do any business
with any existing customers of the Company with respect to
television broadcasting. For purposes of this Paragraph 7,
the term "Company" shall include every subsidiary and other
affiliate of the Company during the period of employment
pursuant to this Agreement. During the three (3) years after
Executive's employment with the Company is terminated for any
reason or for no reason, neither Executive nor any of his or
her affiliates shall hire, solicit, employ or contract with
respect to employment any officer or employee of the Company.
(b) Executive agrees to disclose promptly to the Company and does
assign and agree to assign to the Company, free from any
obligation to him or her, all his or her right, title and
interest in and to any and all ideas, concepts, processes,
improvements and inventions made, conceived, written,
acquired, disclosed or developed by him or her, solely or in
concert with others during the term of his or her employment
by the Company which relate to the business, activities or
facilities of the Company or resulting from or suggested by
any work he or she may do for the Company or at its request.
Executive further agrees to deliver to the Company any and all
drawings, notes, photographs, copies, outlines,
specifications, memoranda and data relating to such ideas,
concepts, processes, improvements and inventions, to cooperate
fully during his or her employment and thereafter in the
securing of copyright, trademark or patent protection or other
similar rights in the United States.
(c) Except as expressly set forth below, Executive agrees, whether
during his or her employment pursuant to this Agreement or
thereafter, except as authorized or directed by the Company in
writing or in the normal exercise of his or her
responsibilities hereunder, not to disclose to others, use for
his or her benefit, copy or make notes of any proprietary or
confidential knowledge or trade secrets relating to the
business, activities or facilities of the Company which may
come to his or her knowledge during his or her employment
pursuant to this Agreement. Executive shall not be bound to
this obligation of confidentiality and nondisclosure if:
(i) the knowledge or information shall become part of the
public domain by publication or otherwise through no
fault of Executive;
(ii) the knowledge or information is known to the recipient
prior to the receipt of the disclosure from Executive;
(iii) the knowledge or information is disclosed to the
recipient by a third party who is in lawful possession
of the knowledge or information and has the lawful
right to make disclosure thereof; or
(iv) he or she is required to disclose such information
pursuant to applicable law or by a court of competent
jurisdiction.
(d) Upon termination of employment pursuant to this Agreement for any
reason or for no reason, upon written request by the Company
Executive will deliver to the Company all records, notes, data,
memoranda, photographs, models and equipment of any nature which are
in his or her possession or control and which are the property of
the Company.
(e) The parties understand and agree that the remedies at law for breach
of the covenants in this Paragraph 7 would be inadequate and that
the Company shall be entitled to injunctive or such other equitable
relief as a court may deem appropriate for any breach of these
covenants. If any of these covenants shall at any time be adjudged
invalid to any extent by any court of competent jurisdiction, such
covenant shall be deemed modified to the extent necessary to render
it enforceable.
8. Parent Stock.
(a) Contemporaneous with the execution and delivery of this Agreement,
Executive has voluntarily elected to purchase 47,375 shares of the
Parent's Class C Common Stock, $0.01 par value per share ("Class C
Common Stock"), at $0.5720665 per share (for an aggregate purchase
price of $27,102 for such shares of Class C Common Stock). The
Class C Common Stock, and all other shares of the Parent's common
stock, are collectively referred to herein as the "Common Stock".
(b) Executive represents and warrants to the Parent as follows:
(i) Executive is an "accredited investor" as that term is
defined in Regulation D as promulgated under the Securities
Act of 1933, as amended (the "Act").
(ii) Executive is acquiring the Common Stock identified above
solely for investment, for his or her own account, and not
with a view to resell or otherwise distribute such Common
Stock. Executive understands that such Common Stock
constitutes "restricted securities" within the meaning of
Rule 144 as promulgated under the Act, and as such, such
Common Stock may not be immediately resold or transferred by
Executive. Executive understands and agrees that the
Parent's restrictive transfer legend will be placed on any
stock certificate representing his or her shares of Common
Stock.
(iii) Executive covenants and agrees that the Parent has made
available to him or her the opportunity to obtain sufficient
information regarding the business and financial condition
of the Parent and to evaluate the merits and risks of his or
her prospective investment in Common Stock. Executive
acknowledges that he or she has asked questions regarding
the financial condition and prospects of the Parent and the
Company and other matters related to the merits and risks of
an investment in the Common Stock and has been provided
detailed financial projections relating thereto, and he or
she has received satisfactory answers concerning such
matters. Executive acknowledges that the Parent and/or its
officers or other representatives have made available to him
or her all documents and information that he or she has
requested relating to his or her prospective purchase of
Common Stock.
(iv) Executive acknowledges that the Common Stock to be purchased
by Executive has not been registered (nor is registration
contemplated) under the Act or any applicable state
securities laws ("Blue Sky Laws"). Accordingly, such Common
Stock must be held indefinitely unless (y) it is
subsequently registered under the Act and/or the Blue Sky
Laws or (z) in the opinion of legal counsel for the Parent,
a sale or transfer may be made without registration
thereunder.
(c) Except as expressly provided herein, Executive covenants and agrees
that he or she will not sell, distribute, bequeath, pledge, encumber
or otherwise transfer or dispose of, whether voluntary or
involuntary, and will not permit to be sold, encumbered, attached,
or otherwise disposed of or transferred in any manner, either
voluntarily, by operation of law or otherwise, all or any portion of
the Common Stock to be purchased by him or her pursuant to Paragraph
8(a), or any other Common Stock at any time thereafter acquired by
him or her.
(d) In the event Executive's employment with the Company is terminated
as provided in Paragraph 3 of this Agreement for any reason, or for
no reason, except as contemplated by Paragraph 3(c) (sale of the
Parent), then each of the Parent and the Company will have the
right, but not the obligation, exercisable at any time within ninety
(90) days after the date of termination of employment, to repurchase
for cash from Executive or Executive's estate, executors and/or
personal representatives, that number of Executive's shares of Class
C Common Stock at $0.5720665 per share, which is Executive's
original purchase price for such shares, in accordance with the
following schedule based upon the effective date of termination.
<TABLE>
<CAPTION>
Shares Which
May Be Repurchased
<S> <C>
Termination Before January 15, 1997 47,375
Termination On or After January 15, 1997
But Before January 15, 1998 37,900
Termination On or After January 15, 1998
But Before January 15, 1999 28,425
Termination On or After January 15, 1999
But Before January 15, 2000 18,950
Termination On or After January 15, 2000
But Before January 15, 2001 9,475
Termination On or After Janaury 15, 2001 - 0 -
</TABLE>
The parties understand and agree that $0.5720665 is the agreed-upon
price at which such shares of Class C Common Stock may be purchased
under this Paragraph 8(d). The parties agree that such price
represents the fair market value of such shares on the date hereof
and agree to treat such price as the fair market value of such
shares on the date hereof for all purposes. The parties further
understand that shares of Class C Common Stock may actually be worth
more than $0.5720665 at the time of any purchase pursuant to this
Paragraph 8(d). In the event Executive's employment is terminated
pursuant to Paragraph 3(e) and an acquisition transaction described
in Paragraph 3(c) occurs prior to the first (1st) anniversary of
Executive's termination of employment, then in any such event
Executive shall have the right to receive an amount, in the form of
the consideration received by the Parent's stockholders or, at the
option of the Parent, solely in cash, equal to the value 9,475
shares of Class C Common Stock had in the acquisition transaction,
less $5,420.33 (i.e., 9,475 shares multiplied by $0.5720665 per
share). If Executive's employment hereunder is terminated pursuant
to Paragraph 3(c), then the Parent's and the Company's rights to
purchase Executive's shares of Class C Common Stock shall
automatically terminate.
(e) Any closing for the purchase and sale of shares of Common Stock
provided in Paragraph 8(d) shall be at the principal executive
offices of the Parent or the Company at a mutually acceptable time,
but in no event more than thirty (30) days after the date an option
to purchase is exercised.
(f) The Parent's transfer restrictions legend shall be placed on each
stock certificate representing Executive's Common Stock referencing
the rights, restrictions, and obligations of the parties hereunder.
(g) If the board of directors of the Parent and the holders of a
majority of the voting power represented by the Common Stock then
outstanding approve a sale of all or substantially all of the
Parent's assets determined on a consolidated basis or a sale of all
or substantially all of the outstanding Common Stock (whether by
merger, recapitalization, consolidation, reorganization,
combination or otherwise) to an Independent Third Party
(collectively, an "Approved Sale"), then Executive shall vote for,
consent to and raise no objections against such Approved Sale. For
purposes of this Paragraph 8(g), an "Independent Third Party" means
any person who, immediately prior to the contemplated transaction,
does not own, directly or indirectly, in excess of 5% of the Common
Stock on a fully-diluted basis (a "5% Owner"), who is not
controlling, controlled by or under common control with any such 5%
Owner and who is not the spouse or descendent (by birth or adoption)
of any such 5% Owner or a trust for the benefit of such 5% Owner
and/or such other persons. If the Approved Sale is structured as a
merger or consolidation, then Executive shall waive any dissenters
rights, appraisal rights or similar rights in connection with such
merger or consolidation. If the Approved Sale is structured as a
sale of stock, then Executive shall agree to sell all of Executive's
Common Stock and rights to acquire Common Stock on the terms and
conditions approved by the board of directors of the Parent and the
holders of a majority of the voting power represented by the Common
Stock then outstanding. Executive shall take all reasonably
necessary actions which are reasonably requested in connection with
the consummation of the Approved Sale as requested by the Parent,
including, without limitation, exercising (and/or selling without
exercise) any option, warrant or similar right to purchase
securities of the Parent. Executive's obligations with respect to
the Approved Sale are subject to the satisfaction of the following
conditions:
(i) subject to clause (ii) and Paragraph 8(h) below, upon the
consummation of the Approved Sale, Executive shall receive
the same form of consideration and the same amount of
consideration as other holders of Common Stock;
(ii) if any holders of Common Stock of any class are given an
option as to the form and amount of consideration to be
received, then Executive shall be given the same option with
respect to any shares of stock of that class held by
Executive, consistent with the rights and preferences set
forth in the Parent's certificate of incorporation as in
effect at such time;
(iii) if Executive then holds any currently exercisable rights to
acquire shares of a class of Common Stock, Executive shall
be given an opportunity to either (A) exercise such rights
prior to the consummation of the Approved Sale and
participate in such sale as a holder of such class of Common
Stock or (B) upon the consummation of the Approved Sale,
receive in exchange for such rights consideration equal to
the amount determined by multiplying (1) the amount of
consideration per share received by holders of such class of
Common Stock in connection with the Approved Sale less the
exercise price per share of such class of Common Stock of
such rights to acquire such class of Common Stock by (2) the
number of shares of such class of Common Stock represented
by such rights;
(iv) Executive shall not be obligated to make any representation
or warranty other than representations or warranties
regarding Executive's title to (including the absence of
encumbrances on), ownership of, and power, authority or
other right to sell, Common Stock or rights to acquire the
same, and other matters concerning Executive and Common
Stock or rights held by Executive (as distinct from the
Parent and its subsidiaries); and
(v) Executive shall not be obligated to provide indemnifications
of the acquiring person(s) and any related persons other
than (A) indemnifications relating specifically to the
matters referred to in clause (iv) above and (B)
indemnifications in respect to matters other than those
referred to in clause (iv) above; provided that (1) the
indemnification obligations described in this clause (B)
shall be shared by all holders of Common Stock and rights to
acquire the same on a pro rata and several basis (not joint
and several), and (2) with respect to Executive's pro rata
share of indemnification obligations described in this
clause (B) as such pro rata share relates to Executive's
ownership or former ownership of Class C Common Stock,
Executive's liability shall not exceed the amount of the
proceeds received by Executive in respect of such shares in
connection with such Approved Sale.
(h) In the event of a sale or exchange of all or substantially all
of the Common Stock and/or rights to acquire the same (whether by
sale, merger, recapitalization, reorganization, consolidation,
combination or otherwise), the participating holders shall receive
in consideration for shares or rights sold or exchanged by them the
same portion of the aggregate consideration from such sale or
exchange as such Stockholder or other holder would have received if
such aggregate consideration had been distributed by the Parent in
complete liquidation pursuant to the rights and preferences set
forth in the Parent's certificate of incorporation as in effect at
such time (as adjusted to reflect the exercise price with respect to
any such rights). Executive shall take all necessary or desirable
actions in connection with the distribution of the aggregate
consideration from such sale or exchange as requested by the Parent.
(i) If the board of directors of the Parent and the holders of a
majority of the voting power represented by the Common Stock then
outstanding approve a registered public offering and sale of Common
Stock (a "Public Offering") pursuant to the Act, then Executive
shall take all actions which are reasonably necessary or desirable,
as determined by the managing underwriter(s), in connection with the
consummation of the Public Offering. If such Public Offering is an
underwritten offering and the managing underwriter(s) advise the
Parent in writing that in their opinion the capital stock structure
of the Parent would adversely affect the marketability of the
offering, then Executive shall consent to and vote for a
recapitalization, reorganization and/or exchange of the capital
stock of the Parent into securities that the managing
underwriter(s), the board of directors of the Parent and the holders
of a majority of the voting power represented by the Common Stock
then outstanding find acceptable and shall take all actions which
are reasonably necessary or desirable, as determined by the managing
underwriter(s) in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the
resulting securities reflect and are consistent with the rights and
preferences set forth in the Parent's certificate of incorporation
as in effect immediately prior to such Public Offering; and further
provided, that if such recapitalization, reorganization and/or
exchange adversely affects Executive in any manner in which the
other similarly-situated holders of Common Stock are not likewise
adversely affected, then Executive shall also have consented to such
recapitalization, reorganization and/or exchange. Executive agrees
for each registered public offering of equity securities of the
Parent that Executive shall not, for a period of 180 days following
the effective date of a registration statement for any public
offering of the Parent's securities, and for a period of seven (7)
days prior to such date, sell, transfer or otherwise dispose of any
shares of Common Stock or rights to acquire the same, except any
common stock or rights sold pursuant to such registration statement,
without the prior consent of the Parent and the managing
underwriter(s), if any.
9. Entire Agreement. This instrument embodies the entire agreement
between the parties hereto with respect to Executive's employment
with the Company, and there have been and are no agreements,
representations, or warranties between the parties other than those
set forth or provided for herein; provided that, as to matters not
expressly addressed in this Agreement, this Agreement shall not be
deemed to supersede the provisions of any employee manual which may
be in effect from time to time, which are applicable to employees
such as Executive and which are not inconsistent with the terms of
this Agreement.
10. No Assignment. This Agreement shall not be assigned by Executive
without the prior written consent of the Parent and the Company and
any attempted assignment without such prior written consent shall be
null and void and without legal effect; provided, however, that in
the case of Executive's death or disability this Agreement, may be
enforced by his or her executors, personal representatives or
guardians, as applicable.
11. Notices. All notices, requests, demands, and other communications
hereunder shall be deemed to have been duly given when (i) delivered
by hand or if mailed, by certified or registered mail, with postage
prepaid; (ii) hand delivered; or (iii) sent if sent by facsimile
transmission (with receipt confirmed), overnight mail or overnight
courier:
(a) If to Executive to c/o WZTV-TV 45 631 Mainstream Dirve,
Nashville, TN 37228, or such other person or place as
Executive may specify in a prior written notice to the
Company;
(b) If to the Parent or the Company to Dan Sullivan, Sullivan
Broadcasting Company, Inc., 4431 Dyke Bennett Road, Franklin,
TN 37064, with a copy to David Pulido, Sullivan Broadcasting
Company, Inc., 18 Newbury Street, Boston, MA 02116, or to such
other person or place as the Company may specify in prior
written notice to Executive.
12. Amendment/Modification. This Agreement shall not be amended,
modified, or supplemented other than in writing signed by each of the
parties hereto.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
14. Headings. The headings in the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part of
this Agreement.
15. Severability. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or
inoperative, the Agreement shall be construed with the invalid and
inoperative provision deleted, and the rights and obligations of the
parties shall be construed and enforced accordingly.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal law of the State of Delaware.
17. Agents and Executives. Compensation as provided in this Agreement
includes all commissions or fees due any agent, manager, attorney, or
other representative of Executive, and Executive covenants and agrees
to hold the Parent and the Company harmless from and against any
claims or demand from any such agent, manager, attorney or other
representative of Executive.
18. Legal Fees. In the event of any litigated dispute between or among
any of the parties to this Agreement, the reasonable legal fees and
expenses of the party successful in such dispute (whether by way of a
decision by a court or other tribunal) shall be paid promptly by the
unsuccessful party upon presentation by the successful party of an
invoice therefor.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/s/ Richard Montgomery
Richard Montgomery
Sullivan Broadcasting Company, Inc.
By: /s/ David Pulido
Its: Exec. V.P.
Sullivan Broadcast Holdings, Inc.
By: /s/ David Pulido
Its: Exec. V. P.
Exhibit 10.5
FOX BROADCASTING COMPANY
STATION AFFILIATION AGREEMENT
May 17, 1990
Mohawk Valley Broadcasting
WFXV
Greenfield Rd.
Rome, NY 13440
Attention: Kevin O'Kane
This sets forth the terms and conditions of the agreement between Fox
Broadcasting Company ("Fox") and Mohawk Valley Broadcasting ("Licensee") for
the carriage of programming over the facilities of Licensee's television
station WFXV ("Station").
1. Fox Programming: Fox will deliver to the Station for free over-the-air
television broadcasting, all programming which Fox makes available for
broadcasting in the community to which Station is presently licensed by the
FCC, which in Utica, NY. The selection, scheduling, substitution and
withdrawal of any program or portion thereof shall at all times remain within
the sole discretion and control of Fox. Licensee shall not and shall not
authorize others to broadcast or otherwise use any program (or part thereof)
or other material supplied by Fox except as specified in this Agreement, and
without limiting the foregoing, Station may broadcast Fox programming only:
(i) as scheduled by Fox, (ii) in the Community specified above in this
Paragraph 1 ("Station's Community"), and (iii) by free over-the-air television
broadcasting.
2. Delivery: Fox will transmit the programming hereunder by satellite and
shall keep Licensee apprised of both the satellite and transponder being used
for such transmission. Any and all costs of whatever kind or nature incurred
with respect to the pickup of the programming from the satellite and its
rebroadcast by the Station shall be borne by and shall be the sole
responsibility of the Licensee.
3. Carriage & Preemption:
(a) Licensee agrees to broadcast over the facilities of the Station all
Fox programs in their entirety, including, but not limited to, all
commercial announcements, Fox i.d.'s, promo's and credits, without
interruption, deletion or addition (except for the addition of
Licensee's commercial announcements as provided hereunder) on the
dates and at the times the programs are scheduled by Fox.
(b) In the event that Licensee, for any reason, fails to telecast or
advises Fox that it will not telecast any Fox programming as provided
herein, then, in each case, Licensee, upon notice from Fox to
Licensee, will telecast such omitted programming and the commercial
announcements contained therein (or any replacement programming and
the commercial announcements contained therein) during a time
period(s) which the parties shall promptly and mutually agree upon
and which shall be of quality and rating value comparable to that of
the time period(s) at which such omitted programming was not telecast
as provided herein. In the event that the parties do not promptly
agree upon a time period(s) as provided in the preceding sentence,
then, without limitation to any other rights of Fox under this
Agreement or otherwise, Fox shall have the right to license the
broadcast rights to the applicable omitted programming (or
replacement programming) to another television station located within
Station's Community.
(c) Without limiting any other rights of Fox under this Agreement or
otherwise, if within any 6-month period during the term of this
Agreement, Station preempts or otherwise fails to broadcast (other
than due to force majeure as provided for in Paragraph 7 below) any
episodic series or other program scheduled by Fox for broadcast on a
once (or less) per week basis (or 25% of any such program scheduled
on a more than once per week basis) for 4 consecutive calendar weeks
(excluding any calendar weeks it is not scheduled by Fox for
broadcast) or 6 calendar weeks in the aggregate, then, with respect
to each such series or other program so preempted, Fox may, upon 30
days prior written notice to Licensee, terminate Station's right to
broadcast said series or other program and, to the extent and for the
period(s) that Fox elects, thereafter license the applicable series
or other program to any other entity or entities located in Station's
Community.
4. Promotion:
(a) Fox will provide Licensee with on-air promotional announcements for
Fox which Licensee will broadcast in station's non-Fox programming.
Fox will endeavor to supply such promotional announcements in various
lengths and formats in order to best serve the interests of Licensee
and Fox. Licensee will make a good faith, reasonable effort to
provide an on-air promotional schedule consistent with Fox's
recommendations. Licensee agrees to maintain complete and accurate
records of all promotional announcements broadcast as provided
herein. Within two (2) weeks following each request by Fox therefor,
Licensee will submit copies of all such records to Fox.
(b) In addition to providing the promotion announcements referred to
above, Fox shall make available to Licensee, at reasonable costs,
such other promotional and sales materials as Fox and Licensee may
mutually consider appropriate. Licensee shall not delete any
copyright, trademark, logo or other notice, or any credit, included
in any materials delivered pursuant to this paragraph or otherwise,
and Licensee shall not exhibit, display, distribute or otherwise use
any trademark, logo or other material or item delivered pursuant to
this paragraph or otherwise, except as instructed by Fox at the time.
5. Commercial Announcements:
(a) Licensee shall have the right to include six (6) 30-second commercial
announcements (inclusive of station breaks) during each hour of
programming in prime time. For each hour of programming in other time
periods, Fox shall determine the number and length of the commercial
announcements that Licensee may include.
(b) Fox will have the right to include commercial announcements in the
remainder of the available commercial time in each hour of
programming. With respect to the Fox programming broadcast by
Licensee, Licensee's broadcast over the Station of the commercial
announcements included by Fox in such programming is of the essence
of this Agreement, and nothing contained in Paragraph 3 above or
elsewhere in this Agreement shall limit Fox's rights or remedies at
law or otherwise relating to failure to so broadcast said commercial
announcements. Licensee agrees to maintain complete and accurate
records of all commercial announcements broadcast as provided herein.
Within two (2) weeks following each request by Fox therefor, Licensee
will submit copies of all such records to Fox.
(c) The placement, timing and format of Fox's and Licensee's commercial
announcements shall be determined by Fox.
(d) For purpose of this Agreement, "prime time" shall mean: 8:00 P.M.
(7:00 P.M. on Sundays) to 11:00 P.M. Eastern and Pacific Time and
7:00 P.M. (6:00 P.M. on Sundays) to 10:00 P.M. Central and Mountain
Time.
6. Station Compensation: Subject to the performance of Licensee's
obligations hereunder, Fox agrees to pay Licensee, and Licensee agrees to
accept, compensation (the "Station Compensation") determined in accordance
with Fox's current, standard, performance-based station compensation formula
(the "Current Formula"). Notwithstanding the foregoing or anything to the
contrary in this Agreement, and in lieu of the Current Formula, Fox shall have
the right at any time and from time to time, upon not less than 15 days
written notice to Licensee (the "Change Notice"), to thereafter calculate the
Station Compensation in accordance with such other formula(s), based in whole
or in part upon Station's relative rating performance and/or other factors, as
may be determined by Fox; provided, however, that: (1) the formula(s) to which
each applicable Change Notice relates (the "New Formula") shall not become
effective prior to the commencement of the calendar quarter following such
Change Notice, and (2) in the event the New Formula is not generally applied
to Fox's affiliated stations and is substantially different from the
applicable formula(s) to be replaced by the New Formula, then Licensee shall
have the right, by written notice to Fox within 15 days of Licensee's receipt
of the Change Notice, to terminate this Agreement effective 60 days after
Fox's receipt of Licensee's termination notice. Payment of the Station
Compensation will be made 60 days after the end of each full or partial
calendar quarter within the term of this Agreement ("accounting period");
provided, however, that notwithstanding anything to the contrary contained
herein, for any such partial calendar quarter, the applicable Station
Compensation shall be that provided above, prorated according to Fox's then-
current standard Station Compensation proration procedure applied by Fox for
such quarter.
7. Force Majeure: Fox shall not be liable to Licensee for failure to supply
any programming or any part thereof, nor shall Licensee be liable to Fox for
failure to broadcast any such programming or any part thereof, by reason of
any act of God, labor dispute, non-delivery by program suppliers or others,
failure or breakdown of satellite or other facilities, legal enactment,
governmental order or regulation or any other similar or dissimilar cause
beyond their respective control ("force majeure event"). If, due to any force
majeure event(s), Fox substantially fails to provide the programming to be
delivered to Licensee under Paragraph 1 above, or Licensee substantially fails
to broadcast such programming as scheduled by Fox, for 7 consecutive weeks, or
for 10 weeks in the aggregate during any 12-month period, then the other party
hereto (the "unaffected party") may terminate this Agreement upon thirty (30)
days prior written notice to the party so failing, which notice may be given
at any time prior to the expiration of 7 days after the unaffected party's
receipt of actual notice that the force majeure event(s) has ended.
8. Assignment: This Agreement shall not be assigned by Licensee without the
prior written consent of Fox, and any permitted assignment shall not relieve
Licensee of its obligations hereunder. Any purported assignment by Licensee
without such consent shall be null and void and not enforceable against Fox.
Licensee also agrees that if any application is made to the Federal
Communications Commission pertaining to an assignment or a transfer of control
of Licensee's license for the Station, or any interest therein, Licensee shall
immediately notify Fox in writing of the filing of such application. Except as
to "short form" assignments or transfers of control made pursuant to Section
73.3540(f) of the Rules and Regulations of the Federal Communications
Commission, Fox shall have the right to terminate this Agreement, effective
upon thirty (30) days notice to Licensee and the transferee or assignee of
such termination, which notice may be given at any time within ninety (90)
days after the later occurring of: (a) the date on which Fox learns that such
assignment or transfer has become effective, or (b) the date on which Fox
receives written notice of such assignment or transfer, or (c) the effective
date of this Agreement (the foregoing termination provision shall apply to any
assignments or transfers of control that become effective at any time on or
after the beginning of the sixth month prior to the effective date of this
Agreement). Licensee agrees, that upon Fox's request, Licensee shall procure
and deliver to Fox, in form satisfactory to Fox, the agreement of the proposed
assignee or transferee that, upon consummation of the assignment or transfer
of control of the Station's authorization, the assignee or transferee will
assume and perform this Agreement in its entirety without limitation of any
kind. If Licensee fails to notify Fox of the proposed assignment or transfer
of control of said Station's authorization, or fails to procure the agreement
of the proposed assignee or transferee in accordance with this Paragraph, then
such failure shall be deemed a material breach of this Agreement.
9. Unauthorized Copying: Licensee shall not, and shall not authorize others
to, record, copy or duplicate any programming and other material furnished by
Fox hereunder, in whole or in part, and shall take all reasonable precautions
to prevent any such recordings, copying or duplicating. Notwithstanding the
foregoing, if Station is located in the Mountain Time Zone, Licensee may pre-
record programming from the satellite feed for later telecast at the times
scheduled by Fox. Licensee shall erase all such prerecorded programming
promptly after its scheduled telecast.
10. Term: The term of this Agreement shall commence on September 1, 1990 and
shall continue until the expiration of August 31, 1992 (the "initial period").
After the initial period, the term of this Agreement may be extended for
additional successive periods of two (2) years each, by Fox, in its sole
discretion, giving written notice of such extension (the "extension notice")
to Licensee at least one hundred twenty (120) days prior to the expiration of
the then-current period; provided, however, that if, within thirty (30) days
of Licensee's receipt of the extension notice, Licensee, in its sole
discretion, gives Fox written notice that Licensee rejects such extension,
then the extension notice shall not be effective and this Agreement shall
terminate upon expiration of the then-current period. Notwithstanding anything
to the contrary contained in this Agreement, upon the termination or
expiration of the term of this Agreement, all of Licensee's and Station's
rights to broadcast or otherwise use any Fox program or any trademark, logo or
other material or item hereunder shall immediately cease and neither Licensee
nor Station shall have any further rights whatsoever with respect to any such
program; material or item.
11. Applicable Law: The obligations of Licensee and Fox under this Agreement
are subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of 1934, as
amended, and the rules and regulations of the Federal Communications
Commission) and this Agreement and all matters or issues collateral thereto
shall be governed by the law of the State of California applicable to
contracts negotiated, executed and performed entirely therein. With respect to
programs offered or already contracted for pursuant to this Agreement, nothing
herein contained shall be construed to prevent or hinder Licensee from (a)
rejecting or refusing Fox programs which Licensee reasonably believes to be
unsatisfactory, unsuitable or contrary to the public interest, or (b)
substituting a program which, in Licensee's opinion, is of greater local or
national importance.
12. Station Acquisition by Fox: In the event that Fox or any of Fox's
parent, affiliated, subsidiary or related companies or other entities acquires
any significant ownership and/or controlling interest in any television
broadcast station licensed to any community within Station's television
market, then Fox shall have the right to terminate this Agreement, upon not
less than sixty (60) days notice to Licensee. Said termination shall be
effective as of such date as Fox shall designate in said notice.
13. Change in Operations: In the event that Station's transmitter location,
power, frequency, programming format or hours of operation are materially
changed at any time so that Station is of less value to Fox as a broadcaster
of Fox programming than at the date of this Agreement, then Fox shall have the
right to terminate this Agreement upon (30) days prior written notice to
Licensee.
14. Consultation With Board: With respect to any significant future
expansions by Fox of its national program service, including expansions into
additional dayparts, Fox will consult in advance with the Fox Broadcasting
Company Affiliates Association Board of Governors; provided, however, that all
decisions shall be made by Fox in its sole discretion.
15. Warranties and Indemnities:
(a) Fox represents and warrants that the broadcasting by Station, in
accordance with this Agreement, of any Fox programming provided by Fox
to Station shall not violate or infringe upon the trade name,
trademark, copyright, literary or dramatic right, or right of privacy
or publicity of any party, or constitute a libel or slander of any
party; provided, however, that the foregoing representations and
warranties shall not apply: (1) to public performance rights in music,
(2) to any material furnished or added by any party other than Fox
after delivery of the programming to Station or (3) to the extent such
programming is changed or otherwise affected by deletion of any
material by any party other than Fox after delivery of the programming
to Station. Fox agrees to indemnify and hold harmless Station and
its parents, affiliates, subsidiaries, successors and assigns, and the
respective owners, officers, directors, agents and employees of each,
from and against all liability, actions, claims, demands, losses,
damages or expenses (including reasonable attorneys' fees, but
excluding Licensee's or Station's lost profits or consequential
damages, if any) caused by or arising out of Fox's breach of the
representations and warranties set forth in the foregoing sentence.
