<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1998
__________________________
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 1-13452
PAXSON COMMUNICATIONS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-3212788
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
601 CLEARWATER PARK ROAD
WEST PALM BEACH, FLORIDA 33401
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 659-4122
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 Act of 1934 during the
proceeding 12 months (or for shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1998:
CLASS OF STOCK NUMBER OF SHARES
- ---------------------------- ----------------
COMMON STOCK-CLASS A, $0.001
PAR VALUE PER SHARE................................ 51,903,134
COMMON STOCK-CLASS B, $0.001
PAR VALUE PER SHARE................................ 8,311,639
<PAGE> 2
PAXSON COMMUNICATIONS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I - Financial Information
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statement of Changes in
Common Stockholders' Equity 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
Part II - Other Information
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 18
Signatures 19
</TABLE>
2
<PAGE> 3
PAXSON COMMUNICATIONS CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $137,286,453 $ 82,641,444
Restricted cash 17,000,000 17,000,000
Accounts receivable, less allowance for doubtful
accounts of $823,254 and $911,941 respectively 4,924,414 4,813,524
Prepaid expenses and other current assets 3,342,301 2,765,984
-------------- --------------
Total current assets 162,553,168 107,220,952
Cash held by qualified intermediary - 418,949,550
Property and equipment, net 141,143,502 105,896,873
Intangible assets, net 536,789,337 205,400,029
Investments in broadcast properties 106,848,464 72,762,195
Investment in cable network 55,551,260 58,974,491
Other assets, net 71,711,490 87,908,884
-------------- --------------
Total assets $1,074,597,221 $1,057,112,974
============== ==============
LIABILITIES, REDEEMABLE SECURITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 13,358,699 $ 11,305,782
Accrued interest 13,873,176 8,475,686
Current portion of long-term debt 504,029 496,378
-------------- --------------
Total current liabilities 27,735,904 20,277,846
Deferred gain 12,100,000 12,100,000
Deferred income taxes 97,303,556 95,747,156
Long-term debt 122,166,752 122,299,025
Senior subordinated notes, net 228,041,639 227,958,736
Redeemable Cumulative Compounding Junior preferred
stock, $0.001 par value; 12% dividend rate per annum,
33,000 shares authorized, issued and outstanding 44,189,493 42,610,662
Redeemable Exchangeable Preferred stock, $0.001 par value;
12.5% dividend rate per annum, 440,000 shares authorized,
170,782 shares issued and outstanding 173,879,479 168,375,990
Class A common stock, $0.001 par value; one vote per share;
150,000,000 shares authorized, 51,868,800 and 50,701,600
shares issued and outstanding 51,869 50,702
Class B common stock, $0.001 par value; ten votes per share, 35,000,000
shares authorized, 8,311,639 shares issued and outstanding 8,312 8,312
Class A & B common stock warrants 1,153,987 2,316,225
Stock subscription notes receivable (2,813,250) (2,813,250)
Additional paid-in capital 292,526,935 285,795,787
Deferred option plan compensation (1,898,619) (2,205,240)
Retained earnings 80,151,164 84,591,023
Commitments and contingencies - -
-------------- --------------
Total liabilities, redeemable securities and
common stockholders' equity $1,074,597,221 $1,057,112,974
============== ==============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
3
<PAGE> 4
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Operations
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------------------
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Revenue:
Local and national advertising $ 31,401,579 $ 18,498,815
Other 206,721 412,685
Trade and barter 56,584 25,840
------------- -------------
Total revenues 31,664,884 18,937,340
Operating expenses:
Direct 5,146,368 3,337,759
Programming 1,542,514 981,880
Sales 1,467,544 723,513
Promotion 989,675 121,832
Technical 2,973,139 2,036,166
General and administrative 8,913,945 6,354,393
Trade and barter 56,584 12,160
Time brokerage and affiliation agreement fees 6,588,140 1,025,504
Option plan compensation 306,621 714,005
Depreciation and amortization 7,949,978 4,079,730
------------- -------------
Total operating expenses 35,934,508 19,386,942