Fox makes no representations, warranties or indemnities, express or
implied, except as expressly set forth in this subparagraph 15 (a).
(b) Without limitation to any of Licensee's other obligations and
agreements under this Agreement, Licensee agrees to indemnify and hold
harmless Fox and its parents, affiliates, subsidiaries, successors and
assigns, and the respective owners, officers, directors, agents and
employees of each, from and against all liability, actions, claims,
demands, losses, damages or expenses (including reasonable attorneys'
fees, but excluding Fox's lost profits or Fox's consequential damages,
if any) caused by or arising out of any matters excluded from Fox's
representations and warranties by subparagraphs 15 (a)(1), (2) or (3)
above, or any breach of any of Licensee's representations, warranties
or agreements hereunder or any programming broadcast by Station other
than that provided by Fox hereunder.
(c) The indemnitor may assume, and if the indemnitee requests in writing
shall assume, the defense of any claim, demand or action covered by
indemnity hereunder, and upon the written request of the indemnitee,
shall allow the indemnitee to cooperate in the defense at the
indemnitee's sole cost and expense. The indemnitee shall give the
indemnitor prompt written notice of any claim, demand or action
covered by the indemnity hereunder. If the indemnitee settles any
claim, demand or action without the prior written consent of the
indemnitor, the indemnitor shall be released from the indemnity in
that instance.
16. Notices: All notices to each party required or permitted hereunder to be
in writing shall be deemed given when personally delivered (including, without
limitation, upon delivery by overnight courier or other messenger or upon
receipt of facsimile copy), upon the date of mailing postage prepaid or when
delivered charges prepaid to the telegraph office for transmission, addressed
as specified below, or addressed to such other address as such party may
hereafter specify in a written notice given as provided herein. Such notices
to Licensee shall be to the address set forth for Licensee on page 1 of this
Agreement. Such notices to Fox shall be to: Fox Broadcasting Company, 10201
West Pico Boulevard, Los Angeles, CA 90035. Attn: Affiliate Relations; with a
copy to: Fox Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA
90035, Attn: Legal Affairs.
17. Miscellaneous:
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between
Fox and Licensee.
(b) No waive of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding
or succeeding failure of the same or any other condition, or a waiver
of any preceding or succeeding breach of the same or any other
obligation.
(c) This Agreement constitutes the entire understanding between Fox and
Licensee concerning the subject matter hereof and shall not be
amended, modified, changed, renewed, extended or discharged except by
an instrument in writing signed by Fox and Licensee or as otherwise
expressly provided herein. Fox and Licensee each hereby acknowledge
that neither is entering into this Agreement in reliance upon any
term, condition, representation or warranty not stated herein, and
that this Agreement replaces any and all prior and contemporaneous
agreements, whether oral or written, pertaining to the subject matter
hereof.
(d) Each and all of the several rights and remedies of each party hereto
under or contained in or by reason of this Agreement shall be
cumulative, and the exercise of one or more of said rights or
remedies shall not preclude the exercise of any right or remedy under
this Agreement, at law, or in equity. Notwithstanding anything to the
contrary contained in this Agreement, in no event shall either party
hereto be entitled to or recover any lost profits or consequential
damages because of a breach or failure by the other party, and except
as expressly provided in this Agreement to the contrary, neither Fox
nor Licensee shall have any right against the other with respect to
claims by any third person or other third entity.
(e) Paragraph headings are inserted for convenience only and shall not be
used to interpret this Agreement or any of the provisions hereof or
given any legal or other effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Fox Broadcasting Company
("Fox")
By: C. Dyedell
Title: SR. VP., LEGAL AFFAIRS
Mohawk Valley Broadcasting
("Licensee")
By: Kevin O'Kane - 9/21/90
Title: President
AGREEMENT AND AMENDMENT TO STATION AFFILIATION AGREEMENT
This AGREEMENT AND AMENDMENT TO STATION AFFILIATION AGREEMENT is entered into
as of June 11, 1993, between Fox Broadcasting Company ("Fox") and Mohawk
Valley Broadcasting ("Licensee").
WHEREAS, Licensee and Fox have entered into a Station Affiliation
Agreement (the "Affiliation Agreement") relating to television station WFXV-TV
("Station");
WHEREAS, Fox Basic Cable, Inc. ("Fox Basic") intends to negotiate and
enter into an affiliation agreement with various cable television operators
for the carriage of a new basic cable program service (the "Cable Network");
WHEREAS, Licensee has expressed a desire and need for a longer term
commitment of affiliation with Fox in order to provide Licensee with
additional assurance of the availability to Licensee of Fox programming and
the stability associated therewith;
WHEREAS, Fox wishes to accommodate Licensee's needs as long as Fox
preserves its access to Licensee's television market when new time periods are
programmed by Fox during the extended period of the Affiliation Agreement;
WHEREAS, Fox and Licensee are required by the Affiliation Agreement to
negotiate regarding the terms and conditions of retransmission consent; and,
WHEREAS,Fox and Licensee desire to enhance the value of the Cable Network
and the Fox affiliate network to cable systems by this Agreement;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
1. SIGNING AUTHORITY: Licensee hereby irrevocably appoints Fox as Licensee's
agent, with full power of delegation and substitution to: (a) negotiate on
Licensee's behalf a retransmission consent agreement with any cable television
system (an "Eligible System") that currently or hereafter carries Station or
on which Station would be eligible for carriage as a must-carry signal
pursuant to Section 76.56 of the Federal Communications Commission's ("FCC's")
Rules ("Must-Carry"), and (b) execute on Licensee's behalf such retransmission
consent agreement with each such Eligible System if it agrees to carry the
Cable Network. Each such retransmission consent agreement will be
substantially in the form of Exhibit A hereto, with such changes as Fox may
reasonably deem necessary or appropriate in completing each agreement. Each
Eligible System that enters into a retransmission agreement pursuant to this
Paragraph 1 shall for purposes of this Agreement be an "Applicable System" for
so long as such agreement is in full force and effect. If Fox is unable to
conclude retransmission consent agreements on certain Eligible Systems, Fox
agrees to provide notice to Licensee authorizing Licensee to negotiate
directly with such Eligible Systems.
2. MUST-CARRY ELECTION/OTHER RETRANSMISSION: Without Fox's prior written
consent, Licensee agrees that Station shall not elect Must-Carry on any
Eligible System (unless said System has only 1,000 or fewer subscribers).
Station shall timely notify all Eligible Systems (other than Eligible Systems
for which it is permitted to elect Must-Carry by the foregoing sentence), in
the manner required by FCC rules, that it is electing to require
"retransmission consent" and is not electing "Must-Carry" (such notice shall
be made by such date that Must-Carry status shall not apply to Station) and
shall timely notify all Eligible Systems that Fox has been appointed as its
agent for the negotiation and execution of retransmission consent. Also,
without Fox's prior written consent, Station shall not grant any form of
retransmission consent to any Eligible System (other than the consent provided
pursuant to Paragraph 1 above) and in any event any retransmission consent
granted by Station with Fox's consent shall be only as permitted by this
Agreement and fully consistent herewith. With respect to any Eligible System
that is carrying any other Fox affiliate or for which any other Fox affiliate
would be eligible for Must-Carry, if Fox gives Station consent to enter into
any retransmission arrangement other than pursuant to this Agreement, and if
Station is not the Home ADI Fox affiliate with respect to the Eligible System,
Station shall not commence negotiations with respect to, or enter into, said
retransmission arrangement until the Home ADI Fox affiliate has executed its
retransmission consent agreement with the Eligible System. With respect to
retransmission consent agreements entered into directly by Licensee with cable
systems, Licensee and Fox shall negotiate in good faith to reach an equitable
understanding regarding the sharing with Fox of any consideration received by
Licensee from cable systems. As used in this Agreement, "Home ADI" shall have
the same definition as specified in Section 76.55 (e) (1) of the FCC's Rules,
and a cable system shall be deemed to be located in only the Home ADI in which
its principal headend is located.
3. STATION COMPENSATION: Subject to the performance of Licensee's
obligations hereunder, Licensee shall be entitled to receive, with respect to
each Applicable System for which Station is the Home ADI Fox affiliate,
affiliate compensation in either of the following forms (as Licensee shall
elect within 5 days following Fox's request therefor):
(a) 5 cents per month from each monthly per-subscriber fee paid by the
Applicable System for the Cable Network, plus Station's allocated
share of 25% of the equity of the Cable Network, based on the
applicable Fox equity-sharing formula (the formula shall include an
allocation of the 25% among 100% of all Fox affiliates, whether or
not an affiliate is entitled to share in said 25%); or
(b) 7 1/2 cents per month from each monthly per-subscriber fee paid by
the Applicable System for the Cable Network.
The 5 or 7 1/2 cents per-subscriber fees described above shall be: (i)
computed as if a minimum of 80% of the Applicable System's basic cable
subscribers were also Cable Network subscribers, whether or not that 80%
actually subscribe to the Cable Network, and (ii) increased each year by
the same CPI percentage increase that applies to the fees paid by the
participating cable system for the Cable Network. The parties recognize
that it will be necessary to specify in greater detail the nature of the
arrangements with respect to the Cable Network, and Fox and Licensee
agree to negotiate in good faith to develop definitive terms, consistent
with the principles contained herein. In any event, however, it is
understood that Licensee shall be entitled to the affiliate compensation
payable hereunder only until the end of the initial term of the
applicable retransmission consent agreement as such initial term is
negotiated by Fox pursuant to Paragraph 1 above. Also, in no event shall
Fox be required to pay in the aggregate, with respect to any Applicable
System, more than the affiliate compensation set forth in (a) or (b)
above, as applicable, and if with respect to any Applicable System there
is one or more Home ADI Fox affiliates in addition to Station, then said
affiliate compensation shall be allocated between all such Home ADI Fox
affiliates (including Station) in such manner as Fox shall determine (if
all Home ADI Fox affiliates cannot agree upon which election to make
between (a) and (b) above, then Fox shall make such election).
4. LOCAL PROGRAMMING/INSERTS: Subject to the agreement and cooperation of
each Applicable System and the establishment of suitable local delivery
arrangement: (a) Station may program locally two hours of original programming
per day on the Cable Network's channel (12N--2:00PM), retaining for its own
sale in that programming nine minutes per hour of commercial announcement
time, and (b) Station may insert into the Cable Network: (1) up to four local
station promos per afternoon promoting Station's early fringe line-up, in such
lengths and formats as Fox Basic may reasonably elect, and (2) local news
updates in a quantity and at time periods determined by Fox Basic after it has
established a format for the new channel.
5. PROGRAM HOLDBACK: As a general rule, but allowing for such unusual
exceptions as Fox may reasonably determine, FBC network product will not be
repeated on the Cable Network until two years after its last FBC broadcast
date, calculated on an episode-by-episode basis, except as part of customary
"stripping" rights granted to stations or basic cable networks.
6. CABLE NETWORK NAME: The Fox name and logo will not be included in the
commonly used and promoted name of the Cable Network. However, Fox may be a
part of its formal name. For example, (this is only an illustrative example)
the formal name, "Affiliate Fox Channel", if used, would be known, promoted
and listed as "AFC."
7. OTHER ARRANGEMENTS: Station may negotiate for any other arrangements it
wishes with any Applicable System, provided that no such arrangement shall be
interposed as a condition on or interfere with the Applicable System's
carriage of or participation in the Cable Network or Fox's affiliate
retransmission arrangements.
8. CHANNEL POSITIONING: In an agreement negotiated between Fox and TCI, Fox
has secured, for all Fox affiliates participating in Fox's retransmission
consent arrangement, commitments on VHF channel-positioning (subject to
certain limited exceptions where there are legal restrictions or more than one
Fox Affiliate being carried) and commitments to carry Fox affiliates that are
currently being carried or that would be eligible for Must-Carry. Fox commits
that Licensee will receive comparable channel-positioning and carriage rights
as do the Fox owned-and-operated stations ("O&Os") in any Cable Network
retransmission consent agreement involving Licensee and any Fox O&O.
9. AMENDMENT OF STATION AFFILIATION AGREEMENT: The Affiliation Agreement is
hereby amended as follows:
(a) Paragraph 10 of the Affiliation Agreement is amended to specify an
expiration date of 10/03/98 (the "Initial Period"). The period of time
between the end of the presently effective initial period and the new
expiration date specified in the preceding sentence is for purposes of
the Affiliation Agreement and "Extension Period."
(b) Paragraph 3 of the Affiliation Agreement is amended to add a new
Paragraph 3(e) as follows:
Licensee shall broadcast over the facilities of Station all Fox
programming to be offered during the Extension Period in time
periods not presently programmed by Fox ("New Programmed Time
Periods"), subject to Fox providing to Licensee at least six
months notice prior to delivering any additional programming
within these time periods. Furthermore, if Licensee has entered in
any agreement(s) prior to an announcement by Fox to program a
specific time period and the agreement(s) is (are) for barter
programming that Licensee is required by the terms of the
agreement(s) to broadcast during a New Programmed Time Period,
then Licensee shall not be required to broadcast the new Fox
programming within the same time period, and the existing
provisions of Paragraph 3(c) of the Affiliation Agreement shall
govern; provided, however, in any such instance(s) Licensee agrees
not to renew or otherwise extend its rights to broadcast such
conflicting programming within a New Programmed Time Period.
(c) Paragraph 3(c) is amended to add the following at the end of said
Paragraph:
In addition to the foregoing, with respect to programming for
broadcast within the New Programmed Time Periods, Fox will provide
Licensee with a minimum of six months notice for each program
addition, and Licensee shall be required to advise Fox within ten
days of receiving notification if Licensee does not wish to
televise said programming as scheduled by Fox. In the event that
Licensee refuses to broadcast any program within a New Programmed
Time Period for any reason other than (i) a program conflict
specified in Paragraph 3(e) hereof or (ii) those specified in
paragraph 11 hereof, then either Licensee or Fox shall have the
right to terminate this Station Affiliation Agreement upon six
months prior notice to the other party.
Except as specifically provided by this Paragraph 9, all of the terms and
conditions of the Affiliation Agreement remain in effect and unmodified
and shall continue in full force and effect and shall be binding upon the
perties hereto in accordance with the terms thereof. If any provision of
this Paragraph 9 is found by a court or agency of competent jurisdiction
to be unlawful or contrary to the public interest then the entire
provisions of this Paragraph 9 shall be null and void.
10. It is expressly agreed that any breach by Licensee or Station of the
terms of this Agreement shall be deemed a breach by Licensee of the
Affiliation Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
For Broadcasting Company Mohawk Valley Broadcasting
("Fox") ("Licensee")
By: /s/ Eden Bar By: /s/ Kevin O'Kane
Its: VP West Coast Operations Its: President
EXHIBIT 10.6
STATION AFFILIATION AGREEMENT
This Agreement dated March 23, 1995, together with the Standard Terms
and Conditions attached hereto and made a part hereof, shall set forth the
terms and conditions pursuant to which United Paramount Television Network
Partnership ("United Paramount"), located at 5555 Melrose Avenue, Hollywood,
California 90038, grants to ACME TV Corp. ("Licensee"), located at 401 W.
Kirkpatrick St., Syracuse, NY 13204 and Licensee accepts, a limited license to
telecast certain television programming, as further described below (the
"Network Programs"), over the facilities of Licensee's broadcast television
station WUPN-TV (the "Station") (a/k/a W53AM) which is licensed by the FCC to
serve the community of Utica, NY (the "Licensed Community").
1. Network Programs.
a. United Paramount will deliver Network Programs to the Station to be
telecast during the following time periods:
i. January 16, 1995 -- January 15, 1996
Prime Time: Two (2) hours/night
Two (2) nights/week
Weekend Movie: 12 p.m. -- 2 p.m. Saturday or Sunday
ii. January 1996 -- January 1997
Prime Time: Two (2) hours/night
Two (2) nights/week
Weekend Movie: 12 p.m. -- 2 p.m. Saturday or Sunday
iii. January 1997 -- January 1998
Prime Time: Two (2) hours/night
Three (3) nights/week
Early Fringe: 3 p.m. -- 5 p.m. Monday -- Friday
Weekend Movies: 12 p.m. -- 2 p.m. Saturday and Sunday
iv. January 1998 -- January 2001 (provided the License Term
is extended pursuant to Paragraph 2 below.)
Prime Time: Two (2) hours/night
Five (5) nights/week
Early Fringe: 3 p.m. -- 5 p.m. Monday -- Friday
Weekend Movies: 12 p.m. -- 2 p.m. Saturday and Sunday
Late Night: 11:00 -- 12:00 p.m. Monday -- Friday
v. Children's Weekend Programming: In addition to the above,
commencing in September 1995, United Paramount shall also
deliver to Station one (1) hour of Children's Weekend
programming for telecast between 8 a.m. and 12 p.m. on
Sunday. Commencing in September 1996 and throughout the
duration of the License Term, as extended pursuant to
Paragraph 2. below, United Paramount shall deliver to
Station two (2) hours of Children's Weekend Programming
for telecast between 8 a.m. and 12 p.m. on Sunday.
Except with respect to the initial commencement of broadcasting
operations on January 16, 1995, United Paramount shall provide Licensee with
one hundred eighty (180) days prior written notice of (i) the specific dates
upon which Station shall begin telecasting the Network Programs and (ii) the
specific days of the week and hours during which Network Programs shall be
scheduled, if changed from above or if not indicated above. For purposes of
this Agreement, "Prime Time" shall mean 8 p.m. to 11 p.m. Eastern and Pacific
Times. The initial days and times for broadcasts of Prime Time Network
Programs shall be Mondays and Tuesdays, 8:00 p.m. to 10:00 p.m. Eastern and
Pacific Times, 7:00 p.m. to 9:00 p.m. Central and Mountain Times. The initial
day for broadcast of the Weekend Movie shall be Saturday.
b. Notwithstanding the provisions of Paragraph 1(a) above, United
Paramount shall have the right, in its sole discretion, to decrease the number
of hours of Network Programs to be furnished pursuant to Paragraph 1(a) above,
or to change the specific days of the week and hours during which the Network
Programs will be scheduled, upon one hundred eighty (180) days prior written
notice to Licensee. United Paramount shall not increase the number of hours of
Network Programs to be furnished pursuant to Paragraph 1(a) above unless such
increase has been approved by a majority of the Affiliate Board (as defined in
Paragraph 10 below); provided, however, that United Paramount may increase the
number of Prime Time nights programmed by the Network to four nights during
1996 and to five nights during 1997 without said approval. The selection,
scheduling, renewal substitution and withdrawal of any Network Program, or
portion thereof, shall at all times remain within the sole discretion and
control of United Paramount.
c. United Paramount shall deliver the one-hour television series
currently entitled "Star Trek: Voyager" to Station as one of the Prime Time
Network Programs commencing in January 1995. In addition to the Prime Time
broadcast, Station shall repeat each episode of "Star Trek: Voyager" between
4:00 p.m. and midnight on the Saturday or Sunday immediately following the
Prime Time broadcast (the "Star Trek Voyager Weekend Run").
d. Beginning in September 1998, provided the License Term is extended
pursuant to Paragraph 2 below, United Paramount shall have the right, at its
sole option, to deliver repeat episodes of "Star Trek: Voyager" to Licensee to
be telecast by Station on a stripped basis as a Network Program at a time to
be determined by United Paramount.
2. License Term.
The term of rights granted to Licensee hereunder (the "License Term")
shall commence on the date United Paramount begins broadcasting Network
Programs and shall continue for three (3) years from that date. The License
Term shall be automatically extended for an additional three years commencing
immediately upon the expiration of the initial three (3) year term, unless
either United Paramount or Licensee shall have given written notice to the
other of its election to not extend the License Term, which notice shall be
sent no later than one hundred twenty (120) days prior to the expiration of
the initial three (3) year term. Notwithstanding the foregoing, United
Paramount, in its sole discretion, may terminate this Agreement at any time
upon one hundred eighty (180) days written notice to Licensee in the event
that United Paramount elects not to commence operation of a national network
service as provided herein, or upon ninety (90) days written notice to
Licensee in the event that United Paramount ceases operation of such national
network service.
3. Carriage
a. Licensee agrees that it is the essence of this Agreement that it
shall telecast over the facilities of the Station all Network Programs
delivered to Licensee in their entirety, including, but not limited to, all
commercial announcements, Network i.d.'s, promos, credits and all data
transmitted as part of the signal, without interruption, deletion or addition
(except for the addition of Licensee's commercial announcements as provided in
Paragraph 4 below) on the dates and at the times the programs are scheduled by
United Paramount, subject only to Paragraph 5(a) below.
b. Licensee shall telecast each Network Program licensed hereunder
solely from Station's originating transmitter and antenna for free over-the-
air television home reception. Licensee shall not (i) transmit any Network
Program, or any audio or visual portion thereof, into a place where admission
is charged or where the reception of the transmission is made subject to the
payment of a fee; (ii) relay the telecast of any Network Program, or any audio
or visual portion thereof, to any other party; (iii) cause, authorize or
permit the duplication or recording of any Network Program, or any audio or
visual portion thereof, over the facilities of any other broadcast station or
cable television system, or by any other facility, device, medium or method
not expressly authorized hereunder.
c. Notwithstanding the provisions of Paragraph 3(b) above, Station shall
have the right to transmit a Network Program over the facilities of its
translator(s) simultaneously with its transmission of that Program over the
facilities of its main transmitter. In the event that the signal emanating
from said translator(s) is received in a community outside the Grade B contour
of the Station, United Paramount shall have the right, at any time, but not
the obligation, to rescind such rights. Further, notwithstanding anything to
the contrary contained herein, and provided that Licensee is in compliance
with Paragraph 11 below, Licensee shall not be deemed to be in breach
hereunder if Station's signal is carried by a cable television system whose
principal head end is located within Station's DMA (as that term is defined in
the broadcast industry); provided, however, that nothing contained herein
shall be deemed a license to a cable television system to transmit any of the
Network Programs or affect the rights of United Paramount as against any cable
television system.
4. Commercial Announcements
a. Subject only to applicable governmental rules and regulations, each
hour of Network Programs hereunder shall be formatted for commercial
announcements (inclusive of station breaks) as follows (pro-rated for half-
hour programs):
i. Prime Time: three (3) minutes of commercial announcements to
Licensee, eight (8) minutes of commercial announcements to
United Paramount.
ii. Weekend Movie: six (6) minutes of commercial announcements to
Licensee, six (6) minutes of commercial announcements to
United Paramount.
iii. Early Fringe: During the fourth calendar quarter: eight (8)
minutes of commercial announcements to Licensee, four (4)
minutes of commercial announcements to United Paramount.
During all other times of the year: six (6) minutes of
commercial announcements to Licensee, six (6) minutes of
commercial announcements to United Paramount.
iv. Star Trek: Voyager Weekend Run: four (4) minutes of
commercial announcements to Licensee, eight (8) minutes of
commercial announcements to United Paramount.
v. Star Trek: Voyager (repeat stripping): five (5) minutes of
commercial announcements to Licensee (plus an additional one
(1) minute station break at the end of each episode), seven
(7) minutes of commercial announcements to United Paramount.
vi. Late Night (other than "Star Trek: Voyager"): seven (7)
minutes of commercial announcements to Licensee, seven (7)
minutes of commercial announcements to United Paramount.
vii. Children's Weekend Programming: United Paramount shall
determine the total commercial announcement time to be placed
in Children's Weekend Programming which commercial
announcement time shall be split evenly between United
Paramount and Licensee.
b. Neither United Paramount nor Licensee shall share in the revenue
realized by the other from the sale of commercial announcements. The
placement, timing and format of all commercial announcements contained in the
Network Programs shall be determined by United Paramount. In addition, United
Paramount may place promotional announcements in the programming set forth
above, the number, timing and format of which shall be determined by United
Paramount.
c. Licensee shall use reasonable efforts to integrate its commercial
announcements to avoid conflicts with competitive products and/or services
contained in the commercial announcements selected and sold by United
Paramount. United Paramount shall endeavor to provide Licensee with
information regarding its commercial announcements in sufficient time prior to
telecast to prevent such conflicts.
d. In the event any state, federal (including without limitation FCC),
or other governmental rule, regulation or law, or any other action shall
reduce or otherwise limit the commercial advertising and/or non-program time
that can be used in any or all of the Network Programs, then United Paramount
shall, notwithstanding the provisions of Paragraph 4(a) above, be entitled to
reduce, on a pro-rata basis, the amount of commercial time available to
Licensee and United Paramount in each of the Network Programs upon ninety (90)
days prior written notice.
e. Licensee's telecast of the commercial announcements contained in the
Network Programs is of the essence of this Agreement. Licensee agrees to
maintain complete and accurate records of all such commercial announcements
telecast. Within one (1) week following United Paramount's request therefor,
Licensee shall submit copies of all such records to United Paramount.
5. Preemption.
a. Authorized Preemptions.
Nothing contained herein shall be construed to prevent Licensee from
rejecting or refusing any Network Program which Licensee reasonably believes
to be unsatisfactory, unsuitable or contrary to the public interest, or from
substituting a program which, in Licensee's opinion, is of greater local or
national importance, provided Licensee shall give United Paramount written
notice of each such preemption, and the justification therefor, at least 72
hours in advance of the scheduled telecast, or as soon thereafter as possible
(including an explanation of the cause for any lesser notice), and further
provided that Licensee fulfills its make-good obligations as set forth in
Paragraph 5(c) below. Such preemptions of Network Programs shall be deemed
"Authorized Preemptions" hereunder. A Network Program shall be deemed
unsatisfactory, unsuitable or contrary to the public interest if (i) Licensee
reasonably believes that telecast of the Network Program would violate any
applicable governmental laws, rules, regulations or published policies; (ii)
Licensee reasonably believes that the Network Program does not meet customary
engineering standards; or (iii) Licensee reasonably believes that the Network
Program would not meet prevailing contemporary standards of good taste in the
Licensed Community. No Network Program will be deemed to be unsatisfactory,
unsuitable or contrary to the public interest based on program performance or
ratings, advertiser reactions, or the availability of alternative programming
(including sporting events) which Licensee believes to be more profitable or
attractive than the scheduled Network Programs. The following preemptions
shall also be deemed Authorized Preemptions (provided Licensee fulfills its
make-good obligations as set forth in Paragraph 5(c) below): (i) preemption
for Force Majeure, as defined in Paragraph 1 of United Paramount's Standard
Terms and Conditions, attached hereto and made a part hereof; (ii) preemption
in accordance with preexisting programming obligations and commitments as of
the date hereof that will interfere or conflict with the scheduled Network
Programs, as expressly set forth in Exhibit A; and (iii) with respect only to
Network Programs not currently contemplated pursuant to Paragraph 1(a) above,
but which United Paramount elects to add pursuant to Paragraph 1(b) above (the
"Additional Network Programs"), preemptions for programming commitments
(excluding paid programming) entered into prior to the date that United
Paramount gives Licensee written notice of such Additional Network Programs
which will interfere with such Additional Network Programs. Such programming
commitments shall be added to Exhibit A at the time that United Paramount
advises Licensee of the Additional Network Programs, and mutually agreeable
times shall be set forth therein for Licensee's telecast of the Additional
Network Programs.
b. Unauthorized Preemptions.
Any preemption, including preemption of a commercial announcement
contained in a Network Program, which is not an Authorized Preemption
hereunder shall be deemed an "Unauthorized Preemption." If Station makes three
(3) or more Unauthorized Preemptions during any twelve (12) month period
during the License Term or if United Paramount reasonably believes based on
Licensee's actions or statements that such Unauthorized Preemptions shall
occur, United Paramount shall have the right, in its sole discretion, to
either (i) terminate Licensee's right to telecast the Network Programs, or any
part thereof, for a period of time determined by United Paramount, and
thereafter license the telecast rights to such Network Program(s) to any other
broadcast television station(s) or (ii) terminate this Agreement.
c. Make-goods.
In the event that Licensee fails for any reason to telecast any Network
Program or any part thereof (including all of the commercial announcements
contained therein) as provided herein, then, in each case, Licensee shall
telecast such omitted program and commercial announcements (or any replacement
program and commercial announcements designated by United Paramount) as
follows: (i) in the case of preemptions for preexisting commitments, in the
time period predesignated by the parties as set forth in Exhibit A, and (ii)
for all other preemptions, in a time period of comparable quality and ratings
value, as mutually determined by the parties. If, Licensee does not promptly
comply with the provisions of this Paragraph 5(c), United Paramount shall have
the right, without limitation to any other right it may have, to license the
broadcast rights to the omitted programming to any other broadcast television
station.
6. Newsbreak.
For each night of Prime Time Network Programs scheduled by United
Paramount, United Paramount shall produce and deliver to Licensee, and
Licensee shall telecast, a thirty (30) second news or promotional spot (the
"Newsbreak") during each of the Prime Time Network Programs; provided,
however, that Station may cover either of the Newsbreaks, or both of them with
its own local newsbreak if Station telecasts a local news program.
7. Promotion.
a. Promotional Announcements.
United Paramount shall provide Licensee with promotional announcements
for the Network Programs (the "Promos"), at no cost to Licensee. Licensee
shall use its good faith, best efforts to telecast the Promos in consultation
with United Paramount to obtain the best possible promotion of the Network
Programs. Licensee agrees to maintain complete and accurate records of all
Promos telecast. Within three (3) weeks following United Paramount's request
therefor, Licensee shall submit copies of such records to United Paramount.
b. Station Identification.
Commencing on the date Licensee executes this Agreement or, at United
Paramount's election, on a subsequent date established by United Paramount,
and continuing throughout the License Term, Station shall identify itself
exclusively as part of the "United Paramount Television Network," or such
other name as United Paramount may subsequently designate in writing, in all
Station I.D.'s telecast, and in all other promotional material distributed;
provided, however, that such identification may be preceded by Station's call
letters, community of license and channel position.
c. Other Promotional Materials.
United Paramount shall provide Licensee, at no cost to Licensee, with
such print, on-air television, radio and collateral materials promoting the
Network Programs as are customarily given to stations that are part of similar
television networks. United Paramount shall also provide, at reasonable cost,
such other merchandising materials as United Paramount deems appropriate.
d. Co-op Advertising.
Licensee shall budget Station's annual advertising funds in such a way
that Station may participate, on a year round basis, in United Paramount's
Network co-op advertising program. United Paramount shall commit an aggregate
amount of co-op advertising dollars to Network's affiliated stations that is
comparable with the amount customarily given by other television networks to
their affiliated stations for similar quantities of programming.
e. Below-Average Ratings.
If, after any "sweeps period," Station's "Sweeps Rating" (as defined
below) falls below the average Sweeps Rating for all of United Paramount's
primary affiliated stations, Station shall be deemed "Performing Below
Average" and shall, within 15 days of United Paramount giving Licensee written
notice thereof, commence full compliance with the following:
i. In each half hour of programming telecast by Station, other
than Network Programs, Station shall telecast no less than
thirty seconds of promotional announcements for Station's
local, syndicated or Network Programs; and
ii. If Station is in the top 50% of the stations Performing Below
Average, at least 40% of the Station's aggregate promotional
availabilities on days Station telecasts Network Programs
shall be Network promotions. These promotional spots shall be
evenly distributed across Station's programming schedule
between the hours of 9 a.m. and midnight; or
iii. If Station is in the bottom 50% of stations Performing Below
Average, at least 50% of the Station's aggregate promotional
availabilities on days Station telecasts Network Programs
shall be Network promotions. These promotional spots shall be
evenly distributed across Station's programming schedule
between the hours of 9 a.m. and midnight.
Licensee's compliance with the foregoing requirements shall continue
until such time as Station is no longer "Performing Below Average," as
determined by the most recent sweeps period. For purposes of this Agreement,
"Sweeps Rating" shall mean the average A.C. Nielsen rating for adults 18-49
for all Prime Time hours programmed by United Paramount during the most recent
"sweeps period."
8. Exclusivity.
Except as set forth in Paragraphs 5(b) and 5(c) above, United Paramount
shall not, during the License Term, license the Network Programs, or any of
them, to any broadcast television station licensed by the FCC to operate in
the Licensed Community, other than to Station. Licensee acknowledges that
telecasts of the Network Programs originating outside of the Licensed
Community may be received by television sets located within the Licensed
Community, and Licensee agrees that such reception shall not constitute a
breach of this Agreement by United Paramount. Licensee agrees that no
exclusivity is granted hereunder with respect to the retransmission by cable
systems of broadcast signals originating outside of the Licensed Community
whether pursuant to a compulsory license or otherwise; except that Licensee
shall be entitled to network non-duplication protection against the
simultaneous presentations of Network Programs on superstations WTBS, WWOR and
WGN by cable systems. The geographic zone of such protection shall be as
permitted by the rules of the FCC existing on the date hereof.
9. Delivery.
a. United Paramount shall make the Network Programs available to
Licensee in such sequence as United Paramount shall determine. Any and all
costs of whatever kind or nature incurred with respect to the pickup of the
Network Programs and their rebroadcast by Station shall be borne by and shall
be the sole responsibility of Licensee. All right, title and interest in and
to the Network Programs delivered to Licensee shall, at all times, remain the
property of United Paramount, subject only to Licensee's right to telecast the
Network Programs in accordance with the terms of this Agreement. Licensee
shall have the right to prepare and retain a taped copy of each Network
Program delivered to Licensee until such time as Station has telecast that
Network Program as scheduled by United Paramount (in the case of "Star Trek:
Voyager," Station may retain the taped copy until the Star Trek: Voyager
Weekend Run is telecast), after which time Licensee shall erase or destroy the
taped copy of that Network Program. At United Paramount's request, Licensee
shall furnish United Paramount with a Certificate of Erasure or Destruction
signed by an officer of Licensee, or other evidence reasonably acceptable to
United Paramount of such erasure or destruction.
b. United Paramount shall endeavor to provide Licensee with synopses for
each of the Network Programs, as well as other programming information,
reasonably in advance of Station's telecast of each Network Program.
10. Affiliate Board.
United Paramount shall establish an Affiliate Board of Governors (the
"Affiliate Board"), which shall have up to ten (10) members representing
Affiliates not owned by Paramount Pictures Corp., Chris-Craft Industries Inc.
or affiliates thereof, and which shall be consulted by United Paramount from
time to time in connection with the Network Programs; provided, however, that
except as specifically provided in Paragraph 1(b) above, all decisions shall
ultimately be made by United Paramount in its sole discretion.
11. Change in Operations.
In the event that Station's transmitter location, power, frequency,
programming format or hours of operation are materially reduced at any time,
other than as a result of Force Majeure, so that Station is of less value to
United Paramount as a telecaster of Network Programs that as of the date of
this Agreement, and said change is not cured within fifteen (15) business days
after said reduction, United Paramount shall have the right to terminate this
Agreement upon thirty (30) days prior written notice to Licensee. Licensee
shall notify United Paramount immediately in writing if Licensee applies to
the Federal Communications Commission to materially modify Station's
transmitter location, power, frequency or programming format or if Licensee
plans to materially modify Station's hours of operation.
12. Notice.
All notices, statements and other documents required to be given
hereunder shall be given in writing either by personal delivery, overnight
mail, certified or registered mail or facsimile (except as herein otherwise
provided) at the respective addresses of the parties set forth above, or such
other addresses as may be designated by the parties from time to time. Notice
shall be deemed given on the date of mailing, the date of personal delivery,
or the date of facsimile transmission, whichever applies.
13. Standard Terms and Conditions.
In the event of any inconsistency between this Agreement and the
Standard Terms and Conditions attached hereto, this Agreement shall control.
14. Governing Law.
This Agreement and all matters collateral hereto shall be governed by
the federal laws of the United States, including the rules, regulations and
published policies of the Federal Communications Commission, and the laws of
the State of California applicable to agreements entered into and to be
performed entirely in that state.
UNITED PARAMOUNT TELEVISION
NETWORK PARTNERSHIP LICENSEE
By BHC Network Partner, Inc.
Its General Partner
/s/ Lucie Salhany By: /s/ Craig L. Fox
Lucie Salhany Title: V. Pres.
President and Chief Executive Officer
United Paramount Television Network
RIDER
ACME TV CORP. (WUPN-TV)
This shall serve as a Rider to the March 23, 1995 Station Affiliation
Agreement (the "Agreement") between United Paramount Television Network
Partnership ("United Paramount") and ACME TV Corp. ("Licensee") with respect
to WUPN-TV. All capitalized terms herein shall be defined as set forth in the
Agreement. In the event of any conflict between this Rider and the Agreement,
this Rider shall control.
1. Paragraph 1. of the Agreement shall be amended so that Station may telecast
the Weekend Movie between 8 p.m. and 11 p.m. on Saturday or Sunday.
2. Notwithstanding the provisions of Paragraph 3.c. of the Agreement, United
Paramount shall only have the right to rescind Station's right to transmit
the Network Programs over its translator(s) to the extent that such
translator(s) is licensed to a community not within Station's DMA and is
within the Grade B contour of a station licensed to a community other than
Utica, New York, which has an affiliation agreement with United Paramount.
3. Paragraph 8. of the Agreement shall be amended to provide that Station
shall be entitled to network non-duplication protection against the
following: a) the simultaneous presentations of Network Programs by cable
systems (which shall include protection against the presentation of Star
Trek: Voyager between the hours of 4 p.m. and 12 midnight on Saturday and
Sunday nights); and b) the presentation by cable systems of a broadcast by
any other station affiliated with the United Paramount Television Network
of any Network Program during the period commencing one (1) day before and
ending ten (10) days after the scheduled broadcast by Station of such
Network Program. The geographic zone of such protection shall be the
maximum permitted by FCC rules existing on the date hereof. However,
notwithstanding the above, the geographic zone of such protection shall not
extend to any Community Unit (76.5(dd)) outside of Station's DMA.
Agreement between ACME TV CORPORATION (WUPN TV) and Harron Cable.
It is agreed between ACME and Harron to carry the signal of WUPN-TV in its
entirety on cable channel 53 for a period of 5 years, beginning September 11,
1995. This is contingent upon the following points:
1. The technical signal provided by WUPN must conform to Harron Cables
typical broadcast station quality.
2. The programming must be a typical independent/network station with no
more than 25% of its programming from 6:00 am to midnight, shopping
channels, religion, or other paid programming per day.
3. Harron Cable will honor requests for network NON-DUPLICATION
PROTECTION. With regard to all other programs as long as they are
simultaneously available on another distant signal carried by Harron
Cable, WUPN reserves the right to request black out.
4. WUPN agrees to pay up to $300.00 for channel line up cards for the
promotion of the new tv station.
5. WUPN and WFXV will promote on air, the fact that Harron Cable will
carry WUPN on CHANNEL 53. WUPN will cross promote the movement of The
Cable Health Channel to Channel 55.
6. WUPN agrees to pay for the cost of the Demodulator and modulator. As
well as the antenna and associated hardware necessary to receive
WUPN's signal.
- - ----------------------------- -----------------------------
HARRON CABLE REPRESENTATIVE DATE
- - ----------------------------- -----------------------------
ACME TV CORP REPRESENTATIVE DATE
Exhibit 10.7
SULLIVAN BROADCASTING COMPANY, INC.
(as successor to A-3 ACQUISITION, INC.)
As Issuer,
THE SUBSIDIARY GUARANTORS
named herein
AND
STATE STREET BANK AND TRUST COMPANY,
as Trustee
-------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of February 7, 1996
-------------------------
Supplemental to the Indenture
among
A-3 Acquisition, Inc.,
the Subsidiary Guarantors named therein
and
State Street Bank and Trust Company
dated as of December 21, 1995,
as Supplemented by the
First Supplemental Indenture
dated as of January 5, 1996
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of February 7, 1996, among
SULLIVAN BROADCASTING COMPANY, INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), having its principal
office at 18 Newbury Street, Boston, Massachusetts 02116, STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company (the "Trustee"), as Trustee
under the Indenture, dated as of December 21, 1995, among A-3 Acquisition,
Inc., the Trustee and the Subsidiary Guarantors named therein (the
"Indenture"), and SULLIVAN BROADCASTING OF BUFFALO, INC., a corporation duly
organized and existing under the laws of the State of Delaware, SULLIVAN
BROADCASTING OF CHARLESTON, INC., a corporation duly organized and existing
under the laws of the State of Delaware, SULLIVAN BROADCASTING OF DAYTON,
INC., a corporation duly organized and existing under the laws of the State of
Delaware, SULLIVAN BROADCASTING OF NASHVILLE, INC., a corporation duly
organized and existing under the laws of the State of Tennessee, SULLIVAN
BROADCASTING OF NEVADA, INC., a corporation duly organized and existing under
the laws of the State of Nevada, SULLIVAN BROADCASTING OF RICHMOND, INC., a
corporation duly organized and existing under the laws of the State of
Delaware, SULLIVAN BROADCASTING OF ROCHESTER, INC., a corporation duly
organized and existing under the laws of the State of Delaware, SULLIVAN
BROADCASTING OF WEST VIRGINIA, INC., a corporation duly organized and existing
under the laws of the State of Delaware, SULLIVAN BROADCASTING MANAGEMENT
SERVICES, INC., a corporation duly organized and existing under the laws of
the State of Delaware, and SULLIVAN BROADCASTING LICENSE CORP., a corporation
duly organized and existing under the laws of the State of Delaware
(collectively, the "Subsidiary Guarantors"), each having its principal office
at 18 Newbury Street, Boston, Massachusetts 02116, except for Sullivan
Broadcasting of Nevada, Inc., whose principal office is 1325 Airmotive Way,
Suite 130, Reno, Nevada 89502 and SULLIVAN BROADCASTING OF UTICA, INC., a
corporation duly organized and existing under the laws of the State of
Delaware ("Utica").
RECITAL OF THE TRUSTEE
WHEREAS, the Company, the Subsidiary Guarantors and the Trustee are
parties to that certain Indenture, dated as of December 21, 1995, pertaining
to $125,000,000 principal amount of the Company's 10 1/4% Senior Subordinated
Notes due 2005 (including the related guarantees, the "Securities"), as
supplemented by the First Supplemental Indenture dated as of January 5, 1996.
RECITALS OF THE COMPANY, THE SUBSIDIARY GUARANTORS AND UTICA
WHEREAS, Utica is a newly formed, wholly-owned subsidiary of the
Company;
WHEREAS, the Company, the Subsidiary Guarantors and Utica desire,
pursuant to Section 9.01 of the Indenture, to execute this Supplemental
Indenture in order to comply with Section 4.15 of the Indenture; and
WHEREAS, the Company, the Subsidiary Guarantors and Utica have duly
authorized the execution and delivery of this Supplemental Indenture in order
for Utica to assume all the obligations of a Subsidiary Guarantor under the
Securities and the Indenture.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree for the equal and proportionate benefit
of all Holders of the Securities, as follows:
Section 1. Utica hereby assumes all the obligations of a Subsidiary
Guarantor, under the Securities and the Indenture; and Utica may exercise
every right and power of a Successor Guarantor under the Indenture with the
same effect as if Utica had been named as a Subsidiary Guarantor therein.
Section 2. Any notice or communication by the Trustee to Utica shall
be addressed as follows:
Sullivan Broadcasting of Utica, Inc.
18 Newbury Street
Boston, Massachusetts 02116
Attn: President
Section 3. From and after the date hereof, the Indenture, as
supplemented by this Supplemental Indenture, shall be read, taken and
construed as one and the same instrument with respect to the Securities.
Section 4. This Supplemental Indenture may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instruments.
* * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year above
written.
SULLIVAN BROADCASTING COMPANY, INC.
By:
Title: President
Attest:
Title: Secretary
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
Title:
Attest:
Title:
SULLIVAN BROADCASTING OF UTICA,
INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING
OF BUFFALO, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
CHARLESTON, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
DAYTON,INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
NASHVILLE, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
NEVADA, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
RICHMOND, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF
ROCHESTER, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING OF WEST
VIRGINIA, INC., as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING
MANAGEMENT SERVICES, INC.,
as Guarantor
By:
Title: President
Attest:
Title: Secretary
SULLIVAN BROADCASTING LICENSE
CORP., as Guarantor
By:
Title: President
Attest:
Title: Secretary
STATE OF )
___________________
) ss:
COUNTY OF )
___________________
On this ____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING COMPANY, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF UTICA, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) __________________
) ss:
COUNTY OF ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF BUFFALO, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF CHARLESTON, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) __________________
) ss:
COUNTY OF ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF DAYTON, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF NASHVILLE, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) __________________
) ss:
COUNTY OF ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF NEVADA, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _______________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF RICHMOND, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) __________________
) ss:
COUNTY OF ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF ROCHESTER, INC.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING OF WEST VIRGINIA,
INC., respectively; that the seal affixed to the foregoing instrument is the
seal of said corporation; that said instrument was signed and sealed in behalf
of said corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) __________________
) ss:
COUNTY OF ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING MANAGEMENT SERVICES,
INC., respectively; that the seal affixed to the foregoing instrument is the
seal of said corporation; that said instrument was signed and sealed in behalf
of said corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
STATE OF ) ___________________
) ss:
COUNTY OF ) ___________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named J. Daniel
Sullivan and Royce Yudkoff, to me known, who each being first duly and
severally sworn did say that they, said J. Daniel Sullivan and Royce Yudkoff,
are the President and Secretary of SULLIVAN BROADCASTING LICENSE CORP.,
respectively; that the seal affixed to the foregoing instrument is the seal of
said corporation; that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and that J. Daniel
Sullivan and Royce Yudkoff each acknowledges the execution of said instrument
to be the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, State of _____________
[SEAL]
COMMONWEALTH OF ) Boston
MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK ) __________________
On this _____ day of February, 1996, before me, a Notary Public in and
for said County and State, personally appeared the within named
_______________________, to me known, who each being first duly and severally
sworn did say that s/he, is the __________________________ of STATE STREET
BANK AND TRUST COMPANY; that the seal affixed to the foregoing instrument is
the seal of said corporation; that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors; and that
s/he acknowledges the execution of said instrument to be the free act and deed
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the date first hereinabove written.
Notary Public, Commonwealth of
Massachusetts
[SEAL]
EXHIBIT 10.10
===============================================================================
AMENDED AND RESTATED OPTION AGREEMENT
BY AND AMONG
M.T. COMMUNICATIONS, INC.,
CENTRAL TENNESSEE BROADCASTING CORPORATION,
MICHAEL P. THOMPSON,
AND
SULLIVAN BROADCASTING COMPANY, INC.
(as assignee of
ABRY Broadcast Partners II, L.P.
and
Sullivan Broadcast Holdings, Inc.
(formerly, "A-3 Holdings, Inc.")
DATED AS OF FEBRUARY 22, 1996
===============================================================================
LIST OF EXHIBITS
----------------
Exhibit A - Defined Terms
Exhibit B - Shares Held
Exhibit C - Opinions of Companies' and Thompson's Counsel
Exhibit D - Excluded Assets
Exhibit E - Copies of Financial Statements
Exhibit F - Form of Escrow Agreement
Exhibit G - Existing Indebtedness
Exhibit H - Sirrom Release
TABLE OF CONTENTS
Page
----
ARTICLE I
OPTION TO ACQUIRE THE OPTION ASSETS............................. 3
1.1 Option Grant.............................................. 3
1.2 Method of Exercise........................................ 4
1.3 Exercise Period........................................... 4
1.4 Withdrawal of Exercise.................................... 4
ARTICLE II
PURCHASE AND SALE OF OPTION ASSETS AND REORGANIZATION........... 4
2.1 Option Asset Purchase: Reorganization..................... 4
(a) Option Asset Purchase................................ 4
(b) Reorganization....................................... 5
2.2 Option and Merger Consideration........................... 5
(a) Purchase Price for Option Assets..................... 5
(b) Merger Consideration................................. 6
2.3 Closing Transactions...................................... 6
(a) Closing.............................................. 6
(b) Closing Transactions................................. 7
(c) Payment in Consideration for Loftus Termination...... 8
2.4 First Adjustment to Merger Consideration.................. 9
(a) SBC's Report After Execution......................... 9
(b) Dispute by Thompson.................................. 9
(c) Dispute Resolution................................... 9
(d) Adjustment of Merger Consideration................... 10
(i) If prior to Closing........................... 10
(ii) If after Closing.............................. 10
(iii) Interest on Unpaid Amounts.................... 11
2.5 Second Adjustment to Merger Consideration................. 11
(a) Buyer's Report After Closing......................... 11
(b) Dispute by Thompson.................................. 11
(c) Dispute Resolution................................... 11
(d) Adjustment of Merger Consideration................... 12
(i) Amount of Adjustment.......................... 12
(ii) Source of Payment............................. 13
(iii) Interest on Unpaid Amounts.................... 13
2.6 Purchase of Studio Premises by Thompson................... 13
(a) Right to Require Purchase............................ 13
(b) Purchase Price....................................... 13
(c) Satisfaction of Purchase Price and TBON Debt......... 14
(d) Lease of Studio Premises After Closing............... 14
(e) Further Actions...................................... 14
ARTICLE III
CONDITIONS AND DELIVERIES AT CLOSING............................ 15
3.1 Conditions to MTC's and CTBC's Obligations................ 15
3.2 Deliveries to Thompson.................................... 16
3.3 Deliveries to Buyer....................................... 16
3.4 Deliveries to the Merger Company.......................... 17
ARTICLE IV
PRE-CLOSING COVENANTS........................................... 18
4.1 Operation and Maintenance of the Business................. 18
4.2 Negative Covenants........................................ 20
4.3 Information............................................... 22
4.4 Consents Generally........................................ 23
4.5 Application for FCC Consent............................... 23
4.6 Hart-Scott-Rodino......................................... 24
4.7 Notice and Cooperation Generally.......................... 24
4.8 Real Estate Matters....................................... 26
4.9 Excepted Transactions..................................... 27
(a) Excluded Assets...................................... 27
(b) Disposition of ETBC, WTBC or JIC Stock and
Certain Notes....................................... 27
(c) Merger of MTC and CTBC............................... 27
(d) Fourth Draw Proceeds................................. 28
(f) Deemed Amendment..................................... 28
4.10 No Premature Assumption of Control........................ 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES......... 28
5.1 Organization and Corporate Power.......................... 29
5.2 Authorization of Transactions............................. 29
5.3 Capitalization............................................ 30
5.4 Subsidiaries; Investments................................. 30
5.5 Absence of Conflicts...................................... 30
5.6 Financial Statements...................................... 31
5.7 Undisclosed Liabilities................................... 32
(a) Generally............................................ 32
(b) Since Adjustment Time................................ 32
5.8 Title to, Condition and Sufficiency of Assets............. 33
(a) Owned Properties..................................... 33
(b) Leased Properties.................................... 33
(c) No Proceedings....................................... 34
(d) Current Use.......................................... 34
(e) Condition and Operation of Improvements.............. 34
(f) Ownership of Assets.................................. 34
(g) Condition of the Assets.............................. 34
5.9 FCC Matters............................................... 35
5.10 Taxes..................................................... 36
5.11 Contracts and Commitments................................. 40
5.12 Proprietary Rights........................................ 42
5.13 Litigation; Proceedings................................... 43
5.14 Brokerage................................................. 43
5.15 Governmental Licenses and Permits......................... 43
5.16 Employees................................................. 43
5.17 Employee Benefit Plans.................................... 44
(a) Plans................................................ 44
(b) Compliance........................................... 44
(c) Correct Copies....................................... 44
5.18 Affiliate Transactions.................................... 44
5.19 Compliance with Laws...................................... 45
5.20 Environmental Matters..................................... 45
5.21 Powers of Attorney........................................ 46
5.22 Disclosure................................................ 46
ARTICLE VI
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THOMPSON......... 47
6.1 Authorization of Transactions............................. 47
6.2 Conflicts................................................. 47
6.3 Brokerage................................................. 48
6.4 Foreign Person............................................ 48
6.5 Litigation................................................ 48
6.6 Shares.................................................... 48
6.7 Disclosure................................................ 49
ARTICLE VII
REPRESENTATIONS AND WARRANTIES TO OPTION HOLDERS AN............... 49
7.1 Authorization of Transactions............................. 49
7.2 Conflicts................................................. 50
7.3 Litigation................................................ 50
7.4 Brokerage................................................. 51
7.5 Disclosure................................................ 51
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS............................. 51
8.1 Survival.................................................. 51
8.2 Indemnification........................................... 51
(a) By Thompson.......................................... 51
(b) By Buyer and the Merger Company...................... 53
(c) Interest............................................. 54
8.3 Indemnification Procedures................................ 54
(a) Notice of Claim...................................... 54
(b) Assumption of Defense................................ 55
(c) Limits of Assumption of Defense...................... 55
(d) Special Provisions Relating to Tax Claims............ 56
8.4 Request for Payment; Dispute Resolution................... 57
(a) Initial Payment Request and Dispute.................. 57
(b) Arbitration Generally................................ 57
(c) Notice of Arbitration................................ 58
(d) Selection of Arbitrator.............................. 58
(e) Conduct of Arbitration............................... 58
(f) Enforcement.......................................... 58
(g) Expenses............................................. 58
(h) Date Due............................................. 59
8.5 Treatment of Indemnification Payments..................... 59
ARTICLE IX
ADDITIONAL AGREEMENTS........................................... 59
9.1 Transaction Structure..................................... 59
9.2 Press Release and Announcement............................ 60
9.3 Further Transfers......................................... 60
9.4 Specific Performance...................................... 60
9.5 Expenses.................................................. 61
9.6 Non-Competition, Non-Solicitation and Confidentiality..... 61
(a) Non-Competition...................................... 61
(b) Confidentiality...................................... 62
(c) Remedy for Breach.................................... 63
9.7 Tax Matters............................................... 63
(a) Responsibility Generally............................. 63
(b) Determination of Certain Taxes....................... 63
(c) Preparation of Returns............................... 63
(d) Cooperation.......................................... 64
9.8 Certain Employment Matters................................ 64
ARTICLE X
MISCELLANEOUS................................................... 65
10.1 Amendment and Waiver...................................... 65
10.2 Notices................................................... 65
10.3 Binding Agreement; Assignment............................. 66
10.4 Severability.............................................. 66
10.5 No Strict Construction.................................... 66
10.6 Captions.................................................. 67
10.7 Entire Agreement.......................................... 67
10.8 Counterparts.............................................. 67
10.9 Governing Law............................................. 67
10.10 Parties in Interest....................................... 67
10.11 Generally Accepted Accounting Principles.................. 68
10.12 WAIVER OF JURY TRIAL...................................... 68
10.13 Other Definitional Provisions............................. 68
10.14 Termination............................................... 69
10.15 CONSENT TO JURISDICTION................................... 69
DEFINED TERMS..................................................... 72
TABLE OF AUTHORITIES
Page
----
AAA RULES........................................... 57
ABRY................................................ 1
ABRY Credit Agreement............................... 1
ABRY Credit Agreement Supplement.................... 1
ABRY Loan Documents................................. 72
ABRY Loans.......................................... 1
Act III Acquisition................................. 72
Act III Broadcasting, Inc........................... 5
Adjustment Amount................................... 72
Adjustment Time..................................... 72
Affiliated Group.................................... 72
Arbitration Notice.................................. 58
Assets.............................................. 72
Broker.............................................. 3
Buyer............................................... 4
Closing............................................. 6
Closing Date........................................ 7
Closing Transactions................................ 7
Communications Act.................................. 72
Companies........................................... 2
Company FCC Authorizations.......................... 73
Confidential Information............................ 62
Consent............................................. 72
Contract............................................ 73
CTBC................................................ 1
Current Obligations................................. 73
Double-Run Program.................................. 74
Environmental and Safety Requirements............... 74
Environmental Lien.................................. 74
ERISA............................................... 44
Escrow Agent........................................ 74
Escrow Agreement.................................... 74
ETBC................................................ 1
Excludable Contract................................. 75
Exercise Date....................................... 4
Exercise Notice..................................... 4
Expiration Time..................................... 4
FCC................................................. 75
FCC Approval Date................................... 75
FCC Authorization................................... 75
FCC Consents........................................ 75
FCC Regulations..................................... 75
Film Obligations.................................... 75
Final Approval Date................................. 75
Final Arbitration Award............................. 58
Final Order......................................... 75
Financial Statements................................ 31
First Adjustment Amount............................. 76
First Adjustment Statement.......................... 9
First Prohibited Debt Obligations................... 77
First Prohibited Film Obligations................... 77
First Prohibited Obligations........................ 78
First Prohibited Other Obligations.................. 78
First Prohibited Trade Obligations.................. 78
GAAP................................................ 79
Hart-Scott-Rodino Act............................... 79
Holdback Amount..................................... 6, 79
Holdback Amount..................................... 34
Improvements........................................ 79
Indebtedness........................................ 57
Indemnification Disputes............................ 54
Indemnified Party................................... 54
Indemnifying Party.................................. 79
Indemnity Fund...................................... 1
Initial Option Agreement............................ 79
Insider............................................. 80
Interest Rate....................................... 1
JIC................................................. 31
Latest Balance Sheet................................ 33
Leased Real Property................................ 33
Leases.............................................. 80
Legal Requirements.................................. 43
Licenses............................................ 80
Lien................................................ 8
Loftus.............................................. 8
Loftus Agreement.................................... 52
Loss................................................ 80
Make-Good Obligations............................... 80
Market Cable System................................. 80
Material Adverse Effect............................. 5
Merger.............................................. 5
Merger Company...................................... 6
Merger Consideration................................ 1
MTC................................................. 84
NOL................................................. 61
Non-Compete Period.................................. 3
Option.............................................. 4
Option Assets....................................... 4
Option Holder....................................... 80
Ordinary Course of Business......................... 33
Owned Real Properties............................... 81
Parties............................................. 57
Payment Request..................................... 81
Permitted Liens..................................... 81
Person.............................................. 44
Plans............................................... 81
Post-Adjustment Tax Period.......................... 81
Pre-Adjustment Tax Period........................... 81
Program Contract.................................... 81
Proprietary Rights.................................. 5
Purchase Price...................................... 34
Real Properties..................................... 57
Requested Party..................................... 1
SBC................................................. 1
SBH................................................. 2
SBN................................................. 82
Second Adjustment Amount............................ 11
Second Adjustment Statement......................... 82
Second Prohibited Debt Obligations.................. 82
Second Prohibited Film Obligations.................. 83
Second Prohibited Obligations....................... 83
Second Prohibited Other Obligations................. 10
Section 2.4 Auditor................................. 12
Section 2.5 Auditor................................. 1
Station............................................. 83
Straddle Period..................................... 2
Studio Acquisition.................................. 14
Studio Acquisition Costs............................ 2
Studio Deposit...................................... 2
Studio Option....................................... 2
Studio Premises..................................... 83
Subsidiary.......................................... 83
Supplemental ABRY Loan.............................. 83
Tax................................................. 84
Tax Benefit......................................... 84
Tax Benefit Reduction............................... 84
Tax Code............................................ 84
Tax Return.......................................... 83
Taxable............................................. 83
Taxes............................................... 83
Taxing.............................................. 2
TBON Borrowing...................................... 2
TBON Deed of Trust.................................. 2
TBON Documents...................................... 2
TBON Loan Agreement................................. 2
TBON Note........................................... 2
TBON Security Agreement............................. 1
Thompson............................................ 13
Thompson Purchase................................... 13
Thompson Purchase Price............................. 3
Time Brokerage Agreement............................ 84
Time Sale Contracts................................. 26
Title Insurer....................................... 85
Tower Site.......................................... 85
Trades.............................................. 85
Trade-Out Payables.................................. 73
Transaction Expenses................................ 85
Treasury Regulations................................ 1
WTBC................................................ 1
AMENDED AND RESTATED
OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT is entered into as of
February 22, 1996, by and among Sullivan Broadcasting Company, Inc., a
Delaware corporation ("SBC") (as the assignee of each of ABRY Broadcast
Partners II, L.P., a Delaware limited partnership ("ABRY"), and Sullivan
Broadcast Holdings, Inc., a Delaware corporation formerly known as "A-3
Holdings, Inc." ("SBH")), M.T. Communications, Inc., a California corporation
("MTC"), Central Tennessee Broadcasting Corp., a Delaware corporation
("CTBC"), and Michael P. Thompson ("Thompson"). Other capitalized terms used
and not otherwise defined in this Agreement are defined in the attached
Exhibit A. As provided in Section 4.9(c), certain references in this Agreement
to MTC may be deemed at certain times to be references to CTBC.
ABRY, SBH, MTC, CTBC and Thompson were parties to an Option Agreement
among them dated as of June 30, 1995 (as heretofore amended, the "Initial
Option Agreement"). ABRY has assigned its rights under the Initial Option
Agreement to SBC. CTBC is the owner and operator of broadcast television
station WXMT-TV, Nashville, Tennessee (the "Station"). ABRY and SBH assigned
their respective rights under the Initial Option Agreement to SBC, which is an
affiliate of each of ABRY and SBH, effective as of February 21, 1996.