------------- -------------
Operating loss (4,269,624) (449,602)
Other income (expense):
Interest expense (10,505,642) (8,735,442)
Interest income 6,180,260 1,315,882
Other expenses, net (246,540) 145,742
Gain on sale of television station 14,330,406 -
Equity in loss of unconsolidated investment (1,290,000) -
------------- -------------
Income (loss) from continuing operations before income tax
provision 4,198,860 (7,723,420)
Income tax provision (1,556,400) -
------------- -------------
Income (loss) from continuing operations before
extraordinary item 2,642,460 (7,723,420)
------------- -------------
Loss from discontinued operations, net of applicable
income taxes - (735,576)
------------- -------------
Net income (loss) 2,642,460 (8,458,996)
Dividends and accretion on preferred stock (7,082,319) (6,271,639)
------------- -------------
Net loss attributable to common stock $ (4,439,859) $ (14,730,635)
============= =============
Basic and diluted loss per common share:
Loss from continuing operations $ (0.07) $ (0.28)
Loss from discontinued operations - (0.02)
------------- -------------
Net loss $ (0.07) $ (0.30)
============= =============
Weighted average shares outstanding 59,588,768 48,777,893
============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
4
<PAGE> 5
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statement of Changes in Common Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK Class A&B Class C Stock
---------------- Common Common Subscription
Class Class Stock Stock Notes
A B Warrants Warrants Receivable
------ ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $40,442 $8,312 $ 6,862,647 $ 2,335,528 $(1,873,139)
Stock issued for acquisition 6,069
Exercise of Class A,B and C
common stock warrants 3,923 (4,546,422) (2,335,528)
Deferred option plan compensation
Option plan compensation
Stock options exercised 268
Increase in stock subscription notes
receivable (940,111)
Dividends on redeemable preferred stock
Accretion on Junior preferred stock
Accretion on Redeemable Exchangeable
preferred stock
Net income
------- ------ ----------- ----------- -----------
Balance at December 31, 1997 50,702 8,312 2,316,225 - (2,813,250)
Stock issued for acquisitions
(unaudited) 600
Exercise of Class A and B common
stock warrants (unaudited) 460 (1,162,238)
Option plan compensation (unaudited)
Stock options exercised (unaudited) 107
Dividends on redeemable
preferred stock (unaudited)
Accretion on Junior preferred stock
(unaudited)
Accretion on Redeemable Exchangeable
preferred stock (unaudited)
Net income (unaudited)
------- ------ ----------- ----------- -----------
Balance at March 31, 1998 (unaudited) $51,869 $8,312 $ 1,153,987 $ - $(2,813,250)
======= ====== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred Option Retained Earnings
Paid-in Plan (Accumulated
Capital Compensation Deficit)
----------- --------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1996 $209,621,241 $(6,397,916) $(103,821,878)
Stock issued for acquisition 66,118,931
Exercise of Class A,B and C
common stock warrants 6,878,028
Deferred option plan compensation 2,263,167 (2,263,167)
Option plan compensation 6,455,843
Stock options exercised 914,420
Increase in stock subscription notes
receivable
Dividends on redeemable preferred stock (24,942,740)
Accretion on Junior preferred stock (665,540)
Accretion on Redeemable Exchangeable
preferred stock (668,726)
Net income 214,689,907
------------ ----------- -------------
Balance at December 31, 1997 285,795,787 (2,205,240) 84,591,023
Stock issued for acquisitions
(unaudited) 5,249,400
Exercise of Class A and B common
stock warrants (unaudited) 1,161,778
Option plan compensation (unaudited) 306,621
Stock options exercised (unaudited) 319,970
Dividends on redeemable
preferred stock (unaudited) (6,744,549)
Accretion on Junior preferred stock
(unaudited) (170,340)
Accretion on Redeemable Exchangeable
preferred stock (unaudited) (167,430)
Net income (unaudited) 2,642,460
------------ ----------- -------------
Balance at March 31, 1998 (unaudited) $292,526,935 $(1,898,619) $ 80,151,164
============ =========== =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
5
<PAGE> 6
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------------
1998 1997
------------ -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,642,460 $ (8,458,996)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,949,978 8,738,098
Option plan compensation 306,621 1,036,231
Program rights amortization - 302,825