ABRY, MTC and CTBC are parties to the Senior Credit Agreement dated as
of June 30, 1995 (as heretofore amended, and as amended as of the date of this
Agreement, "ABRY Credit Agreement") pursuant to which ABRY has made loans to
CTBC in the aggregate principal amount of $15,865,606 (as it may be increased
or reduced from time to time, the "ABRY Loans"). On the date of this
Agreement, ABRY and CTBC are entering into Supplement No. 2 to such Senior
Credit Agreement (the "ABRY Credit Agreement Supplement").
Thompson is the holder of record of all of the issued and outstanding
shares of capital stock of MTC, and MTC is the holder of record of all of the
issued and outstanding shares of capital stock of CTBC, each as described on
the attached Exhibit B.
In addition to CTBC, MTC owns capital stock of three other corporations:
East Tennessee Broadcasting Corporation, a Tennessee corporation ("ETBC"),
West Tennessee Broadcasting Corporation, a Tennessee corporation ("WTBC"), and
Jackson Investment Corporation, a Tennessee corporation ("JIC").
Collectively, MTC, CTBC, ETBC, WTBC and JIC are referred to as the
"Companies."
As a material inducement to ABRY to enter into the ABRY Credit
Agreement, Thompson and MTC (who, as the stockholders of MTC and CTBC,
respectively, derived material benefit from the making of the ABRY Loans)
granted to ABRY the option to acquire certain assets of CTBC, and agreed to
cause MTC to merge with and into SBH or a subsidiary of SBH, upon the terms
and conditions set forth in the Initial Option Agreement.
In January, 1996, CTBC acquired the premises which comprise its present
studio site (the "Studio Premises") by exercising the option (the "Studio
Option") described in Section 4.10(b) of the Initial Option Agreement on the
terms described in such Section 4.10(b) (such acquisition being the "Studio
Acquisition"). In that regard, Thompson, on behalf of CTBC, made a deposit in
the amount of $88,836 (the "Studio Deposit") as required by the terms of the
Studio Option.
CTBC financed the Studio Acquisition by borrowing $340,000 from The Bank
of Nashville (such borrowing being the "TBON Borrowing") pursuant to the terms
of a Term Loan Agreement executed and delivered by CTBC as of January 9, 1996
between CTBC and The Bank of Nashville (as amended or modified from time to
time in accordance with the terms of Supplement No. 1 to the ABRY Credit
Agreement, the "TBON Loan Agreement"). Such loan is evidenced by a promissory
note of CTBC (as amended or modified from time to time in accordance with the
terms of Supplement No. 1 to the ABRY Credit Agreement, the "TBON Note") and
is secured by a Term Loan Deed of Trust executed and delivered by CTBC to T.
Wayne Hood, Trustee, which was recorded on or about January 9, 1996 in the
Register's Office of Davidson County, Tennessee (as amended or modified from
time to time in accordance with the terms of Supplement No. 1 to the ABRY
Credit Agreement, the "TBON Deed of Trust"). Such loan is further secured by
the grant of a security interest pursuant to a Security Agreement executed and
delivered by CTBC as of January 9, 1996 (as amended or modified from time to
time in accordance with the terms of Supplement No. 1 to the ABRY Credit
Agreement, the "TBON Security Agreement" and, together with the TBON Loan
Agreement, the TBON Note, the TBON Deed of Trust and all other documents and
instruments executed in connection with any of the foregoing, as in effect
from time to time, the "TBON Documents").
On the date of this Agreement, CTBC will enter into, and SBC will cause
its wholly-owned subsidiary, Sullivan Broadcasting of Nashville, Inc., a
Tennessee corporation ("SBN"), to enter into, a Time Brokerage Agreement (as
in effect from time to time, the "Time Brokerage Agreement") pursuant to which
the Broker referred to therein (the "Broker") will be entitled to provide
programming for, and sell advertising on, the Station, subject to the control
of CTBC as described therein. In connection with the execution of the Time
Brokerage Agreement, SBC, MTC, CTBC and Thompson have agreed to amend and
restate in its entirety the provisions of the Initial Option Agreement as set
forth in this Agreement.
Thompson, MTC and CTBC are entering into this Agreement with the
understanding and on the condition that, on the date of this Agreement, SBC,
in its capacity as the Option Holder, is assigning the Option (as in effect
pursuant to this Agreement) to a Person who will exercise the Option and who
will be prepared to file the application(s) described in Section 4.5 of this
Agreement on the date of this Agreement or on the next business day
thereafter. SBC is entering into this Agreement and causing SBN to enter into
the Time Brokerage Agreement with the understanding and on the condition that,
on the date of this Agreement, Thompson is paying to CTBC cash in the amount
of $243,000. Of such $243,000: (a) $70,537 is being paid by Thompson in
reimbursement of payments made by CTBC since June 30, 1995 to TBON of
principal and interest in respect of borrowings by Thompson from TBON, and (b)
$172,473 is being paid as a loan by Thompson to CTBC (such loan being the "New
Thompson Loan"). Thompson acknowledges and agrees that the New Thompson Loan
will not bear interest, will be repayable solely out of the proceeds to CTBC
of certain collections as described in Section 4.9(e) and without other
recourse to CTBC, and to the extent not then repaid will be forgiven in full
immediately prior to the Closing.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, SBC, MTC, CTBC and Thompson hereby agree that
the Initial Option Agreement is amended and restated in its entirety as
follows:
ARTICLE I
OPTION TO ACQUIRE THE OPTION ASSETS
-----------------------------------
1.1 Option Grant. CTBC reaffirms the grant to SBC (as the assignee of
ABRY) of the option (the "Option") to acquire from CTBC all of CTBC's right,
title and interest in, to and under the Company FCC Authorizations, the Tower
Site and the tower and all improvements, fixtures, equipment and other assets
located thereon or thereat, all rights of CTBC as lessor under all leases
relating to the tower located on the Tower Site, all transmitting equipment
(including all microwave transmitters and antennas) relating to the Station,
and all records relating FCC compliance matters, in each case to the extent in
existence at the time of Closing and to the extent owned or leased by CTBC
(the "Option Assets"), subject to the terms and conditions set forth in this
Agreement. The Person which holds the Option at any time is referred to as
the "Option Holder." The Option Holder which consummates the purchase and
sale of the Option Assets is referred to as "Buyer." The term "Option Holder"
will include Buyer.
1.2 Method of Exercise. In Order to exercise the Option, the Option
Holder must deliver to CTBC written notice (an "Exercise Notice") of the
Option Holder's intention to do so. The date upon which any Exercise Notice
is given is the "Exercise Date" with respect to such exercise of the Option.
Whether or not any Option Holder exercises the Option, no Option Holder will
be obligated to consummate the Closing Transactions.
1.3 Exercise Period. The Option may be exercised by delivery of an
Exercise Notice as described in Section 1.2 at any prior to the Expiration
Time. The Option will expire if it is not exercised by delivery of an
Exercise Notice as described in Section 1.2 prior to 5:00 P.M., Nashville,
Tennessee time, on June 30, 1998 (the "Expiration Time").
1.4 Withdrawal of Exercise. Subject to the final sentence of this
Section 1.4, an Option Holder may withdraw any exercise of the Option pursuant
to Section 1.2 by delivering written notice to that effect to Thompson at any
time prior to the Closing, and any Option Holder may subsequently exercise the
Option after any such withdrawal at any time prior to the Expiration Time.
Any such subsequent exercise will be subject to the same withdrawal right, on
the terms set forth in this Section 1.4. The withdrawing Option Holder will
reimburse Thompson, MTC and CTBC for all reasonable out-of-pocket expenses
incurred by them prior to any such withdrawal in preparation for the aborted
purchase and sale of the Option Assets in connection with any withdrawn
exercise of the Option.
ARTICLE II
PURCHASE AND SALE OF OPTION ASSETS AND REORGANIZATION
-----------------------------------------------------
2.1 Option Asset Purchase: Reorganization.
(a) Option Asset Purchase. On and subject to the terms and conditions
set forth in this Agreement, on the Closing Date, Buyer will purchase from
CTBC, and CTBC will sell and transfer to Buyer, the Option Assets, free and
clear of all Liens and proxies (other than restrictions on transfer arising
under the Communications Act or the FCC Regulations or except as described
herein). Buyer may order that some or all of the Option Assets be delivered
to one or more Persons other than Buyer upon the payment of the amounts
described in Section 2.3(b)(ii) and the other deliveries of Buyer described in
Section 2.3(b); provided that Buyer will not be entitled to direct that Option
Assets be delivered to any Person which controlled SBC (which was then known
as "Act III Broadcasting, Inc.") immediately prior to the consummation of the
Act III Acquisition. CTBC will retain the amounts received by CTBC pursuant
to Section 2.2(a) in connection with such purchase and sale until the Merger
has been consummated.
(b) Reorganization. Immediately after the purchase and sale of the
Option Assets, Thompson, MTC and SBC will take (and SBC will cause the Merger
Company to take) all actions which are necessary in order to effect the merger
(the "Merger") of MTC with and into SBC or a subsidiary of SBC which SBC may
designate from time to time prior to the Closing (in either case, the "Merger
Company") by written notice to Thompson. At any time when SBC has not
designated such a subsidiary to be the Merger Company, SBC will be Merger
Company. The Merger Company will be the surviving corporation after the
Merger. As a result of the Merger, all of the issued and outstanding capital
stock of the Merger Company will continue to be outstanding and will
constitute the issued and outstanding capital stock of the surviving
corporation, and all of the issued and outstanding capital stock of MTC will
be cancelled and Thompson will be entitled to receive the Merger Consideration
described below. The certificate of incorporation and bylaws of the Merger
Company, as in effect immediately prior to the Merger, will be the certificate
of incorporation and bylaws of the surviving corporation, and the officers and
directors of the Merger Company immediately prior to the Merger will be the
officers and directors of the surviving corporation. The Merger is intended
to qualify as a reorganization under Section 368(a) of the Tax Code. The
purchase and sale of the Option Assets will not be effective unless the Merger
is consummated immediately after the consummation of such purchase and sale.
2.2 Option and Merger Consideration.
(a) Purchase Price for Option Assets. The aggregate consideration
payable by Buyer for the Option Assets (the "Purchase Price") will consist of
an amount equal to the outstanding principal amount of the Supplemental ABRY
Loan, and all unpaid accrued interest thereon, at the time of the Closing.
The Purchase Price will be payable as provided in Section 2.3(b).
(b) Merger Consideration.
(i) The aggregate consideration payable by reason of the Merger
to Thompson, as the holder of all of the issued and outstanding capital
stock of MTC immediately prior to the Merger (the "Merger
Consideration"), will be $13,000,000, adjusted as follows: (A) decreased
by the amount of the First Adjustment Amount, as determined in accordance
with Section 2.4, (B) further decreased by the amount of the Second
Adjustment Amount, as determined in accordance with Section 2.5, and (C)
if the Fourth Draw (as that term is defined in the ABRY Credit Agreement
Supplement, the "Fourth Draw") is made, then further decreased by the
outstanding principal amount of the Fourth Draw (determined in accordance
with the ABRY Credit Agreement Supplement) and the amount of all unpaid
interest accrued thereon as of the Closing Date.
(ii) Of the Merger Consideration, $200,000 will be payable in
cash, by wire or accounts transfer of immediately available funds to the
account(s) designated by Thompson, upon the initial filing by the Option
Holder and (as may be required by the Communications Act or the FCC
Regulations) MTC, CTBC and/or Thompson of the applications to the FCC
described in Section 4.5. Such $200,000 payment will not be subject to
refund by Thompson if the Closing does not occur (so long as neither
Thompson nor any Company has breached its obligation, if any, to
consummate the Closing if the conditions set forth in Section 3.1 have
been satisfied or waived). The remainder of the Merger Consideration will
be payable as described in Section 2.3(b)(iv). The Purchase Price and
the Merger Consideration will be subject to adjustment as provided in
this Agreement.
2.3 Closing Transactions.
(a) Closing. The closing of the purchase and sale of the Option
Assets and the consummation of the Merger pursuant to this Agreement
(collectively, the "Closing") will occur at a place designated by the Merger
Company by written notice to Thompson and Buyer not less than 10 business days
in advance of the Closing, at 10:00 a.m. on a date to be so designated by
Buyer, or on such other date or at such other place or time as may be mutually
acceptable to the Merger Company, Buyer and Thompson. The date specified by
Buyer for the Closing will not be later than the 60th day after the Final
Approval Date. Notwithstanding the foregoing but subject to Section 10.14, if
on any date for the Closing described in the preceding sentences or specified
pursuant to this sentence any condition of CTBC or MTC specified in Section
3.1 has not been satisfied (and will not be satisfied by the execution and
delivery of documents at the Closing) or waived by Thompson, then the date for
the Closing will be extended to any date specified by the Merger Company to
Thompson and Buyer with not less than 3 business days' prior notice (subject
to CTBC's and MTC's conditions to the Closing being satisfied or waived on
such specified date). The date upon which the Closing occurs is referred to
as the "Closing Date."
(b) Closing Transactions. Subject to the conditions set forth in this
Agreement, the Parties will consummate the following transactions (the
"Closing Transactions") at the Closing:
(i) CTBC will deliver to Buyer (and/or another Person designated
by Buyer as described in Section 2.1(a)) such bills of sale, deeds and
assignment documents which are necessary in order to transfer to Buyer
(and/or such other Person) all of CTBC's right, title and interest in,
to and under the Option Assets;
(ii) Buyer will deliver to CTBC (by wire or accounts transfer of
immediately available funds to an account designated by CTBC) the amount
described in Section 2.2(a);
(iii) MTC and the Merger Company will effect the Merger by the
filing of articles of merger with the respective offices of the
secretaries of state of the state(s) of incorporation of the Merger
Company and MTC, whereupon Thompson will deliver to the Merger Company
(or to another Person designated by the Merger Company) all certificates
representing shares of the issued and outstanding capital stock of MTC
immediately prior to the Merger, duly endorsed for transfer with all
requisite state and federal transfer stamps (if any) affixed thereto and
accompanied by duly executed stock powers, together with all
certificates representing issued and outstanding shares of capital stock
of CTBC and, if not previously disposed of pursuant to Section 4.9(b),
ETBC, WTBC and JIC;
(iv) the Merger Company will
(A) deliver to the Escrow Agent (by wire or accounts
transfer of immediately available funds) an amount equal to the
Holdback Amount, for deposit in the Indemnity Fund, and
(B) deliver to Thompson (by wire or accounts transfer of
immediately available funds to an account designated by Thompson)
$13,000,000, reduced by: (1) the Holdback Amount, (2) the First
Adjustment Amount, if the First Adjustment Amount is finally
determined pursuant to Section 2.4 prior to the Closing, and (3)
the outstanding principal amount of the Fourth Draw (determined in
accordance with the ABRY Credit Agreement Supplement) and the
amount of all unpaid interest accrued thereon as of the Closing
Date, if the Fourth Draw has been made;
(v) there will be delivered to Thompson, MTC, CTBC and Buyer, as
applicable, the opinions, certificates and other documents and
instruments required to be delivered to such Persons under Article III;
and
(vi) Thompson will deliver to the Merger Company all corporate
books and records of any Company in Thompson's possession.
Upon the consummation of the Closing Transactions, except as the Merger
Company may otherwise agree in writing after the date of this Agreement, each
Company and the Merger Company will be released in full from all liabilities
and obligations which have or may become owing at any time under or in respect
of any arrangement among Thompson and the Companies in Thompson's capacity as
an employee, officer, director or agent of any Company and all such
arrangements will be terminated. Upon such consummation, Thompson will
execute and deliver to the Merger Company and/or the Companies such evidence
of such release and termination as the Merger Company may reasonably request.
(c) Payment in Consideration for Loftus Termination. In addition to
the Closing Transactions described in Section 2.3(b), at the Closing and
concurrently with the consummation of the Closing Transactions, the Merger
Company will (or will cause MTC or CTBC to) pay to Daniel R. Loftus ("Loftus")
the sum of $700,000, in full satisfaction of all obligations of the Merger
Company or any Company which has or may become owing at any time pursuant to
the Employment Agreement dated December 31, 1993 among CTBC, MTC, Thompson and
Loftus (the "Loftus Agreement"), whereupon the Loftus Agreement and all other
agreements and arrangements between Loftus and any Company will be terminated
and will be of no further force or effect. Such amount will be paid by wire
or accounts transfer of immediately available funds to an account specified by
Loftus. Loftus agrees that, upon such payment (so long as the Broker has
provided CTBC with the funds required by CTBC to pay the compensation owing to
Loftus under the Loftus Agreement, to the extent that the Broker is required
by the terms of the Time Brokerage Agreement to provide such funds), the
Merger Company and each Company will be released in full from all liabilities
and obligations which have or may become owing at any time to Loftus under or
in respect of the Loftus Agreement or otherwise. Upon such payment, Loftus
will execute and deliver to the Merger Company and/or the Companies such
evidence of the termination of the Loftus Agreement and such release as the
Merger Company may reasonably request. The Parties agree that Loftus is an
express third-party beneficiary of this Section 2.3(c).
2.4 First Adjustment to Merger Consideration.
(a) SBC's Report After Execution. As promptly as practicable (and, in
any event, within 90 days) after the date of this Agreement, SBC's accountants
will prepare and deliver to Thompson a statement (the "First Adjustment
Statement") setting forth such accountants' determination of the First
Adjustment Amount. MTC and CTBC will cause to be given to Thompson and one
firm of accountants designated by Thompson access to such books and records of
the Companies as are reasonably requested by Thompson in order to enable
Thompson to verify such calculation of the First Adjustment Amount; provided
that Thompson acknowledges and agrees that all such information will
constitute Confidential Information and, as such, will be subject to the
provisions of Section 9.6 (it being understood that Thompson may use such
information for purposes of determining, disputing or resolving any dispute
regarding the First Adjustment Amount), and Thompson will be responsible for
any unauthorized use or disclosure of any such information by any such
accountants or any Person to whom Thompson discloses any such information.
(b) Dispute by Thompson. If Thompson disagrees with the determination
of the First Adjustment Amount set forth on the First Adjustment Statement,
then Thompson will notify SBC of such disagreement in writing within 45 after
delivery of the First Adjustment Statement (such notice setting forth the
basis for such disagreement in reasonable detail), and Thompson and SBC will
thereafter negotiate in good faith to resolve any such disagreement. Any
resolution as to the amount of the First Adjustment Amount agreed to in
writing by SBC and Thompson will be final and binding upon the Parties. If
Thompson does not so dispute the amount of the First Adjustment Amount set
forth in the First Adjustment Statement, then such undisputed amount will
become final and binding on the Parties on the 45th day after delivery of the
First Adjustment Statement.
(c) Dispute Resolution. If Thompson and SBC are unable to resolve any
such disagreement within thirty (30) days after delivery of such written
notice of disagreement, then Thompson may retain an independent accounting
firm which is approved by SBC (the "Section 2.4 Auditor") solely to resolve
such disagreement. SBC will not unreasonably withhold such approval as to any
"big-six" firm which is not the accounting firm described in Section 2.4(a)
and which does not then serve as the independent auditor of any affiliate of
Thompson. SBC and Thompson will use reasonable efforts to cause the Section
2.4 Auditor to resolve the matter as soon as practicable. The resolution of
such disagreement by the Section 2.4 Auditor will be final and binding on the
Parties.
(d) Adjustment of Merger Consideration.
(i) If prior to Closing. If the First Adjustment Amount is
finally determined in accordance with Sections 2.4(a) through 2.4(c)
prior to the Closing, then the adjustment of the Merger Consideration by
the First Adjustment Amount will be effected by means of the reduction
described in Section 2.3(b)(iv)(B).
(ii) If after Closing. If the First Adjustment Amount is
finally determined in accordance with Sections 2.4(a) through 2.4(c)
after the Closing, then
(A) Thompson will pay the Merger Company an amount equal
to the First Adjustment Amount,
(B) any amount which becomes payable pursuant to this
Section 2.4(d)(ii) will constitute an adjustment of the Merger
Consideration and will be due and payable on the date when the
amount of the First Adjustment Amount is finally determined in
accordance with Sections 2.4(a) through 2.4(c),
(C) to the extent available from the funds then held in
the Indemnity Fund, the Merger Company may seek payment from the
Indemnity Fund of all or any portion of the First Adjustment
Amount, and
(D) to the extent available from the funds then held in
the Indemnity Fund, the Merger Company will seek payment of the
First Adjustment Amount from the Indemnity Fund prior to seeking
payment of such amount from Thompson (provided that the aggregate
amount which the Merger Company is required by this Section
2.4(d)(ii)(D) and Section 2.5(d)(i)(D) to seek from the Indemnity
Fund prior to seeking payment from Thompson will be $500,000).
(iii) Interest on Unpaid Amounts. Any amount payable by
Thompson pursuant to Section 2.4(d)(ii) (other than to the extent that
funds are available from the Indemnity Fund to pay such amount) will
bear interest at the Interest Rate from the date upon which such amount
becomes due and payable as specified in Section 2.4(d)(ii) through and
including the date upon which such amount and all such interest are paid
in full.
2.5 Second Adjustment to Merger Consideration.
(a) Buyer's Report After Closing. As promptly as practicable (and, in
any event, within 90 days) after the Closing, the Merger Company's accountants
will prepare and deliver to Thompson a statement (the "Second Adjustment
Statement") setting forth such accountants' determination of the Second
Adjustment Amount. Thompson and one firm of accountants designated by
Thompson will have access to such books and records of the Merger Company and
the Companies as are reasonably requested by Thompson in order to enable
Thompson to verify such calculation of the Second Adjustment Amount; provided
that Thompson acknowledges and agrees that all such information will
constitute Confidential Information and, as such, will be subject to the
provisions of Section 9.6 (it being understood that Thompson may use such
information for purposes of determining, disputing or resolving any dispute
regarding the Second Adjustment Amount), and Thompson will be responsible for
any unauthorized use or disclosure of any such information by any such
accountants or any Person to whom Thompson discloses any such information.
(b) Dispute by Thompson. If Thompson disagrees with the determination
of the Second Adjustment Amount set forth on the Second Adjustment Statement,
then Thompson will notify the Merger Company of such disagreement in writing
within 45 days after delivery of the Second Adjustment Statement (such notice
setting forth the basis for such disagreement in reasonable detail), and
Thompson and the Merger Company will thereafter negotiate in good faith to
resolve any such disagreement. Any resolution as to the amount of the Second
Adjustment Amount agreed to in writing by the Merger Company and Thompson will
be final and binding upon the Merger Company and Thompson. If Thompson does
not so dispute the amount of the Second Adjustment Amount set forth in the
Second Adjustment Statement, then such undisputed amount will become final and
binding on Thompson and the Merger Company on the 45th day after delivery of
the Second Adjustment Statement.
(c) Dispute Resolution. If Thompson and the Merger Company are unable
to resolve any such disagreement within thirty (30) days after delivery of
such written notice of disagreement, then Thompson may retain an independent
accounting firm which is approved by the Merger Company (the "Section 2.5
Auditor") solely to resolve such disagreement. The Merger Company will not
unreasonably withhold such approval as to any "big-six" firm which is not the
accounting firm described in Section 2.5(a) and which does not then serve as
the independent auditor of any affiliate of Thompson. The Merger Company,
CTBC, and Thompson will use reasonable efforts to cause the Section 2.5
Auditor to resolve the matter as soon as practicable. The resolution of such
disagreement by the Section 2.5 Auditor will be final and binding on Thompson
and the Merger Company.
(d) Adjustment of Merger Consideration.
(i) Amount of Adjustment. If the amount of the Second
Adjustment Amount finally determined in accordance with Sections 2.5(a)
through 2.5(c) is greater than $0, then
(A) Thompson will pay the Merger Company an amount equal
to the Second Adjustment Amount,
(B) any amount which becomes payable pursuant to this
Section 2.5(d)(i) will constitute an adjustment of the Merger
Consideration and will be due and payable on the date when the
amount of the Second Adjustment Amount is finally determined in
accordance with Sections 2.5(a) through 2.5(c),
(C) to the extent available from the funds then held in
the Indemnity Fund, the Merger Company may seek payment from the
Indemnity Fund of all or any portion of the Second Adjustment
Amount, and
(D) to the extent available from the funds then held in
the Indemnity Fund, the Merger Company will seek payment of the
Second Adjustment Amount from the Indemnity Fund prior to seeking
payment of such amount from Thompson (provided that (i) if the
First Adjustment Amount is finally determined in accordance with
Section 2.4 prior to the Closing, then the aggregate amount which
the Merger Company is required by this Section 2.5(d)(i)(D) to
seek from the Indemnity Fund prior to seeking payment from
Thompson will be $500,000 reduced by the First Adjustment Amount,
and (ii) if the First Adjustment Amount is not finally determined
in accordance with Section 2.4 prior to the Closing, then the
aggregate amount which the Merger Company is required by this
Section 2.5(d)(i)(D) and Section 2.4(d)(ii)(D) to seek from the
Indemnity Fund prior to seeking payment from Thompson will be
$500,000)).
(ii) Source of Payment. To the extent available from the funds
deposited in the Indemnity Fund, the Merger Company may seek payment
from the Indemnity Fund of all or any portion of any amount payable to
the Merger Company by Thompson pursuant to Section 2.5(e)(i).
(iii) Interest on Unpaid Amounts. Any amount payable by
Thompson pursuant to Section 2.5(d)(i) (other than to the extent that
funds are available from the Indemnity Fund to pay such amount) will
bear interest at the Interest Rate from the date upon which such amount
becomes due and payable as specified in Section 2.5(d)(i) through and
including the date upon which such amount and all such interest are paid
in full.
2.6 Purchase of Studio Premises by Thompson.
(a) Right to Require Purchase. Notwithstanding the remainder of this
Article 2, the Merger Company will sell to Thompson, and Thompson will
purchase from the Merger Company, and Thompson will purchase from the Merger
Company, immediately after (but on the day of) the Merger, all right, title
and interest of the Merger Company (as the survivor of the Merger) in, to and
under the Studio Premises, as the same exist at the time of the Merger. Such
purchase and sale will be made by delivery of a quit-claim or similar deed or
transfer document and without representation or warranty by CTBC or the Merger
Company, whether express or implied (other than as to the absence any Lien
thereon which was not a Lien thereon prior to the Merger or a Lien created
solely by the Broker). Thompson will be responsible for, and will hold the
Merger Company harmless in respect of, all fees and expenses (including legal
fees and recording and other taxes and fees, including income taxes) incurred
by Thompson or the Merger Company in connection with such purchase and sale.
In connection with such purchase and sale, Thompson will assume all
liabilities of the Merger Company under the TBON Documents, and the Studio
Premises (as purchased by Thompson) will be subject to all Liens arising or
granted under the TBON Documents. Such purchase, sale and assumption are
referred to as the "Thompson Purchase."
(b) Purchase Price. The purchase price payable by Thompson in
connection with the Thompson Purchase (the "Thompson Purchase Price") will
equal $425,000, increased by the aggregate amount of all out-of-pocket costs
and expenses incurred by CTBC in connection with the Studio Acquisition and
the TBON Borrowing (the "Studio Acquisition Costs"), and reduced by the
amount, if any, of the Studio Deposit made by Thompson and not reimbursed by
CTBC on or prior to the Closing Date, and further reduced by the unpaid
principal amount of the TBON Note on the Closing Date (without giving effect
to any payment described in Section 2.6(c).
(c) Satisfaction of Purchase Price and TBON Debt. The Merger Company
may require, as a condition to the Closing, that the Thompson Purchase Price
and CTBC's full obligations under the TBON Documents be satisfied in full out
of the cash portion of the Merger Consideration which is otherwise payable to
Thompson at the time of the Closing or, if such cash portion of the Merger
Consideration is insufficient for such purpose, then by Thompson, out of other
funds. The Merger Company may require that, as evidence of the satisfaction
of such condition, Thompson deliver to the Merger Company evidence of the
release of all Liens and all obligations of the Merger Company under the TBON
Documents.
(d) Lease of Studio Premises After Closing. If the Merger Company so
requests, Thompson will permit the Merger Company (or an affiliate thereof
which the Merger Company may designate), as lessee(s), to continue to occupy
or use those portions of the Studio Premises which are occupied or used by the
Broker during the month prior to the Closing, for use by such lessee(s) in
connection with the conduct of the business of the Station after the Closing
Date; provided that such continued occupancy and use will not continue beyond
the first anniversary of the Closing Date and will be terminable at the
lessee's/lessees' option on not less than 30 days' prior written notice to
Thompson. Such lessee(s) will pay in the aggregate, as rent,
(i) an amount which is sufficient to reimburse Thompson for his
out-of-pocket costs for real estate taxes, casualty insurance and
operating expenses in connection with the maintenance of the Studio
Premises, to the extent incurred by Thompson during the term of such
occupancy (with such amounts to be prorated between the term of such
occupancy and all other periods based on the length of the term of such
occupancy and the entire period to which such costs relate), and
(ii) an amount (but not to exceed $6,000 per month) equal to
principal and interest payments in respect of indebtedness of Thompson
relating to the Studio Premises.
(e) Further Actions. Each of the Merger Company and Thompson will
take all actions reasonably requested by the other to give effect to or
evidence the Thompson Purchase and the other transactions and arrangements
contemplated by this Section 2.6, including entering into a written lease
agreement reflecting the terms described in Section 2.6(d) and customary
estoppels, non-disturbance agreements and consents (including consents to
Liens) relating thereto.
ARTICLE III
CONDITIONS AND DELIVERIES AT CLOSING
------------------------------------
3.1 Conditions to MTC's and CTBC's Obligations. The respective
obligations of CTBC and MTC to consummate the purchase and sale of the Option
Assets and the Merger are subject to the satisfaction of the following
conditions as of the Closing Date:
(a) The representations and warranties of Buyer and the Merger Company
set forth in this Agreement will be true and correct in all material respects
at and as of the time of the Closing as though then made;
(b) The FCC Approval Date will have occurred;
(c) The requisite waiting period, if any, under the Hart-Scott-Rodino
Act will have expired or been terminated;
(d) No action or proceeding before any Governmental Entity will be
pending wherein an unfavorable judgment, decree, injunction or order is
reasonably expected to be obtained and would prevent the consummation of the
Closing Transactions or declare unlawful the Closing Transactions or cause
them to be rescinded; and
(e) Buyer, the Merger Company and First National Bank of Chicago or
another institution which is reasonably acceptable to Thompson will have
executed and delivered the Escrow Agreement, and the Escrow Agreement will be
in full force and effect (assuming its due execution and delivery by
Thompson).
All proceedings to be taken by Buyer and the Merger Company in connection with
the consummation of the Closing Transactions and the other transactions
contemplated by this Agreement and all certificates, instruments and other
documents required to be delivered by Buyer and the Merger Company to effect
the transactions contemplated by this Agreement will be reasonably
satisfactory in form and substance to Thompson. Any condition set forth in
this Section 3.1 may be waived in writing by Thompson, and any such waiver
will be effective as against MTC and CTBC.
None of MTC, CTBC nor Thompson may rely on the failure of any condition
precedent set forth in this Section 3.1 to be satisfied if such failure was
caused by MTC's, CTBC's or Thompson's failure to act in good faith or a breach
of or failure to perform any of its representations, warranties, covenants or
other obligations in accordance with the terms of this Agreement.
3.2 Deliveries to Thompson. In addition to the items described in
Section 2.3(b) to be delivered to Thompson and CTBC, at the Closing, Buyer
and/or the Merger Company will deliver to Thompson all of the following:
(a) Copies of all Consents (if any) which Buyer or the Merger Company
is required to obtain in order to consummate the purchase and sale of the
Option Assets or the Merger, as the case may be, and which have been obtained
prior to the Closing;
(b) Certified copies of the resolutions of Buyer's and the Merger
Company's boards of directors approving the transactions contemplated by this
Agreement;
(c) A certificate, dated not earlier than the 10th day prior to the
Closing Date, of the secretary of state of the state of incorporation or
formation of Buyer (if Buyer is a corporation, limited partnership or limited
liability company) and each state in which Buyer is required to be qualified
to do business, stating that Buyer is in good standing in such state;
(d) A certificate, dated not earlier than the 10th day prior to the
Closing Date, of the secretary of state of the state of incorporation of the
Merger Company and each state in which the Merger Company is required to be
qualified to do business, stating that the Merger Company is in good standing
in such state; and
(e) A counterpart of the Escrow Agreement executed by the Escrow
Agent, the Merger Company and Buyer.
3.3 Deliveries to Buyer. In addition to the items described in
Section 2.3(b) to be delivered to Buyer, at the Closing, CTBC will deliver to
Buyer all of the following:
(a) Copies of all Consents with respect to the purchase and sale of
the Option Assets which have been obtained prior to the Closing;
(b) One or more opinions, dated the Closing Date, with respect to the
matters set forth in the attached Exhibit C (subject to customary
qualifications and exceptions), which opinion(s) will have been rendered by
legal counsel to CTBC which is reasonably acceptable to Buyer;
(c) Certified copies of the resolutions of MTC's and CTBC's boards of
directors approving the transactions contemplated by this Agreement;
(d) If the merger described in Section 4.9(c) has not occurred, a
certificate, dated not earlier than the 10th day prior to the Closing Date, of
the secretary of state of the State of California and each state in which MTC
is required to be qualified to do business, stating that MTC is in good
standing in such state;
(e) A certificate, dated not earlier than the 10th day prior to the
Closing Date, of the secretary of state of the State of Tennessee and each
state in which CTBC is required to be qualified to do business, stating that
CTBC is in good standing in such state; and
(f) A counterpart of the Escrow Agreement executed by the Escrow Agent
and Thompson.
All proceedings to be taken by the Companies and Thompson in connection with
the consummation of the Closing Transactions and the other transactions
contemplated by this Agreement and all certificates, opinions, instruments and
other documents required to be delivered to Buyer to effect the transactions
contemplated by this Agreement will be reasonably satisfactory in form and
substance to Buyer.
3.4 Deliveries to the Merger Company. In addition to the items
described in Section 2.3(b) to be delivered to the Merger Company, at the
Closing, Thompson will deliver to the Merger Company all of the following:
(a) Copies of all Consents with respect to the Merger which have been
obtained prior to the Closing;
(b) One or more opinions, dated the Closing Date, with respect to the
matters set forth in the attached Exhibit C (subject to customary
qualifications and exceptions), which opinion(s) will have been rendered by
legal counsel to Thompson, MTC and CTBC which is reasonably acceptable to the
Merger Company;
(c) Certified copies of the resolutions of MTC's and CTBC's boards of
directors approving the transactions contemplated by this Agreement;
(d) If the merger described in Section 4.9(c) has not occurred, a
certificate, dated not earlier than the 10th day prior to the Closing Date, of
the secretary of state of the State of California and each state in which MTC
is required to be qualified to do business, stating that MTC is in good
standing in such state;
(e) A certificate, dated not earlier than the 10th day prior to the
Closing Date, of the secretary of state of the State of Tennessee and each
state in which CTBC, ETBC, WTBC or JIC is required to be qualified to do
business, stating that such Company is in good standing in such state;
(f) Resignations of each officer or director of each Company effective
as of the Closing or, as to any such director or officer who has not so
resigned, evidence that such director or officer has been removed as such
effective as of the Closing; and
(g) A counterpart of the Escrow Agreement executed by the Escrow Agent
and Thompson.
All proceedings to be taken by the Companies and Thompson in connection with
the consummation of the Closing Transactions and the other transactions
contemplated by this Agreement and all certificates, opinions, instruments and
other documents required to be delivered to the Merger Company to effect the
transactions contemplated by this Agreement will be reasonably satisfactory in
form and substance to the Merger Company.
ARTICLE IV
PRE-CLOSING COVENANTS
---------------------
4.1 Operation and Maintenance of the Business. Prior to the Closing,
unless the Broker, any Option Holder or the Merger Company otherwise agrees in
writing or MTC and CTBC are prohibited from taking the action in question by
the terms of the ABRY Loan Documents or the Time Brokerage Agreement, each of
MTC and CTBC will (and MTC will cause each other Company to):
(a) cause its liability and casualty insurance (or reinsurance)
policies in effect on the date of this Agreement not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under
the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
(b) keep in full force and effect its corporate existence and
all rights, franchises, Proprietary Rights and contractual rights
relating or pertaining to its business, including all Company FCC
Authorizations;
(c) maintain the Assets in such state of repair as is necessary
for the conduct of its business consistent with then-present needs and
past practices, including replacement in accordance with reasonably
prudent practices any inoperable, worn out or obsolete Assets with
assets of quality consistent with reasonably prudent practices and then-
current needs and, in the event of a casualty, loss or damage to any of
the Assets prior to the Closing Date, whether or not MTC or CTBC is
insured, repair or replace such damaged property or use the proceeds of
such insurance in such other manner as the Option Holder or the Merger
Company may consent (which consent the Option Holder and the Merger
Company will not unreasonably withhold);
(d) maintain its books, accounts and records in accordance with
past custom and practice as used in the preparation of the Financial
Statements;
(e) use its best efforts to cooperate with the Option Holder and
the Merger Company to obtain for CTBC from A.C. Nielsen Company metered
rating service for the Station; and
(f) comply in all material respects with all Legal Requirements
and all contractual obligations applicable to its operations or
business, and pay all applicable Taxes which are due and payable (other
than any such Taxes which are being contested in good faith);
provided that, if the Time Brokerage Agreement requires the Broker to, but the
Broker does not, provide CTBC with any funds which are necessary to enable
CTBC to perform any obligation under this Section 4.1, then CTBC's failure to
perform such obligation will not constitute a breach of this Section 4.1 so
long as the Broker has not provided such funds.
Upon the Broker, the Option Holder or the Merger Company giving its written
consent to any matter which otherwise would be prohibited by this Section 4.1,
all schedules and exhibits to this Agreement will be deemed to have been
amended so as to reflect such matter (it being the intent that no matter as to
which the Option Holder or the Merger Company has given its written consent
will result in a breach of any covenant, representation or warranty set forth
in this Agreement). In addition, no liability or obligation as to which such
consent is given will constitute a Prohibited Obligation or result in a claim
for indemnification pursuant to Section 8.2(a).
4.2 Negative Covenants. Except as disclosed on Schedule 4.2, from and
after the date hereof and prior to the Closing, unless the Broker, any Option
Holder or the Merger Company otherwise consents in writing or MTC or CTBC is
required by the terms of the ABRY Loan Documents or the Time Brokerage
Agreement to take the action in question, neither MTC nor CTBC will (and MTC
will cause each other Company not to):
(a) amend or otherwise modify its certificate of incorporation
or bylaws in any manner which could adversely affect any Option Holder
or Buyer;
(b) enter into or amend any Program Contract or other Contract
(provided that, from August 1, 1998 until the Closing occurs, CTBC may
enter into any Program Contract which by its express terms will
terminate and be of no effect if the Closing occurs and which does not
take effect, and under which no obligation or liability of any Company
arises, accrues, is payable or must be performed, prior to July 1, 1999,
other than obligations to provide downpayments to secure payments
becoming due under any such Program Contract after June 30, 1999 (so
long as any such downpayment is made with funds provided to CTBC by
Thompson and CTBC is not obligated to repay such funds to Thompson if
the Closing occurs));
(c) incur any additional Indebtedness;
(d) incur any liability or obligation under any Trade (including
utilizing or receiving any additional services or goods under any Trade
arrangement in existence of the date of this Agreement);
(e) issue or grant any capital stock or any security, option or
other right which is convertible into or exercisable or exchangeable for
any capital stock, or any interest of a type described in Section 7 of
the Loftus Agreement;
(f) sell, lease (as lessor), assign or otherwise dispose of any
Asset, other than (i) any disposition of worn-out or obsolete Assets or
(ii) any disposition in connection with the replacement of the disposed
Asset with an Asset of equal or greater value and utility;
(g) waive any rights having a value in excess of $10,000 in the
aggregate;
(h) have any employee or engage any independent contractor other
than: (i) the Broker, (ii) Loftus, or his successor as General Manager
of the Station, whose compensation and benefits will not be greater than
the amount of such compensation and benefits as in effect on the date of
this Agreement, (iii) a Chief Engineer, whose compensation and benefits
will not be greater than the amount of such compensation and benefits as
in effect on the date of this Agreement, (iv) a Receptionist/Business
Manager, whose compensation and benefits will not be greater than the
amount of such compensation and benefits as in effect on the date of
this Agreement, and (v) from and after January 1, 1998 only, Thompson,
whose compensation shall not exceed $22,000 per month;
(i) make any loan or advance to, or any guarantee for the
benefit of, any Person, other than advances made in the Ordinary Course
of Business of reimbursable expenses incurred by employees or
independent contractors;
(j) redeem, repurchase, or pay or declare any dividend or other
distribution or amount in respect of, any capital stock or any security
or other right which is convertible into or exercisable or exchangeable
for any capital stock;
(k) enter into any ratings service or national or regional sales
representation arrangement;
(l) cause or permit any of ETBC, WTBC or JIC to conduct any
business, acquire any asset or other property, or incur any liability or
obligation of any kind or nature;
(m) incur any obligation to pay money other than of a type
described in Exhibit D to the Time Brokerage Agreement;
(n) breach any obligation or default under the Time Brokerage
Agreement (provided that, if the Time Brokerage Agreement requires the
Broker to, but the Broker does not, provide CTBC with any funds which
are necessary to enable CTBC to perform any obligation under the Time
Brokerage Agreement, then CTBC's failure to perform such obligation will
not constitute a breach of this Section 4.2(n) so long as the Broker has
not provided such funds); or
(o) agree or commit to take any of the foregoing prohibited
actions.
Upon the Broker, the Option Holder or the Merger Company giving its written
consent to any matter which otherwise would be prohibited by this Section 4.2,
all schedules and exhibits to this Agreement will be deemed to have been
amended so as to reflect such matter (it being the intent that no matter as to
which the Option Holder or the Merger Company has given its written consent
will result in a breach of any covenant, representation or warranty set forth
in this Agreement). In addition, no liability or obligation as to which such
consent is given will constitute a Prohibited Obligation or result in a claim
for indemnification pursuant to Section 8.2(a).
4.3 Information.
(a) MTC and CTBC will (and MTC will cause the other Companies to)
provide to the Option Holder and the Merger Company copies of all financial
statements, budgets or other summaries of historical or projected financial
information as and when the same are prepared on a monthly, quarterly, annual
or other basis by any Company for internal management or reporting purposes.
(b) Without limiting the foregoing, from time to time at the Option
Holder's or the Merger Company's request and upon reasonable notice and at
reasonable times, each of MTC and CTBC will (and MTC will cause each other
Company to) provide to the agents, employees and accounting, tax, legal and
other advisors and representatives of the Option Holder and the Merger Company
(i) access to the Assets, (ii) access to all accounts, insurance policies, Tax
Returns, Contracts, and other books and records concerning the Companies and
their respective businesses and such other relevant information and materials
as may be reasonably requested (including the ability to make copies and
abstracts thereof), and (iii) after the delivery of any Exercise Notice and so
long as it has not been withdrawn, the opportunity to discuss the affairs,
finances and accounts of the Companies with the directors, officers,
management employees, present and former independent accountants of the
Companies, in each case for the purposes of conducting such Option Holder's
and the Merger Company's and such other parties' legal, accounting, financial
and other due diligence review regarding the Companies and preparing for the
financing and consummation of the Closing Transactions and the conduct of the
Companies' businesses thereafter, in each case so long as such access does not
unreasonably interfere with the business and operations of the Station. After
the delivery of any Exercise Notice and so long as it has not been withdrawn,
the access described in the preceding sentence will also be afforded to the
agents, employees and accounting, tax, legal and other advisors and
representatives of the Option Holder's and the Merger Company's respective
actual and respective prospective equity and debt financing parties and any
Person with whom the Option Holder is contemplating entering into a time
brokerage, local marketing or other operating arrangement after the Closing.
(c) None of MTC, CTBC or Thompson will (and MTC, CTBC and Thompson
will cause each other Company and each affiliate, director, officer, employee
or agent of the Companies or their affiliates not to), (i) solicit, initiate,
encourage the submission of, or discuss with any Person other than the Option
Holder, SBC and its Affiliates or the Merger Company, any proposal or offer
from any Person (including any of them) relating to any (A) liquidation,
dissolution or recapitalization of, (B) merger or consolidation with or into,
(C) acquisition or purchase of assets of or any equity interest in, or (D) any
similar transaction or business combination involving, any Company, or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any other Person to do or seek any of
the foregoing. MTC, CTBC and Thompson will (and MTC will cause each other
Company to) notify the Option Holder and the Merger Company if any Person
makes any proposal or offer with respect to any of the foregoing. Without
limiting the foregoing, neither Thompson nor MTC will enter into any agreement
to transfer, or grant any option or right to acquire, any capital stock of MTC
or CTBC to any Person other than SBC, any of its Affiliates, or the Merger
Company.
4.4 Consents Generally. It is agreed by the Parties that it will be
the responsibility of the Companies and Thompson to obtain all Consents (other
than the FCC Consents and any Consent required under the Hart-Scott-Rodino
Act, for which the Parties will share responsibility as described in Sections
4.5 and 4.6) prior to the Closing. After any exercise of the Option, MTC,
CTBC and Thompson will use their respective best efforts (without being
required to make any payment not specifically required by the terms of any
related Contract or Legal Requirement or agree to any material modification or
waiver of any term of any Contract or any other right) to (a) obtain or cause
to be obtained prior to the Closing Date all Consents, and (b) cause each
Consent to be effective as of the Closing Date (whether it is granted or
entered into prior to or after the Closing).
4.5 Application for FCC Consent. Promptly (and, in any event, within
10 business days) after delivery of any Exercise Notice, the Option Holder,
the Merger Company, the Companies and Thompson, as may be required by the
Communications Act or FCC Regulations, will complete their respective portions
of applications to the FCC for the related FCC Consents and, together with the
other Parties who are required to join in such filings, file such applications
with the FCC. Upon the initial filings described in the preceding sentence,
SBC will pay to Thompson the $200,000 described in Section 2.2(b). Each of
MTC, CTBC, the Option Holder, the Merger Company and Thompson will (and MTC
will cause each other Company to) diligently take or cooperate in the taking
of all reasonable steps that are necessary, proper or desirable, and otherwise
use its best efforts, to expedite the preparation and filing of such
applications and their prosecution to Final Orders (it being understood that,
upon any assignment of the Option, any such application(s) which are no longer
appropriate may be withdrawn and this Section 4.5 will apply to the assignee
Option Holder as if the Option were being exercised anew). Each of MTC, CTBC
and Thompson will (and Thompson will cause each Company to) provide the Option
Holder and the Merger Company, and the Option Holder and the Merger Company
will provide MTC and CTBC, with a copy of any pleading, order or other
document served on such Person relating to any such application, unless such
pleading, order or other document indicates on its face that it was served
upon or delivered to the Option Holder, the Merger Company or such Company, as
the case may be.
4.6 Hart-Scott-Rodino. After any exercise of the Option, the Option
Holder, the Merger Company, CTBC, MTC and Thompson (as may be required by the
Hart-Scott-Rodino Act) promptly will (and MTC will cause each other Company
to) complete all documents required to be filed with the Federal Trade
Commission and the United States Department of Justice in order to comply with
the Hart-Scott-Rodino Act and, promptly (and in any event within 10 business
days) after any Option Holder or the Merger Company requests such filings to
be made and, together with the other Parties who are required to join in such
filings, will file the same with the appropriate Governmental Entities. The
Option Holder, the Merger Company, MTC, CTBC and Thompson will (and Thompson
will cause each Company to) promptly furnish all materials thereafter required
by any of the Governmental Entities 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 Closing
Transactions.
4.7 Notice and Cooperation Generally.
(a) Prior to the Closing, promptly (and, in any event, within 10
business days) after it obtains knowledge thereof, but in all events prior to
the Closing, the Option Holder or the Merger Company will inform Thompson in
writing, and MTC, CTBC and Thompson will (and MTC will cause each other
Company to) inform the Option Holder and the Merger Company in writing, of any
fact or circumstance which, if it existed on the Closing Date, would
constitute a breach of any representation or warranty of itself or any other
Party set forth in this Agreement or any breach of any of its or any other
Party's covenants or agreements set forth in this Agreement, or any order or
decree or any complaint praying for an order or decree restraining or
enjoining the consummation of the Closing Transactions, or upon receiving any
notice from any Governmental Entity or any other Person of its intention to
institute an investigation into or institute a suit or proceeding to restrain
or enjoin the consummation of the Closing Transactions, or nullify or render
ineffective the Option, this Agreement or the Closing Transactions if
consummated. No such knowledge or notice will affect any Party's right to
indemnification or other remedy provided for in this Agreement in respect of
any such matter of which it obtains knowledge or receives such notice.
(b) Without limiting the foregoing, MTC, CTBC and Thompson will (and
MTC will cause each other Company to) give prompt written notice to the Option
Holder (i) if any material portion of the Assets suffers damage on account of
fire, explosion, or other cause of any nature which is sufficient to prevent
operation of the Station in any material respect, (ii) if the regular
broadcast transmission of the Station in the normal and usual manner in which
it heretofore has been operating is interrupted or interfered with in any
material manner for a period in excess of 24 consecutive hours, (iii) if MTC
or CTBC receives a National Labor Relations Board union election petition
relating to employees of the Station, (iv) if the Station receives notice from
any Market Cable System currently carrying the Station's signal of such Market
Cable System's intention to delete the Station from carriage or change the
Station's channel position on such Market Cable System, (v) if any Market
Cable System alleges that the Station does not deliver an adequate signal
level, as defined in Section 76.55(c)(3) of the FCC Regulations, to such
Market Cable System's principal headend (other than any such notice as to
which such failure has been remedied or been determined not to exist), (vi) if
there is filed any petition for special relief to include any additional
community or area as part of the Station's television market, as defined in
Section 76.55(e) of the FCC Regulations, or (vii) if there is filed any
petition for special relief requesting the deletion of any community or area
from the Station's television market.
(c) Each of MTC, CTBC and Thompson will (and Thompson will cause each
Company to) use its best efforts to cause the conditions to MTC's and CTBC's
obligations to consummate the Closing Transactions to be satisfied (including
the preparation, execution and delivery of all agreements contemplated
hereunder to be executed and delivered by such Party in connection with or
prior to the Closing). Thompson will cause each of MTC and CTBC to comply
with all of its obligations under this Agreement and the Time Brokerage
Agreement. SBC (if SBC is not the Merger Company) will cause the Merger
Company, and SBC will cause SBN, to comply with all of its obligations under
this Agreement and the Time Brokerage Agreement.
4.8 Real Estate Matters.
(a) Prior to the Closing, MTC, CTBC and Thompson will (and MTC will
cause each other Company to) use their respective best efforts to assist the
Option Holder and/or the Merger Company, at the requesting Person's expense,
to obtain, with respect to each parcel of Leased Real Property, the following
documents: (i) estoppel letters from the lessors and/or sublessors of the
Leased Real Properties, and (ii) non-disturbance agreements from the lenders
of any of such lessors and/or sublessors.
(b) Prior to the Closing, MTC, CTBC and Thompson will (and MTC will
cause each other Company to) use their respective best efforts to assist the
Option Holder and/or the Merger Company, at the requesting Person's expense,
to obtain, for the benefit of the Option Holder, MTC and/or CTBC, an ALTA
Owners or Leasehold Policy of Title Insurance, as the case may be, Form B-
1970, for each of the Real Properties, issued by a title insurer designated by
the requesting Person (the "Title Insurer"), in such amount as the requesting
Person determines to be the fair market value thereof (including all
Improvements thereon), insuring the interest of MTC or CTBC (or, after the
Closing, the Option Holder) in such parcel as of the Closing Date, subject
only to the Permitted Liens and those Liens described on Schedule 5.8F, and
with such other endorsements and other terms and conditions as the requesting
Person may request.
(c) At the Option Holder's or the Merger Company's request and
expense, MTC, CTBC and Thompson will (and MTC will cause each other Company
to) use their respective best efforts to assist the requesting Person in
procuring, for the benefit of MTC, CTBC or the Option Holder, in preparation
for the Closing, current surveys of each of the Real Properties, prepared by a
licensed surveyor and conforming to 1992 ALTA/ACSM Minimum Detail Requirements
for Urban Land Title Surveys, and such standards as the Title Insurer may
reasonably require as a condition to the removal of any survey exceptions from
the Title Policy, and certified to the requesting Person, its lenders and the
Title Insurer, in a form sufficient to permit the issuance of the title
policies described in Section 4.8(b).
4.9 Excepted Transactions. Notwithstanding the other provisions of
this Article IV and Section 10.1, it is understood and agreed by the Parties
that:
(a) Excluded Assets. Prior to the Closing, the Companies shall
transfer to Thompson or one or more of his designees, with or without
consideration, any or all of the assets of the Companies described on the
attached Exhibit D; provided that Thompson assumes all liabilities and
obligations of the Companies with respect to any such transferred asset.
After the Closing, Thompson will indemnify and hold harmless each of Buyer and
the Companies in respect of all such liabilities and obligations.
(b) Disposition of ETBC, WTBC or JIC Stock and Certain Notes. Prior
to the Closing, MTC may distribute or otherwise transfer to Thompson all of
the issued and outstanding capital stock of any or all of ETBC, WTBC and JIC,
without any consideration being payable by Thompson in respect thereof, in
which event the representations, warranties, covenants, closing conditions,
agreements and other provisions set forth in this Agreement will no longer be
deemed to refer to or apply to the corporation(s) the stock of which is so
transferred. MTC and Thompson will use their respective best efforts to
effect such distributions or other transfers promptly after the date of this
Agreement, and in any event on or prior to March 31, 1996. In addition, prior
to the Closing, CTBC and/or MTC may distribute or otherwise transfer to
Thompson, without any consideration being payable by Thompson in respect
thereof, MTC's and CTBC's rights to receive amounts payable to them by
Thompson as of the date of this Agreement, as reflected in the audited
financial statements as of June 30, 1995 heretofore delivered to ABRY by MTC
and CTBC.
(c) Merger of MTC and CTBC. Promptly after the date of this Agreement
(and in any event within 10 days after the grant of any requisite approval by
the FCC for the merger of MTC and CTBC becomes a Final Order), Thompson, MTC
and CTBC will cause MTC to be merged with and into CTBC, with CTBC being the
surviving corporation of that merger and Thompson being the sole stockholder
of CTBC after such merger. Toward that end, on or prior to February 23, 1996,
Thompson, MTC and/or CTBC (as may be required by the Communications Act or the
FCC Regulations) will file with the FCC the requisite application(s) (if any)
for such approval by the FCC, and each of them will use his or its best
efforts to prosecute such application(s) to a final grant. MTC and CTBC will
provide the Option Holder and the Merger Company with copies of such
application(s), any supplemental information supplied to or filing with the
FCC, any related pleading, order or other document served on Thompson or any
Company, and all related correspondence and communications by or with the FCC.
The certificate of incorporation and bylaws of CTBC immediately prior to such
merger will be the certificate of incorporation and bylaws of the surviving
corporation immediately after such merger, and the officers and directors of
CTBC immediately prior to such merger will be the officers and directors of
the surviving corporation immediately after such merger. From and after the
effectiveness of such merger, all references in this Agreement to MTC will be
deemed to be references to CTBC, as the successor to MTC.
(d) Fourth Draw Proceeds. If the Fourth Draw is made, then upon the
making of the Fourth Draw CTBC may distribute or lend the cash proceeds of the
Fourth Draw to Thompson.
(e) Repayment of New Thompson Loan. Upon receipt thereof, CTBC may
pay to Thompson up to $172,473 out of the amounts (if any) received by CTBC
pursuant to subparagraph 5.C(v)(c) of the Time Brokerage Agreement. Any such
payment to Thompson will constitute a repayment of the New Thompson Loan.
(f) Deemed Amendment. Upon the taking of any action expressly
authorized by Section 4.9(a), 4.9(b), 4.9(c), 4.9(d) or 4.9(e), all schedules
and exhibits to this Agreement will be deemed to have been amended so as to
reflect such action (it being the intent that no action which is expressly
authorized or required by Section 4.9(a), 4.9(b), 4.9(c), 4.9(d) or 4.9(e)
will result in a breach of any covenant, representation or warranty set forth
in this Agreement). Thompson will give the Option Holder and the Merger
Company prior written notice of the taking of any action which is expressly
authorized or required by Section 4.9(a), 4.9(b), 4.9(c), 4.9(d) or 4.9(e).
4.10 No Premature Assumption of Control. Nothing contained in this
Agreement or the Time Brokerage Agreement will give SBC, SBN, any Option
Holder or the Merger Company any right to control the programming, operations,
or any other matter relating to the Station prior to the Closing, and CTBC
will have complete control of the programming, operations and all other
matters relating to the Station up to the time of the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
CONCERNING THE COMPANIES
------------------------
As a material inducement to SBC, in its capacities as the initial Option
Holder and the initial Merger Company, to enter into this Agreement
Supplement, and as a material inducement for ABRY to enter into the ABRY
Credit Agreement Supplement, and for the benefit of any subsequent Option
Holder, Buyer and Merger Company, MTC and CTBC hereby jointly and severally
make the representations and warranties set forth in this Article V. MTC and
CTBC agree that, if the Closing occurs, then as of the time of the Closing
each representation and warranty of MTC and CTBC set forth in this Article V
will be deemed to be remade by MTC and CTBC as of the time of the Closing as a
material inducement to Buyer and the Merger Company to consummate the Closing
Transactions.
5.1 Organization and Corporate Power. With respect to each Company:
(a) such Person is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation specified on
Schedule 5.1 and is qualified to do business in every jurisdiction in which
the nature of its business or its ownership of property requires it to be
qualified and in which the failure to so qualify could have an adverse effect
on it or its business; (b) all such jurisdictions in which such corporation is
qualified are set forth on Schedule 5.1; (c) such corporation has full
corporate power necessary to own and operate its properties to carry on its
business as now conducted and as presently proposed to be conducted; (d) such
authorizations are set forth on Schedule 5.1 are in full force and effect; (e)
the copies of such corporation's certificate of incorporation and bylaws which
have been furnished to ABRY reflect all amendments made thereto at any time
and are correct and complete; (f) the minute books containing the records of
meetings of such corporation's stockholders and board of directors, the stock
certificate books and the stock record books of such corporation are correct
and complete; and (g) such corporation is not in default under or in violation
of any provision of its certificate of incorporation or by-laws.
5.2 Authorization of Transactions. Each of MTC and CTBC has full
corporate power and authority to execute and deliver this Agreement the Time
Brokerage Agreement and all other agreements contemplated hereby and thereby
to which it is a party and to perform its obligations hereunder and
thereunder. The boards of directors of MTC and CTBC have duly approved this
Agreement, the Time Brokerage Agreement and all other agreements contemplated
hereby and thereby to which such corporation is a party and have duly
authorized MTC's and CTBC's execution and delivery of this Agreement, the Time
Brokerage Agreement and such other agreements and the performance of their
respective obligations hereunder and thereunder. No other corporate
proceedings or actions on the part of MTC or CTBC are necessary to approve and
authorize MTC's or CTBC's execution and delivery of this Agreement, the Time
Brokerage Agreement or any other agreement contemplated hereby or thereby to
which it is a party or the performance of its obligations hereunder or
thereunder. This Agreement, the Time Brokerage Agreement and all other
agreements contemplated hereby or thereby to which MTC or CTBC is a party have
been duly executed and delivered by such corporation and constitute the valid
and binding agreements of such corporation, enforceable against such
corporation in accordance with their terms, except as enforceability hereof or
thereof may be limited by bankruptcy or other laws affecting creditor's rights
generally and limitations on the availability of equitable remedies.
5.3 Capitalization. With respect to each Company: (a) the authorized,
issued and outstanding stock of such Company is as set forth on Schedule 5.3
and is owned beneficially and of record as set forth on Schedule 5.3; (b)
except as set forth on Schedule 5.3, all of the issued and outstanding shares
of such corporation have been duly authorized, are validly issued, fully paid
and nonassessable, and are not subject to, nor were they issued in violation
of any preemptive rights; (c) except as set forth on Schedule 5.3, there are
no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or
commitments to which any Company is a party or which are binding upon any
Company and which provide for the issuance, disposition or acquisition of any
Company's capital stock (other than this Agreement); (d) except as set forth
on Schedule 5.3, there are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to such corporation; (e) except
as set forth on Schedule 5.3, there are no voting trusts, proxies or any other
agreements or understandings among any such corporation and/or the
stockholders of any such corporation with respect to the voting of the capital
stock or the conduct of the affairs of any such corporation; and (f) no such
corporation is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of
any Company.
5.4 Subsidiaries; Investments. Other than the capital stock of CTBC,
ETBC, WTBC and JIC owned by MTC as described on Schedule 5.3, no Company: (a)
owns or holds any shares of capital stock or any other security, interest or
investment in any other Person or any right which is exercisable or
exchangeable for or convertible into any capital stock or other security,
interest or investment in any other Person, or (b) has ever had any Subsidiary
or any ownership interest in any Person.
5.5 Absence of Conflicts. Except for the FCC Consents, the expiration
or termination of any applicable waiting period under the Hart-Scott-Rodino
Act, or as set forth in Schedule 5.5, neither the execution, delivery and
performance of this Agreement or the Time Brokerage Agreement by MTC or CTBC
nor the consummation of the Closing Transactions or the arrangements
contemplated by the Time Brokerage Agreement (a) do or will
(i) conflict with or result in any breach of any of the
provisions of,
(ii) constitute a default under,
(iii) result in a violation of,
(iv) give any third party the right to terminate or to
accelerate any obligation under,
(v) result in the creation of any Lien upon the capital stock of
any Company or any Assets under,
the provisions of the certificate of incorporation or by-laws of any Company
or any indenture, mortgage, lease, credit agreement or other agreement,
instrument or other Contract or any Legal Requirement to which any Company is
bound or by which any Company or any Asset is affected, or any of the same to
which any Company or any Asset is subject, or (b) without limiting the
foregoing, require any Consent of any Governmental Entity or any other Person.
5.6 Financial Statements. MTC and CTBC have furnished ABRY or another
Option Holder with copies of (i) the unaudited balance sheets of CTBC as of
April 30, 1995 and November 30, 1995 (such November 30, 1995 balance sheet
being the "Latest Balance Sheet") and the related statements of income for the
respective 4-month, 12-month and 11-month periods then ended; (ii) unaudited
balance sheet and statements of income and cash flow for CTBC for the fiscal
year ended December 31, 1991, and the audited balance sheets and statements of
income and cash flow for CTBC for the fiscal years ended December 31, 1992,
December 31, 1993 and December 31, 1994 and the 6-month period ended June 30,
1995; and (iii) unaudited balance sheets and statements of income and cash
flow for MTC for the fiscal years ended December 31, 1991, December 31, 1992,
December 31, 1993, and December 31, 1994 and the 6-month period ended June 30,
1995. Copies of such financial statements (the "Financial Statements") are
attached to this Agreement as Exhibit E. Except as described on Schedule 5.6,
each Financial Statement (including the notes thereto, if any) is accurate
and complete in all material respects, is consistent with the Companies' books
and records (which, in turn, are accurate and complete in all material
respects), and present fairly the Companies' financial condition and results
of operations as of the times and for the periods referred to therein, and has
been prepared in accordance with GAAP, subject in the case of unaudited
financial statements to changes resulting from normal year-end adjustments
(which will not be material individually or in the aggregate) and to the
absence of footnote disclosure.
5.7 Undisclosed Liabilities.
(a) Generally. Except as described on Schedule 5.7, no Company has
any obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to become due
and regardless of when asserted) arising out of transactions entered into
prior to the date of this Agreement or the Closing, or any action or inaction
prior to the date of this Agreement or the Closing, or any state of facts
existing prior to the Closing, other than
(i) liabilities and obligations under Contracts which are
described on Schedule 5.11,
(ii) liabilities and obligations under Contracts which are
Excludable Contracts,
(iii) Liabilities reflected on the liabilities side of the
Latest Balance Sheet or in the footnotes thereto, or
(iv) liabilities (other than pursuant to any Contract) which
have arisen in the Ordinary Course of Business since the date of the
Latest Balance Sheet
(none of which is a liability for breach of contract, breach of warranty, tort
or infringement, or an environmental liability). Without limiting the
foregoing, no Company has any liability or obligation to Sirrom Capital
Corporation or any affiliate thereof.
(b) Since Adjustment Time. Without limiting Section 5.7(a), except as
set forth on Schedule 5.7, since the Adjustment Time, no Company has: (i)
entered into or terminated any Contract (other than any Excludable Contract),
(ii) incurred any Indebtedness, (iii) incurred any liability or obligation
other than a current liability arising in the Ordinary Course of Business,
(iv) paid or declared any distribution or redeemed or paid any amount of value
in respect of any of its securities, (v) employed or otherwise engaged
Thompson or incurred any liability to or in respect of (or made any payment to
or directly or indirectly for the benefit of) any Insider, except as permitted
by Section 9.8, (vii) sold or otherwise disposed of any asset or group of
assets, or (viii) agreed to do any of the foregoing.
5.8 Title to, Condition and Sufficiency of Assets.
(a) Owned Properties. The parcels described on Schedule 5.8A (the
"Owned Real Properties") constitute all of the fee simple interests in real
property owned by CTBC. No other Company owns any interest in any real
property. With respect to each parcel of Owned Real Property, except as
described on Schedule 5.8A: such parcel is free and clear of all Liens,
except Permitted Liens, and CTBC owns good and marketable title thereto; (ii)
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any Person (other than another Company) the right
of use or occupancy of any portion of such parcel; and (iii) there are no
outstanding options or rights of first refusal to purchase such parcel or any
portion thereof or interest therein.
(b) Leased Properties. The leases and subleases, if any, described on
Schedule 5.8B (the "Leases") constitute all of the leases and subleases under
which CTBC holds any leasehold or subleasehold interest in real property. No
other Company holds any leasehold in any real property. Each Lease is in full
force and effect, and under such Lease CTBC holds a valid and existing
leasehold or subleasehold interest in the real property which is subject to
such Lease (a "Leased Real Property"). The Leased Real Properties constitute
all of the interests in real property held by MTC or CTBC other than in fee
simple. MTC and CTBC have delivered to ABRY or another Option Holder complete
and accurate copies of each of the Leases, in each case including all
modifications and amendments thereto. With respect to each Lease, except as
described on Schedule 5.8B: (i) such Lease is legal, valid, binding,
enforceable and in full force and effect; (ii) CTBC is not in breach or
default in any material respect under, and no event has occurred which, with
notice or lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration of, such Lease; (iii) to the
Companies' knowledge, no other party to such Lease is in breach or default in
any material respect under, and no event has occurred which, with notice or
lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration of, such Lease; (iv) no party to
such Lease has repudiated any provision thereof; (v) there are no disputes,
oral agreements, or forbearances in effect as to such Lease; (vi) such Lease
has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to ABRY or another
Option Holder; and (vii) CTBC has not assigned, transferred, conveyed,
mortgaged, deeded in trust or caused any Lien (other than any Permitted Lien)
to exist with respect to any interest in such Lease.
(c) No Proceedings. Except as set forth on Schedule 5.8C, there is no
proceeding in eminent domain or any similar proceeding pending or (to the
Companies' knowledge) threatened or affecting any Company's interest in any
Owned Real Property or any Leased Real Property (collectively, the "Real
Properties"). There exists no writ, injunction, decree, order or judgment
outstanding, nor any litigation, pending or (to the Companies' knowledge)
threatened, relating to the ownership, lease, use, occupancy or operation by
any Company of any Real Property.
(d) Current Use. The current use by each Company of the Real
Properties does not violate in any material respect any instrument of record
or agreement affecting any Real Property. There is no violation in any
material respect of any applicable covenant, condition, restriction, easement
or agreement which violation could adversely affect any Company's interest in
or use or occupancy of any Real Property.
(e) Condition and Operation of Improvements. Except as described on
Schedule 5.8E, as to each Owned Real Property and, to the Companies'
knowledge, as to each Leased Real Property: (i) all components of all
buildings, structures and other improvements included within the Real
Properties (the "Improvements"), including the roofs and structural elements
thereof and the heating, ventilation, air conditioning, air pollution emission
capture and abatement, plumbing, electrical, mechanical, sewer, waste water
and paving and parking equipment systems and facilities included therein, are
in adequate condition to operate such facilities as currently used, occupied
or operated, and there are no facts or conditions affecting any of the
Improvements which would, individually or in the aggregate, interfere in any
significant respect with the use, occupancy or operation thereof as currently
used, occupied or operated; (ii) there are no structural deficiencies in any
buildings located upon the Real Properties; and (iii) no Improvement or
portion thereof is dependent for its access, operation or utility on any land,
building or other improvement not included in the Real Properties.
(f) Ownership of Assets. Except as set forth on Schedule 5.8F, MTC
and CTBC (taken together) own good and marketable title in and to, or a valid
leasehold interest in, all of the Assets, free and clear of all Liens (other
than Permitted Liens).
(g) Condition of the Assets. Except as set forth on Schedule 5.8G,
the Assets are in a condition which is sufficient for the current operation of
the Companies' respective businesses in the Ordinary Course of Business and
there are no known latent defects with respect thereto. The Companies, taken
together, own or lease under valid leases all buildings, machinery, equipment
and other tangible assets and intangible assets necessary for the conduct of
their respective business as currently conducted and as presently proposed to
be conducted.
5.9 FCC Matters.
(a) Schedule 5.9A contains a complete list of all material Company FCC
Authorizations. Except as set forth on Schedule 5.9A:
(i) CTBC is the holder of the Company FCC Authorizations
described on Schedule 5.9A;
(ii) taken together, the Company FCC Authorizations set forth on
Schedule 5.9A constitute all of the material licenses and authorizations
required under the Communications Act and the FCC Regulations for the
operation of the Station and the conduct of the businesses of the
Companies as currently conducted and as presently proposed to be
conducted, and no further material FCC Authorization is necessary for
the continuation of the operation of the Station as currently conducted
or presently proposed to be conducted;
(iii) each Company FCC Authorization specified on Schedule 5.9A
is in full force and effect and is not subject to or scheduled for
renewal prior to the date specified for such Company FCC Authorization
on Schedule 5.9A;
(iv) each Company FCC Authorization is valid for the full term
thereof, none of Thompson nor any Company has any reason to believe that
any Company FCC Authorization 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 Companies' knowledge,
threatened) any action by or before the FCC to revoke, cancel, rescind,
modify, or refuse to renew in the ordinary course any Company FCC
Authorization, and, except as described on Schedule 5.9A, there is not
now pending, issued or outstanding (or, to the Companies' knowledge,
threatened) by or before the FCC, any investigation, order to show
cause, cease and desist order, notice of violation, notice of apparent
liability, or notice of forfeiture, petition or complaint with respect
to any Company, Thompson, the Station or any Company FCC Authorization;
(vi) the Station is operating in compliance in all material
respects with all applicable FCC Authorizations, the Communications Act
and the FCC Regulations;
(vii) on the date of this Agreement, the Station is not 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) no Company has received any 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; and
(ix) no other television station or communications facility is
causing objectionable interference with the Station's transmissions or
the public's reception of the Station's transmissions.
(b) The Companies have delivered to ABRY their records and analysis
with respect to cable system carriage of the Station (including as to cable
systems which do not carry the Station) as of the date of this Agreement.
5.10 Taxes.
(a) All Tax Returns required to be filed by any Company (taking into
account any valid extension of time within which to file such Tax Returns)
have been timely filed, and each such Tax Return has been prepared in
compliance with all applicable Legal Requirements and is true and accurate in
all respects. Each Affiliated Group has timely filed all Tax Returns required
to be filed by it (taking into account any valid extension of time within
which to file such Tax Returns) with respect to each Tax period during which
any Company formed a part of such Affiliated Group, and each such Tax Return
has been prepared in compliance with all applicable Legal Requirements and is
true and accurate in all respects.
(b) All Taxes owed by any Company and which are due and payable
(whether or not shown on any Tax Return) have been paid, and all Taxes owed by
each Affiliated Group with respect to each Tax period during which any Company
formed a part of such Affiliated Group and which are due and payable (whether
or not shown on any Tax Return) have been paid. Each Company and each such
Affiliated Group has duly withheld and, if due and payable, paid all Taxes
required to be withheld and paid with respect to amounts paid to employees,
independent contractors, creditors and other Persons.
(c) Except as set forth on Schedule 5.10:
(i) with respect to each Taxable period of each Company, and
each Taxable period of an Affiliated Group during which any Company
formed a part of such Affiliated Group, either such Taxable period has
been audited by the relevant Taxing authority or authorities or the time
for assessing or collecting Tax with respect to such Taxable period has
closed and such Taxable period is not subject to review by any relevant
Taxing authority;
(ii) no Company (and no Affiliated Group, with respect to any
Taxable period during which any Company formed a part of such Affiliated
Group) has consented to extend the time, or is the beneficiary of any
extension of time, in which any Tax may be assessed or collected by any
Taxing authority;
(iii) no Company (and no Affiliated Group, with respect to any
Taxable period during which any Company formed a part of such Affiliated
Group) has requested or been granted an extension of the time for filing
any Tax Return which is presently in effect;
(iv) no Company is a party to or is bound by any Tax sharing
agreement or has any current or contingent contractual obligation to
indemnify any other Person with respect to Taxes, other than obligations
to indemnify a lessor for property Taxes or sales/use or gross receipts
Taxes (but not income or franchise Taxes) imposed on lease payments upon
terms which are customary in leases for property of the type in
question;
(v) there is no action, suit, proceeding, audit or investigation
with respect to Taxes now in progress, pending or threatened against or
with respect to any Company (or any Affiliated Group, with respect to
any Taxable period during which any Company was a member of such
Affiliated Group), and no claims have been asserted relating to Taxes
against any Company (or any Affiliated Group, with respect to any
Taxable period during which any Company was a member of such Affiliated
Group);
(vi) there are no Liens for Taxes (other than for Taxes not yet
due and payable) upon any of the Assets;
(vii) no Company owns any interest in real property located in
the State of New York;
(viii) no Company will be required, as a result of (a) a change
in method of accounting for a Tax period beginning before February 1,
1996, to include any adjustment under Section 481(c) of the Tax Code (or
any corresponding provision of state, local or foreign Tax law) in
Taxable income for any Tax period beginning after January 31, 1996, or
(b) any closing agreement under Section 7121 of the Tax Code (or any
corresponding provision of state, local or foreign Tax law), to include
any item of income in or exclude any item of deduction from Taxable
income for any Taxable period beginning after January 31, 1996;
(ix) each Company has disclosed on its federal, state, local or
foreign income Tax Returns all positions taken thereon that could
reasonably give rise to an accuracy-related penalty under Section 6662
of the Tax Code (or any corresponding provision of state, local or
foreign Tax law);
(x) no Company is a "passive foreign investment company," as
that term is used in Section 1296 of the Tax Code (or any corresponding
provision of state or local Tax law);
(xi) no Company will be required, during any Taxable period
commencing after January 31, 1996, to report any item of "subpart F
income," within the meaning of Section 952 of the Tax Code (or any
corresponding provision of state or local Tax law) which is attributable
to the operations of any Company prior to February 1, 1996;
(xii) other than for any Taxable period as to which all
applicable statutes of limitations had expired as of February 1, 1996,
no Company has been a member of any Affiliated Group or has filed or
been included in a combined, consolidated or unitary income Tax Return
except an Affiliated Group consisting solely of two or more of the
Companies;
(xiii) no Company (and no Affiliated Group, with respect to any
Taxable period during which any Company formed a part of such Affiliated
Group) has reason to believe that any Taxing authority has valid grounds
to claim or assess any additional Tax with respect to any Company for
any Taxable period in excess of any reserves for such Tax established by
the Person;
(xiv) no claim has been made against any Company by a Taxing
authority in a jurisdiction where such Company does not pay Taxes or
file Tax Returns that such Person is or may be subject to Taxes assessed
by such jurisdiction;
(xv) no Company has made any payment, nor is it obligated to
make any payment, that is not or will not be deductible by reason of
Section 28OG of the Tax Code or has given or will give rise to an excise
tax under Section 4999 of the Tax Code (or any corresponding provisions
of state, local or foreign Tax law);
(xvi) no Company has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Tax Code (or
any corresponding provision of state, local or foreign Tax law) during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Tax
Code (or any corresponding provision of state, local or foreign Tax
law);
(xvii) no Company has a permanent establishment in any foreign
country, within the meaning of the relevant Tax treaty between the
United States of America and such foreign country;
(xviii) neither Thompson nor any Company has filed a consent
under Section 341(f) of the Tax Code (or any corresponding provision of
state, local or foreign Tax law) with respect to any Company;
(xix) none of the Assets is subject to a tax benefit transfer
lease executed in accordance with Section 168(f)(8) of the Tax Code or
other applicable federal Tax legislation;
(xx) none of the Assets constitutes "tax exempt use property"
within the meaning of Section 168(h) of the Tax Code (or any
corresponding provision of state, local or foreign Tax law); and
(xxi) MTC or CTBC has furnished to ABRY or another Option Holder
true, correct and complete copies of all Tax Returns filed with respect
to any Company (and any Affiliated Group, for any Tax period during
which any Company formed a part of such Affiliated Group) for (1) each
Taxable period which remains open to audit, review or examination by the
relevant Taxing authority or authorities and (2) the most recent closed
Taxable period.
(d) To the Companies' knowledge, Schedule 5.10 contains a list of all
states, territories and jurisdictions in which any Company or any Affiliated
Group of which any Company forms a part is required to file any Tax Return.
5.11 Contracts and Commitments.
(a) Except for this Agreement, the Time Brokerage Agreement, the ABRY
Loan Documents, the TBON Documents, any Excludable Contract, and any customary
licensing agreement entered into with BMI, ASCAP or a similar organization in
the Ordinary Course of Business after the date of this Agreement
(collectively, the "Specified Contracts"), or any Contract described on
Schedule 5.11A or Schedule 5.11C, no Company is a party to or bound by any
Contract, whether written or oral, including any:
(i) collective bargaining agreement or contract with any labor
union or any bonus, pension, profit sharing, retirement or any other
form of deferred compensation plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice;
(ii) contract for the employment of any officer, individual
employee or other Person (including as an independent contractor or on a
consulting basis), or any agreement to provide severance benefits upon
any termination of employment or any independent contractor arrangement;
(iii) agreement or indenture relating to the borrowing of money
or the incurrence of indebtedness or to mortgaging, pledging or
otherwise placing a Lien on any Asset;
(iv) agreements with respect to the lending or investing of
funds by any Company;
(v) network affiliation, license or royalty agreement;
(vi) Trade arrangement;
(vii) Program Contract;
(viii) guaranty of any obligation of any other Person, other
than endorsements made for collection made in the Ordinary Course of
Business;
(ix) sales representation agreement;
(x) agreement with any rating service or intellectual property
licensing organization;
(xi) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually or entered into outside of the
Ordinary Course of Business;
(xii) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned
or controlled by it;
(xiii) contract which prohibits it from freely engaging in
business anywhere in the world;
(xiv) agreement, contract or understanding pursuant to which any
Company subcontracts work to third parties; or
(xv) other agreement material to it, whether or not entered into
in the Ordinary Course of Business.
(b) Except as disclosed on Schedule 5.11B, (i) each Specified Contract
and each item which is required to be described on Schedule 5.11A is in full
force and effect, unless it has expired by its terms, been terminated by any
Company by reason of a breach of a party thereto other than a Company, or been
terminated by a party other than the Company other than by reason of a breach
by a Company, (ii) no Specified Contract and no item described on Schedule
5.11A has been breached in any material respect or cancelled or repudiated by
any Company or, on the date of this Agreement and the Companies' knowledge, by
any other party thereto, (iii) each Company has performed in all material
respects all the obligations required to be performed by it in connection with
each Specified Contract and each item described on Schedule 5.11A and is not
in receipt of any claim of default under any such Contract or item, (iv) no
Company has a present expectation or intention of not fully performing any
obligation pursuant to any Specified Contract or any item described on
Schedule 5.11A, and (v) on the date of this Agreement, no Company has any
knowledge of any anticipated breach by any other party to any Specified
Contract or any item set forth on Schedule 5.11A.
(c) Schedule 5.11C specifies with respect to each Program Contract the
number of unused exhibitions pursuant to the cash portion, if any, of such
Program Contract as of February 1, 1996 and the schedule of payments due under
each Program Contract as in effect on such date.
(d) MTC and CTBC have provided ABRY or another Option Holder with true
and correct copies of all written contracts and other items which are referred
to on Schedule 5.11A, in each case together with all amendments, waivers or
other changes thereto. Schedule 5.11A contains an accurate and complete
description of all material terms of all oral contracts and other oral items
referred to therein.
5.12 Proprietary Rights.
(a) Schedule 5.12A sets forth a complete and correct list of: (i) all
registered Proprietary Rights and all pending applications for registration of
Proprietary Rights owned, filed or used by any Company, (ii) all call letters
used by any Company, (iii) all Proprietary Rights the loss of which would have
a Material Adverse Effect, and (iv) all licenses or similar agreements or
arrangements to which any Company is a party either as licensee or licensor
for Proprietary Rights.
(b) Except as set forth on Schedule 5.12B, (i) taken together, the
Companies own and possess all right, title and interest in and to, or have a
valid and enforceable right to use, each of the Proprietary Rights required to
be described on Schedule 5.12A, in each case free and clear of all Liens
(other than Permitted Liens), and no claim by any third party contesting the
validity, enforceability, use or ownership of any of the foregoing has been
made, is currently outstanding or is threatened, (ii) no loss or expiration of
any material Proprietary Right of any such type or material group of such
Proprietary Rights is pending, reasonably foreseeable or, to the Companies'
knowledge, threatened, (iv) no Company has received any notice of, nor is any
Company aware of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to any
such Proprietary Right, including any demand or request that any Company
license rights from a third party, (v) no Company has in any material respect
infringed, misappropriated or otherwise conflicted with any rights of any
third parties and no Company is aware of any infringement, misappropriation or
conflict which will occur as a result of the continued operation of any
Company's business as currently conducted or as presently proposed to be
conducted, and (vi) the Proprietary Rights required to be described on
Schedule 5.12A have not in any material respect been infringed,
misappropriated or conflicted by any third party.
(c) Neither the consummation of the time brokerage arrangements
pursuant to the Time Brokerage Agreement nor the consummation of the Closing
Transactions will have an adverse effect on any Company's right, title and
interest in and to any of the Proprietary Rights required to be described on
Schedule 5.12A. Each Company has taken all necessary actions to maintain and
protect such Proprietary Rights so as to not adversely affect the validity or
enforcement of such Proprietary Rights. To the Companies' knowledge, the
owners of the Proprietary Rights licensed to any Company have taken all
necessary and desirable actions to maintain and protect such Proprietary
Rights.
5.13 Litigation; Proceedings. Except as set forth in Schedule 5.13,
there are no actions, suits, proceedings, orders, judgments, decrees or
investigations pending (or, to the Companies' knowledge, threatened) against
or affecting any Company at law or in equity, or before or by any Governmental
Entity, and, to the Companies, knowledge, there is no basis for any of the
foregoing.
5.14 Brokerage. There are no claims for brokerage commissions,
finders, fees or similar compensation in connection with the transactions
contemplated by this Agreement or the Time Brokerage Agreement based on any
arrangement or agreement made by or on behalf of any Company.
5.15 Governmental Licenses and Permits. Schedule 5.15 contains a
complete listing and summary description of all material permits, licenses,
franchises, certificates, approvals and other authorizations of foreign,
federal, state and local governments or other similar rights, other than FCC
Authorizations (collectively, the "Licenses"), owned or possessed by any
Company or used by any Company in the conduct of its business. Except as
indicated on Schedule 5.15, taken together, the Companies own or possess all
right, title and interest in and to all of the Licenses which are necessary to
conduct its business as currently conducted or presently proposed to be
conducted. No loss or expiration of any License is pending, reasonably
foreseeable or, to the Companies' knowledge, threatened (including as a result
of the transactions contemplated by this Agreement or the Time Brokerage
Agreement) other than by reason of expiration in accordance with the terms
thereof.
5.16 Employees. Each Company has complied in all material respects
with all applicable Legal Requirements relating to the employment of personnel
and labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and
other taxes, the Worker Adjustment and Retraining Act, and the Immigration
Reform and Control Act of 1986. Except as set forth on Schedule 5.11, no
Company is a party to or bound by any collective bargaining agreement, nor has
it experienced any strike, grievance, unfair labor practice claim or other
material employee or labor dispute. No Company has engaged in any unfair
labor practice. To the Companies' knowledge, there is no organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any Company.
5.17 Employee Benefit Plans.
(a) Plans. No Company has any obligation to contribute to (or any
other liability, including current or potential withdrawal liability, with
respect to) (i) any "multiemployer plan" (as that term is defined in Section
3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or (ii) except as set forth on Schedule 5.17, any employee or
fringe benefit plan, program, policy or arrangement of any type providing
benefits to current or former employees or independent contractors and their
dependents and beneficiaries, whether or not terminated, whether or not
funded, and whether or not subject to ERISA, including any such plan, program,
policy or arrangement, or any multiemployer plan, maintained or contributed to
(or formerly maintained or contributed to) by any member of a controlled group
of businesses (within the meaning of Section 414 of the Tax Code) of which any
Company is, or was, a member (the "Plans").
(b) Compliance. No Plan is subject to ERISA, is (or is intended to
be) qualified under Section 401(a) of the Tax Code, is subject to the
prohibited transaction rules of Section 4975 of the Tax Code, or is funded or
required to be funded. No Plan provides medical, health, life insurance or
other welfare-type benefits for current or future retired or terminated
employees (except for limited continued coverage required to be provided under
Section 4980B of the Tax Code or as required under applicable state law). The
Plans and all related trusts, insurance contracts and funds have been
maintained, funded and administered in compliance in all material respects
with the applicable provisions of all applicable Legal Requirements. No
actions, suits or claims with respect to any Plan (other than routine claims
for benefits) are pending or to the Companies' knowledge threatened which
could result in or subject any Company to any liability, and there are no
circumstances which would give rise to or be expected to give rise to any such
actions, suits or claims.
(c) Correct Copies. MTC and CTBC have provided ABRY or another Option
Holder with true and complete copies of all documents pursuant to which each
Plan is maintained, funded and administered (or a description of such Plan if
no written plan document exists) and the most recent annual reports (including
Form 5500 and attachments) for the Plans, to the extent applicable.
5.18 Affiliate Transactions. Except as set forth on Schedule 5.18, no
Insider (a) is a party to any agreement, contract, commitment or transaction
with any Company or which pertains to the business of any Company, or (b) has
any interest in any Asset, other than as a stockholder of any Company as
described on Exhibit B.
5.19 Compliance with Laws.
(a) Each Company and each of their respective officers, directors,
agents and employees have complied in all material respects with all
applicable Legal Requirements which affect the business or business practices
(including MTC's and CTBC's broadcasting, production, promotion, marketing and
sales activities) of each Company or any Assets and to which any Company is
subject, and no claim has been filed against any Company alleging a violation
in any material respect of any such Legal Requirement.
(b) Except as set forth on Schedule 5.19, no Company is now subject
(or has been subject during the previous five years) to any investigation,
penalty assessment, or audit (in each case of which MTC or CTBC was made or
became aware) by any Governmental Entity or to any other allegation that MTC
or CTBC (including any agent, representative or broker acting on behalf of MTC
or CTBC) violated the regulations of any such Governmental Entity or made a
material false statement or omission to any Governmental Entity.
5.20 Environmental Matters. Except as described on Schedule 5.20:
(a) Each Company has complied in all material respects and is in
compliance in all material respects with all Environmental and Safety
Requirements.
(b) Each Company has obtained and complied in all material respects
with, and is in compliance in all material respects with, all permits,
licenses and other authorizations that are required pursuant to Environmental
and Safety Requirements for the occupation of its facilities and the operation
of its business, and such permits, licenses and other authorizations may be
relied upon for continued lawful operation of the businesses of each Company
immediately after each of the consummation of the arrangements contemplated by
the Time Brokerage Agreement and the consummation of the Closing Transactions,
in each case without transfer, reissuance, or other approval or action by any
Governmental Entity or other Person.
(c) No Company has received any claim, complaint, citation, report or
other notice regarding any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, arising under Environmental
and Safety Requirements.
(d) No above-ground or underground storage tank or surface
impoundment, and no asbestos or PCB-containing material, exists or is present
on, above or below any property owned, used, leased or occupied or formerly
owned, used, leased or occupied by any Company.
(e) No present facts, events or conditions relating to the past or
present facilities, properties or operations of any Company will prevent,
hinder or limit continued compliance in all material respects with
Environmental and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental and Safety
Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to Environmental and
Safety Requirements, including any Environmental and Safety Requirement
relating to onsite or offsite releases or threatened releases of hazardous or
otherwise regulated materials, substances or wastes, personal injury, property
damage or natural resources damage.
(f) No Company has received any claim, complaint, citation, report or
other notice regarding any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, arising under Environmental
and Safety Requirements.
(g) Neither the execution and delivery of this Agreement nor the
consummation of the Closing Transactions imposes any obligations for site
investigation or cleanup, or notification to or consent of Governmental Entity
or any other Person, pursuant to any "transaction-triggered" Environmental and
Safety Requirement.
(h) No Company has, either expressly or by operation of law, assumed
or undertaken any liability or corrective or remedial obligation of any other
Person relating to Environmental and Safety Requirements.
(i) No Environmental Lien has attached to any property owned, leased
or operated by any Company.
5.21 Powers of Attorney. Except as set forth on Schedule 5.21, there
are no outstanding powers of attorney executed on behalf of any Company.
5.22 Disclosure. As they apply to the Station, any Asset or any
Company, neither this Agreement, the Time Brokerage Agreement, nor any of the
schedules or Exhibits hereto, contains any untrue statement of a material fact
or omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THOMPSON
-------------------------------------------------------
As a material inducement to SBC, in its capacities as the initial Option
Holder and the initial Merger Company, to enter into this Agreement, and as a
material inducement for ABRY to enter into the ABRY Credit Agreement
Supplement, and for the benefit of SBC and any subsequent Option Holder,
Merger Company or Buyer, Thompson hereby represents and warrants as set forth
in this Article VI. Thompson agrees that, if the Closing occurs, then as of
the time of the Closing each representation and warranty set forth in this
Article VI will be deemed to have been remade by Thompson as of the time of
the Closing as a material inducement to Buyer and the Merger Company to
consummate the Closing Transactions.
6.1 Authorization of Transactions. Thompson has full power, authority
and legal capacity to execute and deliver this Agreement and all other
agreements contemplated hereby to which Thompson is a party and to perform its
obligations hereunder and thereunder. No other proceedings or actions on the
part of Thompson are necessary to approve and authorize the execution and
delivery of this Agreement by Thompson or any other agreement contemplated
hereby to which Thompson is a party or the performance of Thompson's
obligations hereunder or thereunder. This Agreement and the other documents
contemplated hereby to which Thompson is a party have been duly executed and
delivered by Thompson and constitute the valid and binding agreement of
Thompson, enforceable against Thompson in accordance with their terms, except
as enforceability hereof may be limited by bankruptcy or other laws affecting
creditor's rights generally and limitations on the availability of equitable
remedies.
6.2 Conflicts. Except for the FCC Consents, the expiration or earlier
termination of any applicable waiting period under the Hart-Scott-Rodino Act
and the Consents described on Schedule 5.5, neither the execution and the
delivery of this Agreement and the other documents contemplated hereby to
which Thompson is a party, nor the consummation of the transactions
contemplated hereby and thereby, (a) do or will
(i) conflict with, result in a breach of any of the provisions
of,
(ii) constitute a default under,
(iii) result in the violation of,
(iv) give any third party the right to terminate or to
accelerate any obligation under,
(v) result in the creation of any Lien upon any of the capital
stock of MTC pursuant to, or
(vi) require any consent, order, approval, authorization or
other action of, or any filing with or notice to, any Governmental
Entity or other Person under,
the provisions of any indenture, mortgage, lease, credit agreement or other
agreement or instrument by which Thompson is bound or by which Thompson or any
of his assets are affected, or any Legal Requirement to which Thompson or any
of his assets is subject, or (b) without limiting the foregoing, require any
Consent.
6.3 Brokerage. There are no claims for brokerage commissions,
finders, fees or similar compensation in connection with the transactions
contemplated by this Agreement or the Time Brokerage Agreement based on any
arrangement or agreement made by or on behalf of Thompson.
6.4 Foreign Person. Thompson is not a "foreign person" for purposes
of the withholding requirements of Section 1445(a) of the Tax Code (or any
corresponding provision of state, local or foreign Tax law).
6.5 Litigation. There are no actions, suits, proceedings, orders or
investigations pending (or, to Thompson's or any Company's knowledge,
threatened) against or affecting Thompson at law or in equity, or before or by
any Governmental Entity, which would adversely affect Thompson's performance
under this Agreement and the other agreements contemplated hereby to which
Thompson is a party or the consummation of the transactions contemplated
hereby or thereby.
6.6 Shares. Thompson holds of record and owns beneficially all of the
issued and outstanding shares of capital stock of MTC, as set forth on the
attached Exhibit B, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and any state securities laws),
claims, taxes, charges, encumbrances, pledges, security interests, options,
warrants, rights, contracts, calls, commitments, equities, demands or other
Liens (other than any such item arising under this Agreement). Thompson is
not a party to any option, warrant, right, contract, call, put or other
agreement or commitment providing for the disposition or acquisition of any
capital stock of MTC or CTBC (other than this Agreement), and Thompson is not
a party to any voting trust, proxy or other agreement or understanding with
respect to the voting of any capital stock of or the conduct of the business
or affairs of MTC or CTBC.
6.7 Disclosure. As they apply to Thompson or his properties, neither
this Article VI, nor any of the schedules referred to herein, contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
------------------------------
AS TO OPTION HOLDERS AND MERGER COMPANIES
-----------------------------------------
As a material inducement to MTC, CTBC and Thompson to enter into this
Agreement and the other agreements which are being entered into by Thompson,
MTC and/or CTBC with SBC and SBN on the date of this Agreement, SBC, in its
capacities as the initial Merger Company and the initial Option Holder, hereby
represents and warrants to MTC, CTBC and Thompson as set forth in this Article
VII. SBC, each Option Holder and each Merger Company agrees that, if the
Closing occurs, then as of the time of the Closing each representation and
warranty set forth in this Article VII will be deemed to have been remade by
Buyer and the Merger Company (each as to itself and not as to any other
Person) as of the time of the Closing as a material inducement to CTBC, MTC
and Thompson to consummate the Closing Transactions.
7.1 Authorization of Transaction. The representing Person has full
power and authority to execute and deliver this Agreement and all other
agreements contemplated hereby to which such Person is a party and to perform
its obligations hereunder and thereunder. No other proceedings or actions on
the part of the representing Person are necessary to approve and authorize
such Person's execution and delivery of this Agreement or any other agreement
contemplated hereby to which such Person is a party or the performance of such
Person's obligations hereunder or thereunder. This Agreement and each of the
other agreements contemplated hereby to which such Person is a party
constitutes a valid and binding obligation of such Person, enforceable against
such Person in accordance with their terms, except as enforceability hereof
may be limited by bankruptcy or other laws affecting creditor's rights
generally and limitations on the availability of equitable remedies.
7.2 Conflicts. As of the time of the Closing, except for the FCC
Consents and the expiration or earlier termination of any applicable waiting
period under the Hart-Scott-Rodino Act, neither the execution and delivery by
the representing Person of this Agreement and the other documents contemplated
hereby to which such Person is a party, nor the consummation by such Person of
the transactions contemplated hereby and thereby, do or will
(i) conflict with, result in a breach of any of the provisions
of,
(ii) constitute a default under,
(iii) result in the violation of,
(iv) give any third party the right to terminate or to
accelerate any obligation under,
(v) require any consent, order, approval, authorization or other
action of, or any filing with or notice to, any Governmental Entity or
other Person pursuant to, or
(vi) result in any Lien on the Purchase Price or the Merger
Consideration (other than pursuant to this Agreement or the Escrow
Agreement) under,
the certificate or incorporation or bylaws or similar organizational documents
of the representing Person or under the provisions of any indenture, mortgage,
lease, credit agreement or other agreement or instrument to which such Person
is bound or by which it or any of its assets are affected, or any Legal
Requirement to which such Person or any of its assets is subject.
7.3 Litigation. There are no actions, suits, proceedings, orders or
investigations pending (or, to the representing Person's knowledge,
threatened) against or affecting such Person at law or in equity, or before or
by any Governmental Entity, which would adversely affect such Person's
performance under this Agreement and the other agreements contemplated hereby
to which such Person is a party or the consummation of the transactions
contemplated hereby or thereby.
7.4 Brokerage. There are no claims for brokerage commissions,
finders, fees or similar compensation in connection with the transactions
contemplated by this Agreement or the Time Brokerage Agreement based on any
arrangement or agreement made by or on behalf of the representing Person.
7.5 Disclosure. As they apply to the representing Person, neither
this Article VII, nor any of the schedules referred to herein, contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
-----------------------------------
8.1 Survival. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement will survive the execution and
delivery of this Agreement, the Closing and the consummation of the Closing
Transactions and will not be affected by any examination made for or on behalf
of, or any notice to, any Party, the knowledge of any Party or any of their
respective officers, directors, stockholders, employees, agents or other
representatives, or the acceptance of any certificate or opinion. The
survival of the representations and warranties of MTC and CTBC set forth in
this Agreement will be limited to the period of two years after the Closing
Date (the intention being merely that any claim as to any such representation
or warranty must be asserted by Buyer or the Merger Company during the period
of such survival); provided that the representations and warranties set forth
in Section 5.3 and Section 5.10, including as any such representation or
warranty set forth in Section 5.3 or Section 5.10 is deemed to be remade as of
the time of the Closing as described in the first paragraph of Article V, will
so survive until the expiration of the various statutes of limitations which
are applicable the matters covered thereby.
8.2 Indemnification.
(a) By Thompson. Subject to the limitations set forth in this Section
8.2(a), after the Closing, Thompson will indemnify Buyer and the Merger
Company and hold each of them harmless from and against any loss, liability,
deficiency, damage or expense (including reasonable legal expenses and costs
and including interest and penalties and any reasonable cost or expense
arising from or incurred in connection with any action, suit, proceeding,
claim or judgement relating to any matter described below, or in enforcing the
indemnity provided by this Section 8.2) (a "Loss") which Buyer, the Merger
Company or any Company may suffer, sustain or become subject to, as a result
of:
(i) any matter which constitutes a breach of any representation
or warranty of MTC or CTBC set forth in this Agreement or the Initial
Option Agreement (including any representation or warranty deemed to be
remade by MTC or CTBC as of the time of the Closing pursuant to the
first paragraph of Article V) or (if such breach occurred or occurs
prior to the Closing) any covenant or agreement of MTC or CTBC set forth
in this Agreement or the Initial Option Agreement;
(ii) any matter which constitutes a breach of any
representation, warranty, covenant or agreement of Thompson set forth
this Agreement or the Initial Option Agreement (including any
representation or warranty deemed to be remade by Thompson as of the
time of the Closing pursuant to the first paragraph of Article VI) or
any certificate delivered by Thompson to Buyer or the Merger Company
with respect thereto in connection with the Closing or any Tax imposed
on Thompson with respect to any Closing Transaction;
(iii) any Tax (A) attributable to any Company or any Affiliated
Group of which any Company has been a member, for all Pre-Adjustment Tax
Periods or the portion of any Straddle Period ending on (and including)
January 31, 1996; or (B) attributable to any Company for any Post-
Adjustment Tax Period or the portion of any Straddle Period after the
Adjustment Time, to the extent such Taxes relate to adjustments made by
any Taxing authority to any Company's treatment of any Tax item for any
Pre-Adjustment Tax Period or the portion of any Straddle Period ending
on (and including) January 31, 1996, including adjustments made by any
Taxing authority reducing any Company's depreciable basis for any assets
or the amount of any Tax Benefit as of the Adjustment Time; or
(iv) any litigation, investigation, proceeding, or other claim
by any Governmental Entity or any Person, to the extent it arises from
the business or operation of any Company or the Station prior to the
Adjustment Time;
provided that Thompson's liability pursuant to this Section 8.2(a) will be
subject to the following limitations:
(A) Thompson will not be liable for any Loss described in
clause (i) or clause (iv) above unless and until the aggregate
amount of all Losses described in clause (i) and clause (iv) above
exceeds $100,000, in which event Thompson will be liable for all
Losses described in clause (i) and clause (iv) above (and not only
for Losses described in clause (i) and clause (iv) above to the
extent that they exceed such $100,000 threshold),
(B) Thompson will not be liable for any Loss described in
clause (i) above based upon any representation or warranty, unless
Buyer or the Merger Company gives Thompson written notice asserting
the misrepresentation or breach in question on or prior to (i) if
such Loss is based upon any representation or warranty set forth in
Section 5.3 or Section 5.10, including as any such representation
or warranty is deemed to be remade as of the time of the Closing as
described in the first paragraph of Article V, then the expiration
of the statute of limitations applicable to the matter covered
thereby, or (ii) in the case of any other such Loss, the second
anniversary of the Closing Date,
(C) Thompson will not be liable for any Loss arising out of
or relating to any misrepresentation or breach of warranty which
arises solely by reason of Broker's activities with respect to the
Station pursuant to the Time Brokerage Agreement, and
(D) Thompson will not be liable with respect to any Loss to
the extent that the amount of such Loss was actually included as a
First Prohibited Obligation or Second Prohibited Obligation
reflected in either Adjustment Amount as finally determined in
accordance with Section 2.4 or 2.5 or reflected in the Current
Obligations.
To the extent of the funds available from the Indemnity Fund, Buyer and the
Merger Company may seek payment from the Indemnity Fund of any amount which
becomes payable to Buyer or the Merger Company pursuant to this Section
8.2(a).
(b) By Buyer and the Merger Company. After the Closing, the Merger
Company will indemnify Thompson and hold Thompson harmless from and against
any Loss which Thompson may suffer, sustain or become subject to, as the
result of
(i) any matter which constitutes a breach of any representation,
warranty, covenant or agreement of the Merger Company set forth in this
Agreement or the Initial Option Agreement (including any representation
or warranty deemed to be remade by the Merger Company as of the time of
the Closing pursuant to the first paragraph of Article VII), or (if such
breach occurs after the Closing) any covenant or agreement of MTC or
CTBC set forth in this Agreement, or any covenant or agreement of the
Merger Company set forth in this Agreement or the Initial Option
Agreement; or
(ii) any litigation, investigation, proceeding, or other claim
by any Governmental Entity or any Person, to the extent it arises from
or relates to the business or operation of MTC, CTBC or the Merger
Company after the Closing and not arising out of or relating to any item
described in clause (i), (ii), (iii) or (iv) of Section 8.2(a).
After the Closing, Buyer will indemnify Thompson and hold Thompson harmless
from and against any Loss which Thompson may suffer, sustain or become subject
to, as the result of
(A) any matter which constitutes a breach of any
representation, warranty, covenant or agreement of Buyer set forth
in this Agreement or the Initial Option Agreement (including any
representation or warranty deemed to be remade by Buyer as of the
time of the Closing pursuant to the first paragraph of Article
VII), or any covenant or agreement of Buyer set forth in this
Agreement or the Initial Option Agreement; or
(B) any litigation, investigation, proceeding, or other
claim by any Governmental Entity or any Person, to the extent it
arises from or relates to the business or operation of Option
Assets or Buyer after the Closing and not arising out of or
relating to any item described in clause (i), (ii), (iii) or (iv)
of Section 8.2(a).
(c) Interest. Any amount which becomes payable to Buyer, the Merger
Company or Thompson pursuant to this Section 8.2 with respect to any Loss will
bear interest at the Interest Rate from the date upon which a written request
for indemnification in respect of such Loss is given to the Person from whom
payment is sought through and including the date upon which such amount and
such interest are paid in full.
8.3 Indemnification Procedures.
(a) Notice of Claim. Any Party making a claim for indemnification
under Section 8.2 (the "Indemnified Party") will notify the Party from whom
indemnification is claimed (the "Indemnifying Party") of the claim in writing
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party) or discovering
the liability, obligation or facts giving rise to such claim for
indemnification. Such notice will describe the claim, the amount thereof (if
known and quantifiable), and the basis thereof, in each case to the extent
known to the Indemnified Party. The failure to so notify the Indemnifying
Party will not relieve the Indemnifying Party of its obligations under Section
8.2, except to the extent that such failure actually prejudices the
Indemnifying Party.
(b) Assumption of Defense. With respect to any third party claim
which gives rise or is alleged to give rise to a claim for indemnity under
Section 8.2 and which involves only the payment of money damages to such third
party, the Indemnifying Party, at its option (subject to the limitations set
forth below), will be entitled to control the defense of such claim and to
appoint a nationally recognized reputable counsel acceptable to the
Indemnified Party to act as lead counsel of such defense. Prior to the
Indemnifying Party assuming control of such defense, the Indemnifying Party
must first (i) verify to the Indemnified Party in writing that the
Indemnifying Party will be fully responsible (with no reservation of any
rights) for all Losses relating to such claim and that it will provide full
indemnification (whether or not otherwise required under Section 8.2) to the
Indemnified Party with respect to all Losses relating to such action, and (ii)
furnish the Indemnified Party with evidence which, in the Indemnified Party's
reasonable judgment, establishes that the Indemnifying Party is and will be
able to satisfy any such liability.
(c) Limits of Assumption of Defense. An Indemnifying Party's rights
pursuant to Section 8.3(b) will be subject to the following additional
limitations:
(i) the Indemnified Party will be entitled to participate in the
defense of such claim and to employ counsel of its choice for such
purpose, and the fees and expenses of such separate counsel will be
borne by the Indemnified Party (except that the fees and expenses of
such separate counsel incurred prior to the date the Indemnifying Party
effectively assumes control of such defense will be borne by the
Indemnifying Party);
(ii) the Indemnifying Party will not be entitled to assume
control of such defense and will pay the fees and expenses of legal
counsel retained by the Indemnified Party if (A) the claim for
indemnification relates to or arises in connection with any criminal
proceeding, action, indictment, allegation or investigation, (B) the
Indemnified Party reasonably concludes that, in light of any actual or
potential conflict of interest, it would be inappropriate for legal
counsel selected by the Indemnifying Party to represent the Indemnified
Party, (C) the Indemnified Party reasonably believes that an adverse
determination with respect to the action lawsuit, investigation,
proceeding or other claim giving rise to such claim for indemnification
would be detrimental to or injure the Indemnified Party's reputation or
future business prospects (or, in the case of a claim by the Buyer, any
Company's or the Station's reputation or business prospects), or (D)
upon petition by the Indemnified Party, an appropriate court rules that
the Indemnifying Party failed or is failing to vigorously prosecute or
defend such claim; and
(iii) if the Indemnifying Party assumes control of the defense
of any such claim, then the Indemnifying Party will obtain the prior
written consent of the Indemnified Party before entering into any
settlement of such claim, if such settlement does not expressly and
unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(d) Special Provisions Relating to Tax Claims.
(i) Anything to the contrary in this Section 8.3
notwithstanding, Thompson will not, without first notifying the Merger
Company promptly of such intention and obtaining the Merger Company's
written consent thereto, compromise or settle any issue arising with
respect to a Tax claim in a manner which could result in a Tax Benefit
Reduction or otherwise affect the Tax liability of the Merger Company or
any Company for any Straddle Period or Post-Adjustment Tax Period.
(ii) Any indemnification payment required to be made hereunder
with respect to Taxes will be paid promptly after the fact and amount of
liability have been settled or, if later, the final determination by
either the appropriate Tax authority or a court of competent
jurisdiction (and, if such determination is potentially subject to
further appeal, the time for such appeal has expired). The Indemnifying
Party will be required to post appropriate security as necessary to
protect the Indemnified Party from (A) the immediate imposition of a
Lien that arises or attaches from nonpayment after assessment and demand
of such amounts, or (B) seizures of assets.
(iii) Notwithstanding Section 8.3(d)(ii), any indemnification
payment which arises out of a Tax Benefit Reduction will be made
promptly after the date upon which the Indemnified Party actually
suffers a detriment from such Tax Benefit Reduction by making a payment
of Taxes which otherwise would have been subject to offset by any Tax
Benefit which would have been available absent the Tax Benefit
Reduction. In calculating the Loss arising out of a Tax Benefit
Reduction, the amount of Taxes (exclusive of interest, penalties or
additions to tax) included in such Loss will be determined by
multiplying the amount of the Tax Benefit Reduction by the highest
marginal Tax rate applicable to the Indemnified Party for the Taxable
period as to which the Tax Benefit Reduction causes a detriment to the
Indemnified Party.
8.4 Request for Payment; Dispute Resolution.
(a) Initial Payment Request and Dispute. Any Party may assert a claim
for payment of any Loss payable to it pursuant to Section 8.2 by delivering
written notice (a "Payment Request") to the Party from who payment is sought
(the "Requested Party") specifying a description and the amount of the Loss in
question and the amount of the payment requested. The Requested Party may
dispute its obligation to pay such amount by giving the Requesting Party
notice to that effect on or prior to the 10th business day after such Payment
Request is given, and the Requesting Party and the Requested Party will
negotiate in good faith to resolve any such dispute. Any resolution of such
dispute which is agreed to in writing by the Requesting Party and the
Requested Party will be final and binding on them and any amount which is
agreed by them will be due and payable on the date when each of them has
executed such an agreement. The resolution of any dispute as to which the
Requesting Party and the Requesting Party do not reach written agreement will
be governed by the provisions of Sections 8.4(b) through 8.4(g) below. If the
Requested Party does not so dispute its obligation to pay any requested
amount, then such obligation will become final and binding on the Requested
Party and the requested amount will be due and payable on the 10th business
day after the Payment Request is given.
(b) Arbitration Generally. The arbitration procedures described in
this Section 8.4 will be the sole and exclusive method of resolving disputes
regarding claims for indemnification pursuant to Section 8.2 ("Indemnification
Disputes"); provided that nothing in this Section 8.4 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 8.4 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.
(c) Notice of Arbitration. If the Parties involved do not resolve any
such asserted Indemnification Dispute as described in Section 8.4(a) during
the 10 business days after dispute notice is given, then the Requesting Party
or the Requested Party may commence arbitration pursuant to this Section 8.4
by giving each other party involved in such Indemnification 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.
(d) Selection of Arbitrator. Those of Buyer, the Merger Company and
Thompson who are involved in the dispute will attempt to select a single
arbitrator by mutual agreement. If no such arbitrator is selected prior to
the 10th 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 Indemnification Dispute will be selected in accordance with the
AAA Rules.
(e) Conduct of Arbitration. The arbitration will be conducted in New
York, New York under the AAA Rules, as modified by any written agreement among
the Parties involved in the 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 parties will use
reasonable efforts to cause a Final Arbitration Award to occur within 90 days
after the arbitrator is selected. Any Final Arbitration Award will be final
and binding upon Buyer, the Merger Company and Thompson, and there will be no
appeal from or reexamination of any Final Arbitration Award, except in the
case of fraud, perjury or evident partiality or misconduct by the arbitrator
prejudicing the rights of any Party or to correct manifest clerical errors.
(f) Enforcement. A Final Arbitration Award may be enforced in any
state or federal court having jurisdiction over the subject matter of the
related Indemnification Dispute.
(g) Expenses. A prevailing party in any arbitration proceeding
described in this Section 8.4 will be entitled to recover from any non-
prevailing party such prevailing party's reasonable attorneys fees and
disbursements in addition to any damages or other remedies awarded to such
prevailing party, and any non-prevailing party also will be required to pay
all other costs and expenses associated with the arbitration; provided that
(1) if an arbitrator is unable to determine that a party is a prevailing party
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 (2) 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 Buyer and/or the Merger Company,
collectively, and one-half by Thompson, 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 party or parties for purposes of this
Section 8.4(g).
(h) Date Due. Any amount (including any expenses described in section
8.4(g)) which is determined in any Final Arbitration Award to be payable by
any Party will be due and payable on the business day after such Final
Arbitration Award is rendered.
8.5 Treatment of Indemnification Payments. Each of Buyer, the Merger
Company and Thompson will treat all payments made pursuant to Section 8.2
(including all payments made to Buyer or the Merger Company out of the
Indemnity Fund) as adjustments of the Purchase Price (if payable to or by
Buyer) or the Merger Consideration (if payable to or by the Merger Company)
for all purposes.
ARTICLE IX
ADDITIONAL AGREEMENTS
---------------------
9.1 Transaction Structure. If requested by the Option Holder and/or
the Merger Company prior to the Closing, each of MTC, CTBC and Thompson will
(and MTC will cause each other Company to) alter the form of the transfer of
the direct or indirect ownership of the Assets and the Station which is
contemplated by this Agreement (including as a merger, a reorganization, or a
sale of assets followed by a sale of capital stock of CTBC or MTC) in a manner
which is proposed by the Option Holder and/or the Merger Company and which
will not cause the Companies or Thompson to realize ordinary income or capital
gains in an amount which (taking into account and applying in full all
available Tax Benefits of the Companies and Thompson) will cause the Companies
or Thompson to incur any additional Tax liability (i.e., any Tax liability in
excess of that which would arise if the transactions were effectuated in the
manner described in this Agreement) as to which the Option Holder and the
Merger Company do not agree in writing to reimburse Thompson. Buyer and the
Merger Company will indemnify and hold harmless Thompson from and against any
such increased Tax liability or other cost or expense incurred by Thompson by
reason of any such alteration in form of transaction.
9.2 Press Releases and Announcement. Prior to the Closing, no press
releases related to this Agreement, the Time Brokerage Agreement or any
Closing Transaction will be issued or made without the mutual approval of
Thompson, the Option Holder and the Merger Company, except for any public
disclosure which any Party in good faith believes is required by law or
regulation (in which case the disclosing Party will give Thompson, if the
Buyer or the Merger Company is the disclosing Party, or Buyer and the Merger
Company, if a Company or a Thompson is the disclosing Party, an opportunity to
review and comment upon such disclosure before it is made). After the
Closing, Thompson will not make any press release related to this Agreement,
the Time Brokerage Agreement or any Closing Transaction without Buyer's and
the Merger Company's consent.
9.3 Further Transfers. Buyer, CTBC, MTC, the Merger Company and
Thompson each will execute and deliver such further instruments of conveyance
and transfer and take such additional actions as any of the other of them may
reasonably request to effect, consummate, confirm or evidence the transfer to
Buyer of the Option Assets, the Merger and the other transactions contemplated
hereby.
9.4 Specific Performance.
(a) MTC, CTBC and Thompson acknowledge that MTC's and CTBC's
businesses are unique, and recognize and affirm that in the event of a breach
of this Agreement by MTC, CTBC or Thompson, money damages may be inadequate
and the Option Holder and the Merger Company may have no adequate remedy at
law. Accordingly, MTC, CTBC and Thompson agree that the Option Holder and the
Merger Company will have the right, in addition to any other rights and
remedies existing in its favor, to enforce its rights and MTC's, CTBC's and
Thompson's obligations hereunder not only by an action or actions for damages
but also by an action or actions for specific performance, injunctive and/or
other equitable relief.
(b) The Option Holder and the Merger Company acknowledge that their
respective obligations pursuant to Sections 4.5 and 4.6 are unique, and
recognize and affirm that in the event of a breach of either such Section by
the Option Holder or the Merger Company, money damages may be inadequate and
Thompson, MTC and CTBC may have no adequate remedy at law. Accordingly, the
Option Holder and the Merger Company agree that Thompson, MTC and CTBC may
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and the Option Holder's and the Merger Company's
obligations under such Sections not only by an action or actions for damages
but also by an action or actions for specific performance, injunctive and/or
other equitable relief.
9.5 Expenses. Thompson, the Option Holder and the Merger Company will
be responsible for all of their own fees, costs and expenses (including fees,
costs and expenses of legal counsel, investment bankers, accountants, brokers
or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with preparation, negotiation and execution
of this Agreement and the Time Brokerage Agreement, the consummation of the
Closing Transactions and the arrangements contemplated by the Time Brokerage
Agreement and the preparation for the consummation of the Closing Transactions
and such arrangements, and Thompson will be responsible for any such expenses
incurred by any Company; provided that the Option Holder and the Merger
Company, collectively, will pay one-half, and CTBC will pay one-half, of the
filing fees required to be paid in connection with the applications and
filings described in Sections 4.5 and 4.6. Thompson will be responsible for
and will promptly pay all Taxes imposed on Thompson, any Company or any Asset
by reason of any transaction contemplated by this Agreement.
9.6 Non-Competition, Non-Solicitation and Confidentiality.
(a) Non-Competition. In consideration of the making of the ABRY Loans
and, after the Closing, the payment of the Purchase Price and the Merger
Consideration, Thompson will not during the period beginning on the date of
this Agreement and ending on the fifth anniversary of the Closing Date (the
"Non-Compete Period"):
(i) engage (whether as an owner, lender, operator, manager,
employee, officer, director, consultant, advisor, representative or
otherwise) directly or indirectly in any form of the broadcast
television ownership or operation business in the Nashville, Tennessee
ADI (provided that neither involvement with MTC or CTBC as an officer,
director, consultant, employee or otherwise to the extent not otherwise
prohibited by this Agreement, nor ownership of less than 2% of the
outstanding stock of any publicly-traded corporation with which Thompson
has no other relationship, will be deemed to be a breach of this Section
9.6(a)); or
(ii) directly or indirectly contact, approach or solicit for the
purpose of offering employment to or hiring (whether as an employee,
consultant, agent, independent contractor or otherwise) or actually hire
any person who is both engaged by MTC or CTBC as an employee or
independent contractor on the date of this Agreement and engaged as an
employee or independent contractor by MTC, CTBC, SBC or any Affiliate
thereof, or by any other Person which may then own or operate the
Station, at the time of such contact, approach or solicitation, or
induce or attempt to induce any customer or other business relation of
any Company with respect to the Station into any business relationship
which might materially harm any Company with respect to the Station;
provided that this clause (ii) will not prohibit Thompson from
soliciting for employment any of Victoria Everly, Steven Glover,
Jennifer Thompson Hefner, Mark Hefner, Bryan Thompson, and Loftus.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 9.6(a) is invalid or unenforceable, then the
Option Holder, the Merger Company and Thompson agree that the court making the
determination of invalidity or unenforceability will have the power to reduce
the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision,
and this Agreement will be enforceable as so modified after the expiration of
the time within which the judgment may be appealed.
(b) Confidentiality. Thompson will treat and hold as confidential all
information concerning the business and affairs of any Company which is of a
type that in accordance with the Companies, past practices has been treated as
confidential or proprietary (the "Confidential Information"), refrain from
using any Confidential Information except in connection with this Agreement or
the conduct of the business of the Companies, and deliver promptly to MTC,
CTBC, the Option Holder or the Merger Company or destroy, at the request and
option of MTC, CTBC, the Option Holder or the Merger Company, all tangible
embodiments (and all copies) of the Confidential Information which are in such
Thompson's possession or under Thompson's control. If Thompson is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, Thompson will
notify the Option Holder and the Merger Company promptly of the request or
requirement so that a Company, the Option Holder or the Merger Company may
seek an appropriate protective order or waive compliance with the provisions
of this Section 9.6(b). If, in the absence of a protective order or the
receipt of a waiver hereunder, Thompson is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, then Thompson may disclose the Confidential
Information to the tribunal; provided that Thompson will use his commercially
reasonable efforts to obtain, at the request of a Company, the Option Holder
or the Merger Company, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential information required to
be disclosed as a Company, the Option Holder or the Merger Company may
designate.
(c) Remedy for Breach. Thompson acknowledges and agrees that in the
event of a breach by Thompson of any of the provisions of this Section 9.6,
monetary damages will not constitute a sufficient remedy. Consequently, in
the event of any such breach, each Company, the Option Holder, the Merger
Company and/or their respective successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the
provisions hereof, in each case without the requirement of posting a bond or
proving actual damages.
9.7 Tax Matters.
(a) Responsibility Generally. Except to the extent that such Taxes
are reflected as current liabilities in the computation of the Current
Obligations, Thompson will be responsible for the payment of all Taxes of any
Company with respect to any Pre-Adjustment Tax Period and the portion of any
Straddle Period ending on (and including) January 31, 1996. The Companies
will be responsible for the payment of all Taxes of the Companies with respect
to any Post-Adjustment Tax Period and the portion of any Straddle Period
beginning after January 31, 1996.
(b) Determination of Certain Taxes. The Tax liabilities for each
Straddle Period will be determined by closing the books and records of the
Companies as of the Adjustment Time, and by treating the portion of the
Straddle Period ending on (and including) January 31, 1996 and the portion of
the Straddle Period beginning after January 31, 1996 as if they were separate
Tax periods.
(c) Preparation of Returns. The Companies will be responsible for
preparing and filing on their own behalf all Tax Returns for any Pre-
Adjustment Tax Period as to which Tax Returns have not been filed on or prior
to the date of this Agreement and for all Straddle Periods and Post-Adjustment
Tax Periods; provided that all such returns will be subject to review and
approval (which approval will not be unreasonably withheld or delayed) by the
Merger Company prior to their filing. With respect to all such Tax Returns
for Pre-Adjustment Tax Periods and Straddle Periods, the Companies, except to
the extent required or permitted by applicable law, will prepare such Tax
Return in all respects, and make all elections, in a manner consistent with
the Tax Returns filed for antecedent Taxable periods. The Companies will be
entitled to any Tax credits or refunds allowable to the Companies with respect
to any Post-Adjustment Tax Period or Straddle Period, including Tax credits or
refunds (1) arising out of the utilization of any Tax Benefit, or (2)
attributable to the carryback of NOLs or other Tax Benefits from any Post-
Adjustment Tax Period to any Straddle Period.
(d) Cooperation. Thompson, MTC, CTBC, Buyer and the Merger Company
will (and MTC will cause the other Companies to) provide each other with such
assistance, cooperation, and information as any of them may reasonably request
in connection with (i) preparation of any Tax Return of any Company or with
respect to any Company's operations, (ii) determining any Taxes or right to a
refund of Taxes of any Company or with respect to any Company's operations,
(iii) responding to any audit or other examination by any Taxing authority, or
any judicial or administrative proceedings relating to liability for Taxes,
and (iv) defending or prosecuting any action or proceedings in respect of
Taxes assessed or proposed to be assessed against any Company or with respect
to any Company's operations. Thompson, MTC, CTBC, Buyer and the Merger
Company each will (and MTC will cause the other Companies to) retain until the
expiration of any relevant statutes of limitations (and, to the extent
notified thereof, any extension thereof) and provide each other, at all
reasonable times, with any work papers, records or other information which may
be relevant to any of the matters listed in the preceding sentence. A party
requesting assistance or documentation hereunder will reimburse the party or
parties providing such assistance or documentation for reasonable expenses
incurred therein.
9.8 Certain Employment Matters. Notwithstanding Section 4.2(h), until
the Closing, CTBC will pay on behalf of Thompson all premiums becoming due in
order to maintain medical coverage for Thompson of the type in effect on the
date of this Agreement (or, if such coverage in unavailable, then such similar
coverage as CTBC is able to procure).
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendment and Waiver. This Agreement may be amended and any
provision of this Agreement may be waived; provided that any such amendment or
waiver (a) will be binding upon MTC or CTBC prior to the Closing only if such
amendment or waiver is set forth in a writing executed by MTC or Thompson, (b)
will be binding upon MTC or CTBC after the Closing only if such amendment or
waiver is set forth in a writing executed by the Merger Company, (c) will be
binding upon Thompson only if such amendment or waiver is set forth in a
writing executed by Thompson, (d) will be binding upon any Option Holder only
if such amendment or waiver is set forth in a writing executed by any Option
Holder or the Broker, and (e) will be binding upon any Merger Company only if
such amendment or waiver is set forth in a writing executed by any Merger
Company or the Broker. No course of dealing between or among any Persons
having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any Party under or by reason of this Agreement. Any amendment or waiver
entered into by any Option Holder in such capacity will be binding on all
subsequent Option Holders and Buyer, and any amendment or wavier entered into
by Person which at the time is the Merger Company in such capacity will be
binding on all subsequent Persons who may be the Merger Company at any time.
SBC will be responsible for any breach of this Agreement by any such assignee.
10.2 Notices. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered or delivered by express courier service.
Notices, demands and communications to any Party will, unless another address
is specified in writing, be sent to the address indicated below:
to MTC or CTBC (prior to the Closing) or Thompson:
c/o M.T. Communications, Inc.
300 Peabody Street
Nashville, TN 37210
Attention: Michael P. Thompson
Daniel R. Loftus
to MTC or CTBC (after the Closing), SBC, the Option Holder or the
Merger Company:
Sullivan Broadcasting Company, Inc.
4431 Dyke Bennett Road
Franklin, TN 37064
Attention: J. Daniel Sullivan
with a copy (which will not constitute notice) to:
Sullivan Broadcasting Company, Inc.
18 Newbury Street
Boston, MA 02116
Attention: Royce Yudkoff
David Pulido
or to such other address and/or to the attention of such other individual, and
with such other copy or copies, as the recipient may have designated by
written notice to the sending Person.
10.3 Binding Agreement; Assignment.
(a) This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the Parties and their respective successors
and permitted assigns; provided that neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by MTC, CTBC, or
Thompson without the prior written consent of the Option Holder and the Merger
Company. No consent or approval of MTC, CTBC or Thompson will be required for
the assignment by SBC, or any of its direct or indirect assignees, of the
Option or any other right under this Agreement, including SBC's right to be or
to designate the Merger Company.
(b) No failure by any Party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof will constitute a waiver
of any such breach or any other covenant, duty, agreement or condition.
10.4 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
10.5 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the Parties to express their mutual
intent. In the event an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the Parties,
and no presumption or burden of proof will arise favoring or disfavoring any
Person by virtue of the authorship of any of the provisions of this Agreement.
10.6 Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement
and will not be deemed to, limit, characterize or in any way affect any
provision of this Agreement, and all provisions of this Agreement will be
enforced and construed as if no caption had been used in this Agreement.
10.7 Entire Agreement. The provisions of the Initial Option Agreement
will be superseded upon the execution and delivery of this Agreement; provided
that the execution and delivery of this Agreement will not terminate, nullify
or limit the liability of any Person for any misrepresentation or breach of
any warranty, covenant or agreement set forth in the Initial Option Agreement.
The execution and delivery of this Agreement will have no effect on the ABRY
Loan Documents. This Agreement and the documents referred to herein contain
the entire agreement between the Parties and supersede any other prior
understandings, agreements or representations by or between the Parties,
written or oral, which may have related to the subject matter hereof in any
way.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which taken
together will constitute one and the same instrument.
10.9 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by and
construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. In furtherance of the foregoing, the internal law of the State of New
York will control the interpretation and construction of this Agreement (and
all schedules and exhibits hereto), even if under that jurisdiction's choice
of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
10.10 Parties in Interest. Except as contemplated by Section 2.3(c),
nothing in this Agreement, express or implied, is intended to confer on any
Person other than the Parties and their respective successors and assigns any
rights or remedies under or by virtue of this Agreement.
10.11 Generally Accepted Accounting Principles. Where any accounting
determination or calculation is required to be made under this Agreement or
the exhibits hereto, including the calculation of any amount relating to the
determination of the Current Obligations and the Adjustment Amounts, such
determination or calculation (unless otherwise provided) will be made in
accordance with GAAP, except that if because of a change in GAAP any Company
would have to alter a previously utilized accounting method or policy in order
to remain in compliance with GAAP, such determination or calculation will
continue to be made in accordance with MTC's and CTBC's previous accounting
methods and policies.
10.12 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD
OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY
FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
10.13 Other Definitional Provisions.
(a) The terms "hereof," "herein" and "hereunder" and terms of similar
import will refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, clause, Exhibit and Schedule references
contained in this Agreement are references to Sections, clauses, Exhibits and
Schedules in or attached to this Agreement, unless otherwise specified.
(b) Each defined term used in this Agreement has a comparable meaning
when used in its plural or singular form. Each gender-specific term used in
this Agreement has a comparable meaning whether used in a masculine, feminine
or gender-neutral form.
(c) As used in this Agreement, the terms "knowledge" or "aware" will
mean and include (i) the actual knowledge or awareness of the Person in
question (which will include the actual knowledge and awareness of the
officers and directors of such Person and all persons controlling such Person)
and, in the case of MTC or CTBC, the actual knowledge or awareness of each of
Thompson and Loftus, and (ii) the knowledge or awareness which a prudent
business person would have obtained in the conduct of his business after
making reasonable inquiry and reasonable diligence with respect to the
particular matter in question. The "knowledge" of the Companies will include
the knowledge of each Company.
(d) Whenever the term "including" is used in this Agreement (whether
or not that term is followed by the phrase "but not limited to, or "without
limitation" or words of similar effect) in connection with a listing of items
within a particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, the items within that classification.
(e) Each reference in this Agreement to any Legal Requirement will be
deemed to include such Legal Requirement as it hereafter may be amended,
supplemented or modified from time to time and any successor thereto, unless
such treatment would be contrary to the express terms of this Agreement.
10.14 Termination. This Agreement will terminate without any action
by any Person immediately after the Expiration Time unless either (i) the
Closing occurs prior to the Expiration Time, or (ii) any Exercise Notice is
given prior to the Expiration Time and is not withdrawn prior to the
Expiration Time. This Agreement will terminate upon any withdrawal of any
exercise of the Option pursuant to Section 1.4 if such withdrawal occurs on or
after the Expiration Time. Thompson may terminate this Agreement by giving
written notice to that effect to the Option Holder and the Merger Company at
any time after June 30, 1999 if the Closing has not occurred at the time such
notice is given and neither Thompson nor any Company is in breach or default
in any material respect of any of its obligations under this Agreement. The
Option Holder and the Merger Company may terminate this Agreement at any time
prior to the Closing by giving written notice to that effect to Thompson. No
termination of this Agreement will relieve any Party from liability for any
misrepresentation or breach of any representation, warranty, covenant or
agreement set forth in this Agreement which occurs prior to such termination
(which representations and warranties will survive for a period of two years
after such termination).
10.15 CONSENT TO JURISDICTION. THE PARTIES AGREE THAT NONEXCLUSIVE
JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT OR RELATING
TO THIS AGREEMENT WILL PROPERLY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN
THE BOROUGH OF MANHATTAN, NEW YORK, NEW YORK. BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH
COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO ANY SUCH
ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN ANY SUCH
COURT, AND HEREBY WAIVE ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR
INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. EACH PARTY FURTHER
AGREES THAT DELIVERY IN ACCORDANCE WITH SECTION 10.2 OF ANY PROCESS REQUIRED
BY ANY SUCH COURT WILL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST
SUCH PARTY, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY
STATUTE OR RULE OF COURT.
* * * *
IN WITNESS WHEREOF, the Parties have executed this Amended and Restated
Option Agreement as of the date first written above.
SULLIVAN BROADCASTING COMPANY, INC.
By: /s/ Derrick Pulido
--------------------------
Its: Exec. V.P.
--------------------------
M. T. COMMUNICATIONS, INC.
By: /s/ Michael P. Thompson
--------------------------
Its: Pres.
--------------------------
CENTRAL TENNESSEE BROADCASTING
CORPORATION
By: /s/ Daniel R. Loftus
--------------------------
Its: President
--------------------------
/s/ Michael P. Thompson
--------------------------
Michael P. Thompson
As to Section 2.3(c) only:
/s/ Daniel R. Loftus
--------------------------
Daniel R. Loftus
Exhibit A
---------
DEFINED TERMS
-------------
As used in the Amended and Restated Option Agreement to which this
Exhibit A is attached, the following terms will have the following respective
meanings:
"ABRY Loan Documents" means the "Credit Documents" referred to in the
ABRY Credit Agreement.
"Act III Acquisition" means the acquisition of substantially all of the
outstanding common stock of Act III Broadcasting, Inc., a Delaware
corporation, by SBC (then known as "A--3 Acquisition, Inc."), which
acquisition was consummated on January 4, 1996.
"Adjustment Amount" means the First Adjustment Amount or the Second
Adjustment Amount.
"Adjustment Time" means 12:01 a.m., Nashville, Tennessee, time, on
February 1, 1996.
"Adjustment Time Receivables" means the accounts receivable of CTBC as
of the Adjustment Time.
"Affiliated Group" means an affiliated group of corporations as defined
in Section 1504(a) of the Tax Code (or any analogous combined, consolidated or
unitary group defined under state, local or foreign income Tax law).
"Assets" at any time means the assets, rights and properties, whether
owned, leased or licensed, real, personal or mixed, tangible or intangible,
used in or pertaining to the business of the Station or any Company at such
time.
"Communications Act" means the Communications Act of 1934, 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 with respect to,
any Governmental Entity or any other Person which is required for any of the
execution, delivery or performance of this Agreement or the Time Brokerage
Agreement, the consummation of the arrangements contemplated by the Time
Brokerage Agreement, the consummation of any Closing Transaction, or the
conduct of the business of any Company or holding or utilization of any Asset
hereafter or thereafter, whether such requirement arises pursuant to any Legal
Requirement, Contract 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.
"Company FCC Authorizations" means all FCC Authorizations issued to or
held by the Companies.
"Contract" means any oral or written agreement, instrument, document,
lease, employee benefit or welfare plan or other business or commercial
arrangement (in each case, including any extension, renewal, amendment or
other modification thereof) to which any Company is a party or by which any
Company is bound or to which any Company or any Asset is subject or which
pertains to the business or properties of any Company or the Station.
"Current Obligations" means the aggregate amount of the following items
(without duplication):
(a) all liabilities of any Company for any expense of any type
described in Section 10.5 of the Initial Option Agreement or Section 9.5
of this Agreement, or for any expense of any Company in connection with
the performance of MTC's, CTBC's or Thompson's obligations under this
Agreement (other than any item which this Agreement specifies is to be
at Buyer's, the Option Holder's or the Merger Company's expense)
(collectively, "Transaction Expenses"), which either (i) were incurred
prior to the Adjustment Time and were not paid prior to the Adjustment
Time or (ii) were incurred after the Adjustment Time, whether or not
paid on, after or prior to the date of this Agreement and which are not
of a type which is described on Exhibit D to the Time Brokerage
Agreement;
(b) all Film Obligations which first became payable prior to the
Adjustment Time (without regard to any postponement entered into after
the Adjustment Time of the due date of any amount payable thereunder)
and which were not paid prior to the Adjustment Time;
(c) all Make-Good Obligations of the Companies which the Broker
or CTBC satisfies or has satisfied since the Adjustment Time; and
(d) all liabilities of the Companies, determined in accordance
with GAAP on a consolidated basis, as of the Adjustment Time, excluding
all Transaction Expenses, all Film Obligations, all Make-Good
Obligations, the principal amount of and unpaid accrued interest on the
ABRY Loans (the amount of which unpaid accrued interest was $443,395 as
of the Adjustment Time), and any amount payable pursuant to the release
attached hereto as Exhibit H, if paid by any Company.
For purposes of this Agreement and the Time Brokerage Agreement, the amount of
the Current Obligations will be determined without regard to any compromise or
settlement which may be effected after the date of this Agreement as
contemplated by subparagraph 5.D of the Time Brokerage Agreement.
"Double-Run Program" means any telecast of any episode of any
programming title specified below to the extent episodes of such programming
were telecast on the Station on more than six occasions during any week after
June 30, 1995 and on or prior to the date of this Agreement (whether or not
the same episode of such programming is telecast on the Station on more than
one occasion during any such day):
Baywatch
Blossom
Fresh Prince of BelAir (other than from June 30, 1995 through the end of
the 1995-96 television season)
Heat of the Night
"Environmental and Safety Requirements" means all Legal Requirements,
and all obligations under any Contract, concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including all those relating to the presence, use, production, generation,
handling, transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or
cleanup of any hazardous or otherwise regulated materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or electromagnetic radiation.
"Environmental Lien" means any Lien, either recorded or unrecorded, in
favor of any Governmental Entity and relating to any liability arising under
Environmental and Safety Requirements.
"Escrow Agent" has the meaning which the Escrow Agreement assigns to
that term.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Buyer, the Merger Company, Thompson and First National Bank of Chicago or
another institution which is reasonably acceptable to Buyer, the Merger
Company and Thompson (as Escrow Agent), to be dated as of the Closing Date,
substantially in the form of Exhibit F attached to this Agreement, as such
Escrow Agreement is in effect from time to time.
"Excludable Contract" means any Contract entered into in the Ordinary
Course of Business with a Person who is unrelated to any Company or any
Insider and:
(a) under which the Companies have (and under which, as of the
Adjustment Time, the Companies had) only monetary obligations which in
the aggregate do not exceed $10,000; or
(b) which is a Time Sales Contract which provides solely for the
sale of advertising time for cash;
in each case, so long as the termination of such Contract (either alone or
together with the all other similar or related Contracts) could not have a
Material Adverse Effect.
"FCC" means the Federal Communications Commission or any successor
thereto.
"FCC Approval Date" means the first day upon which each FCC Consent is
effective.
"FCC Authorization" means any license or authorization issued by the
FCC, together with all applications therefor, all renewals, extensions and
modifications thereof and all additions thereto.
"FCC Consents" means all Consents of the FCC.
"FCC Regulations" means all published regulations and policies
promulgated by the FCC, under the Communications Act or otherwise, as in
effect from time to time.
"Film Obligations" means all payment obligations of any Company under
any Program Contract.
"Final Approval Date" means the first date upon which each FCC Consent
relating to the Closing Transactions is effective and is a Final Order.
A "Final Order" means any FCC Consent (a) which 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) as to which (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 such FCC Consent on its own motion has expired, or (ii) 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.
"First Adjustment Amount" means the sum of:
(a) (i) the amount (if any) by which the Current Obligations
exceeds $491,944, (ii) reduced by the amount of the proceeds of the
collections of the Adjustment Time Receivables which are retained by the
Broker pursuant to subparagraph 5.C(v)(b) of the Time Brokerage
Agreement;
(b) the amount (if any) by which (i) the amount of the proceeds
from the collections of the Adjustment Time Receivables which are
retained by the Broker pursuant to subparagraph 5.C(v)(c) of the Time
Brokerage Agreement, is less than (ii) $342,669;
(c) if the aggregate amount of all First Prohibited Obligations
exceeds $100,000, then further decreased by each of the following:
(1) 200% of the aggregate amount of all First Prohibited
Debt Obligations incurred after the Adjustment Time and on or prior
to the date of this Agreement (whether or not paid) or incurred
prior to the Adjustment Time and not paid in cash prior to the
Adjustment Time;
(2) the aggregate amount of all payments made prior to the
Adjustment Time in respect of First Prohibited Debt Obligations and
during the existence of any Default or Event of Default (as those
capitalized terms are defined in the ABRY Credit Agreement);
(3) 200% of the aggregate amount of all First Prohibited
Trade Obligations incurred after the Adjustment Time and on or
prior to the date of this Agreement (whether or not performed) or
incurred prior to the Adjustment Time and not performed prior to
the Adjustment Time;
(4) 200% of the aggregate amount of all First Prohibited
Film Obligations (whether the underlying Film Contract was entered
into prior to or after the Adjustment Time) which were neither paid
in cash prior to the Adjustment Time nor reflected in the Current
Obligations;
(5) the aggregate amount of all First Prohibited Film
Obligations which are reflected in the Current Obligations;
(6) the aggregate amount of all First Prohibited Other
Obligations which are reflected in the Current Obligations; and
(7) 200% of the aggregate amount of all First Prohibited
Other Obligations (whether incurred prior to or after the
Adjustment Time) which were neither paid in cash prior to the
Adjustment Time nor reflected in the Current Obligations.
The First Adjustment Amount may be less than $0. The Parties intend that the
amount of the First Adjustment Amount reflect 200% of the amount of certain
First Prohibited Debt Obligations, First Prohibited Trade Obligations, First
Prohibited Film Obligations and First Prohibited Other Obligations.
Therefore, such amounts may be reflected in two or more of clauses (a), (b)
and (c)(1) through (c)(7) above and/or in the Current Obligations.
"First Prohibited Debt Obligations" means all Indebtedness of any
Company (other than the ABRY Loans, the Studio Deposit, the New Thompson Loan
and the TBON Borrowing) which, without duplication,
(a) was outstanding on June 30, 1995 and which was not
described on Exhibit I to the Initial Option Agreement,
(b) was incurred by any Company on or after June 30, 1995 and
prior to the date of this Agreement in violation of Section 4.2 of the
Initial Option Agreement,
in each case, together with all interest, premium, penalties and other charges
associated therewith, and in either case whether or not paid prior to the date
of this Agreement; provided that the following will not constitute First
Prohibited Debt Obligations: a Company's obligation to repay any bona fide
advance of funds to such Company by Thompson prior to the Adjustment Time, or
reasonable interest thereon, any "Refinanced Indebtedness" referred to in the
Initial Option Agreement, or any Indebtedness described on Exhibit G to this
Agreement.
"First Prohibited Film Obligations" means all obligations (including the
value of all time to be provided in barter, based on the average spot price
for the time period in question) which were payable by any Company on June 30,
1995 or which have become or will become payable by any Company at any time
(including after the date of this Agreement) pursuant to any Program Contract
(a) which any Company entered into on or prior to June 30, 1995
and which was not described on Schedule 5.10 to the Initial Option
Agreement or
(b) which any Company entered into in violation of Section 4.2
of the Initial Option Agreement,
in either case whether or not paid prior to the Adjustment Time; provided that
no obligation arising under any Program Contract which is described on
Schedule 5.10 to this Agreement will constitute a First Prohibited Film
Obligation.
"First Prohibited Obligations" means all First Prohibited Debt
Obligations, First Prohibited Film Obligations, First Prohibited Other
Obligations and First Prohibited Trade Obligations.
"First Prohibited Other Obligations" means all payments, liabilities and
obligations of any Company
(a) which were required to be identified, but which were not
identified, on Schedule 5.7 to the Initial Option Agreement as of June
30, 1995 or
(b) the incurrence or payment of which constitutes a
misrepresentation or breach of warranty set forth in Section 5.7(b) of
this Agreement (other than any First Prohibited Debt Obligation, First
Prohibited Film Obligation or First Prohibited Trade Obligation),
in each case whether or not paid or satisfied prior to the date of this
Agreement, and the cost of all Double-Run Programming (the "cost" of any
programming for purposes of this paragraph being determined on a straight-
line, per-episode or per-run basis, as applied to the Film Obligations paid or
payable pursuant to the applicable Program Contract); provided that no
obligation described on Schedule 5.7 to this Agreement will constitute a First
Prohibited Other Obligation.
"First Prohibited Trade Obligations" means Trade-Out Payables existing
as of June 30, 1995 and not disclosed on Exhibit B to the Initial Option
Agreement, and all Trade-Out Payables incurred after June 16, 1995 and prior
to the date of this Agreement, whether or not discharged prior to the date of
this Agreement; provided that no Trade-Out Payable incurred pursuant to any
Trade arrangement described on Schedule 5.7 to this Agreement will constitute
a First Prohibited Trade Obligation.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as in effect from time to time.
"Holdback Amount" means $4,000,000; provided that, if the First
Adjustment Amount is finally determined in accordance with Section 2.4 prior
to the Closing, then the "Holdback Amount" will be $4,000,000 reduced by the
lesser of (a) the First Adjustment Amount and (b) $500,000.
"Indebtedness" means without duplication, (i) any indebtedness for
borrowed money or issued in substitution for or exchange of indebtedness for
borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture
or other debt security, (iii) any indebtedness for the deferred purchase price
of property or services with respect to which a Person is liable, contingently
or otherwise, as obligor or otherwise (other than trade payables and other
current liabilities incurred in the ordinary course of business which are not
more than six months past due) (iv) any commitment by which a Person assures a
creditor against loss (including contingent reimbursement obligations with
respect to letters of credit), (v) any indebtedness guaranteed in any manner
by a Person (including guarantees in the form of an agreement to repurchase or
reimburse), (vi) any obligations under capitalized leases with respect to
which a Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations a Person assures a creditor
against loss, (vii) any indebtedness secured by a Lien on a Person's assets
(other than any Lien arising by operation of law) and (viii) any unsatisfied
obligation for "withdrawal liability" to a "multiemployer plan" as such terms
are defined under ERISA. Film Obligations will not constitute "Indebtedness."
"Indemnity Fund" has the meaning which the Escrow Agreement assigns to
that term.
"Insider" means any stockholder of any Company, any officer or director
of any Company, any affiliate or relative of any of the foregoing Persons, or
any Person in which any of the foregoing Persons directly or indirectly owns
any material beneficial interest.
"Interest Rate" means 18% per annum (or, if lower, the highest rate
permissible under applicable law).
"Legal Requirements" means the Communications Act, the FCC Regulations,
and all other federal, state and local laws, statutes, codes, rules,
regulations, ordinances, judgments, orders, decrees and the like of any
Governmental Entity, including common law.
"Lien" means any mortgage, pledge, hypothecation, lien (statutory or
otherwise), preference, priority, security agreement or other encumbrance of
any kind or nature whatsoever (including any conditional sale of 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).
"Make-Good Obligations" means all obligations of any Company to provide
advertising time or pay money after the date of this Agreement in respect of:
(1) any advertising time telecast on or prior to the date of
this Agreement as to which any minimum ratings requirement specified by
the purchaser of such time and agreed to by a Company was not satisfied,
or
(2) any payment received on or prior to the date of this
Agreement, or any account receivable as of the date of this Agreement,
in respect of advertising time which was scheduled to be telecast on or
prior to the date of this Agreement but which was not actually telecast
in accordance with all applicable contractual requirements on or prior
to the date of this Agreement.
"Market Cable System" means any cable television system located within
the Station's market, as defined in Section 76.55(e) of the FCC Regulations.
"Material Adverse Effect" means an adverse effect on the any of the
business, financial condition, operating results, earnings, assets, customer,
supplier, employee or independent contractor relations or business prospects
of the Companies, taken as a whole.
"Ordinary Course of Business" means the ordinary course of the conduct
of business by MTC and CTBC, substantially consistent with their respective
past practices and, as to any time after the date of this Agreement, as
modified in the manner contemplated by the Time Brokerage Agreement.
"Parties" means the Option Holder, the Merger Company, MTC, CTBC and
Thompson.
"Permitted Liens" 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 any Company as lessee, the interest of the
lessor in such property; and (iii) easements, rights-of-way, reservations of
rights, conditions or covenants, zoning, building or similar restrictions or
other restrictions or encumbrances that do not, individually or in the
aggregate materially interfere with the use of the affected property in the
operation of the Station as currently conducted or as presently proposed 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 arising under the TBON Documents.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or any Governmental Entity.
"Post-Adjustment Tax Period" means any Tax period beginning on or after
February 1, 1996.
"Pre-Adjustment Tax Period" means any Tax period ending before February
1, 1996.
"Program Contract" means all program licenses and other Contracts under
which any Company is authorized to broadcast film product or programs on the
Station.
"Proprietary Rights" means all of the following items owned by, issued
to or licensed to, any Company, along with all income, royalties, damages and
payments due or payable at the Adjustment Time or thereafter, including
damages and payments for past, present or future infringements or
misappropriations thereof, the right to sue and recover for past infringements
or misappropriations thereof and any and all corresponding rights that, now or
hereafter, may be secured throughout the world: patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or
not reduced to practice) and any reissue, continuation, continuation-in-part,
division, revision, extension or reexamination thereof; trademarks, service
marks, trade dress, logos, trade names and corporate names together with all
goodwill associated therewith, copyrights, registered or unregistered and
copyrightable works; mask works; and all registrations, applications and
renewals for any of the foregoing; trade secrets and confidential information
(including ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
financial, business and marketing plans, and customer and supplier lists and
related information); computer software and software systems (including data,
databases and related documentation); other proprietary rights; licenses or
other agreements to or from third parties regarding the foregoing; and all
copies and tangible embodiments of the foregoing (in whatever form or medium),
in each case including the items set forth on Schedule 5.12.
"Second Adjustment Amount" means (a) 200% of the aggregate amount of all
Second Prohibited Obligations, whether or not paid or satisfied at the time of
the Closing, reduced (but not below zero) by (b) the excess (if any) of
$100,000 over the aggregate amount of all First Prohibited Obligations.
"Second Prohibited Debt Obligations" means all Indebtedness of any
Company (other than the ABRY Loan, the Studio Deposit, the New Thompson Loan
and the TBON Borrowing) which, without duplication,
(a) is outstanding on the date of this Agreement and which is
not described on Exhibit G to this Agreement,
(b) is incurred by any Company on or after the date of this
Agreement and prior to the Closing in violation of Section 4.2 of this
Agreement,
in each case, together with all interest, premium, penalties and other charges
associated therewith, and in each case whether or not paid prior to the
Closing.
"Second Prohibited Film Obligations" means all obligations (including
the value of all time to be provided in barter, based on the average spot
price for the time period in question) which become or will become payable by
any Company at any time (including after the Closing) pursuant to any Program
Contract which any Company enters into in violation of Section 4.2 of this
Agreement, in each case whether or not paid prior to the Closing.
"Second Prohibited Obligations" means all Second Prohibited Debt
Obligations, Second Prohibited Film Obligations and Second Prohibited Other
Obligations.
"Second Prohibited Other Obligations" means all liabilities and
obligations of any Company
(a) which are required to be identified, but which are not
identified, on Schedule 5.7 to this Agreement or
(b) which are incurred by any Company in violation of Section
4.2 of this Agreement (other than any Second Prohibited Debt Obligation
or Second Prohibited Film Obligation),
in each case whether or not paid prior to the Closing.
"Straddle Period" means any Taxable period beginning before and on or
ending after February 1, 1996.
With respect to any Person, a "subsidiary" means any corporation,
partnership, association or other business entity of which (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 indirect 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.
The capitalized term "Subsidiary" means any subsidiary of MTC.
"Supplemental ABRY Loan" means the "Third Draw" referred to in the ABRY
Credit Agreement.
"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).
"Tax Benefit" means any of (1) any net operating loss as defined in Tax
Code Section 172 ("NOL") or any net capital loss which may arise during all
Post-Adjustment Tax Periods, (2) any passive activity losses, investment tax
credits, passive activity credits, foreign tax credits, or similar Tax
benefits available Lo any Company for any Tax period, and (3) MTC's and each
Subsidiary's depreciable Tax basis in any of its assets as of the Adjustment
Time.
"Tax Benefit Reduction" means any reduction in the amount of any Tax
Benefit, other than any reduction relating Lo utilization of a Tax Benefit by
any Company in a Post-Adjustment Tax Period or the portion of a Straddle
Period beginning after the Adjustment Time.
"Tax Return" means any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
Person or the administration of any Legal Requirement relating to any Taxes.
"Time Sale Contracts" means all orders, agreements and other Contracts
for the sale of advertising time (including socalled infomercials) on the
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.
"Tower Site" means the premises owned by CTBC located at old Brick
Church Pike, Nashville, Tennessee.
"Trades" mean all trade, barter or similar arrangements for the sale of
advertising time other than for cash on the 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 any Company to provide
advertising time arising under any Trade, whenever made.
"Treasury Regulations" means the regulations promulgated by the Internal
Revenue Service under the Tax Code, as in effect from time to time.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 20,184
<SECURITIES> 0
<RECEIVABLES> 22,547
<ALLOWANCES> (1,159)
<INVENTORY> 0
<CURRENT-ASSETS> 68,667
<PP&E> 45,703
<DEPRECIATION> (1,763)
<TOTAL-ASSETS> 716,839
<CURRENT-LIABILITIES> 46,548
<BONDS> 125,185
0
0
<COMMON> 5
<OTHER-SE> 203,022
<TOTAL-LIABILITY-AND-EQUITY> 203,037
<SALES> 26,042
<TOTAL-REVENUES> 28,588
<CGS> 0
<TOTAL-COSTS> 30,655
<OTHER-EXPENSES> 12
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,130
<INCOME-PRETAX> (10,209)
<INCOME-TAX> 7,487
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,722)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