Provision for doubtful accounts 575,660 356,485
Deferred income tax provision 1,556,400 -
Loss (gain) on sale or disposal of assets 82,027 (153,577)
Equity in loss of unconsolidated investment 1,290,000 -
Gain on sale of television station (14,330,406) -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (686,550) 3,005,161
Increase in prepaid expenses and other current
assets (576,317) (1,450,604)
Increase in programming deposits (7,013,750) -
Decrease (increase) in other assets 373,829 (2,399,573)
Increase (decrease) in accounts payable and
accrued liabilities 2,052,917 (373,334)
Increase in accrued interest 5,397,490 8,008,697
Payments for program rights - (338,898)
------------ -------------
Net cash (used in) provided by operating
activities (379,641) 8,272,515
------------ -------------
Cash flows from investing activities:
Acquisitions of broadcasting properties (358,669,960) (94,184,131)
Increase in investments in broadcast properties (34,552,839) (4,862,838)
Decrease in deposits on broadcast properties 22,853,732 4,200,000
Decrease in cash held by qualified intermediary 418,949,550 -
Purchases of property and equipment (14,147,177) (12,106,406)
Distribution received from unconsolidated investment 2,133,231 -
Proceeds from sales of broadcast properties 18,262,658 751,050
------------ -------------
Net cash provided by (used in) investing
activities 54,829,195 (106,202,325)
------------ -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 80,000,000
Payments of long-term debt (124,622) (193,915)
Proceeds from exercise of common stock options, net 320,077 129,960
Increase in stock subscription notes receivable - (840,111)
------------ -------------
Net cash provided by financing activities 195,455 79,095,934
------------ -------------
Increase (decrease) in cash and cash equivalents 54,645,009 (18,833,876)
Cash and cash equivalents at beginning of period 82,641,444 61,748,788
------------ -------------
Cash and cash equivalents at end of period $137,286,453 $ 42,914,912
============ =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
6
<PAGE> 7
PAXSON COMMUNICATIONS CORPORATION
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------------
1998 1997
=========== ===========
(Unaudited)
<S> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 4,599,246 $ 245,082
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
Non-cash operating and financing activities:
Accretion of discount on senior subordinated notes $ 82,903 $ 73,103
=========== ===========
Issuance of common stock for acquisition $ 5,250,000 $ -
=========== ===========
Dividends accrued on redeemable preferred stock $ 6,744,549 $ 5,941,050
=========== ===========
Accretion on redeemable securities $ 337,770 $ 330,589
=========== ===========
Trade and barter revenue $ 56,584 $ 1,012,528
=========== ===========
Trade and barter expense $ 56,584 $ 983,841
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of the consolidated financial statements.
7
<PAGE> 8
PAXSON COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Paxson Communications Corporation's (the "Company") financial information
contained in the financial statements and notes thereto as of March 31, 1998 and
for the three month periods ended March 31, 1998 and 1997, is unaudited. In the
opinion of management, all adjustments necessary for the fair presentation of
such financial information have been included. These adjustments are of a normal
recurring nature. There have been no changes in accounting policies since the
period ended December 31, 1997. The composition of accounts has changed since
December 31, 1997 to reflect the operations of acquisitions discussed elsewhere
herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Certain reclassifications have been made to the
prior year's financial statements to conform with the 1998 presentation. These
financial statements, footnotes, and discussions should be read in conjunction
with the December 31, 1997 financial statements and related footnotes and
discussions contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, and the definitive proxy statement for the annual
meeting of stockholders held April 17, 1998, and Form 8-K dated March 6, 1998,
all of which were filed with the United States Securities and Exchange
Commission.
2. DISCONTINUED OPERATIONS
During 1997, the Company sold its interests in WTVX-TV and WPBF-TV and
substantially all of its Paxson Radio segment assets and thus discontinued the
operations of the Paxson Network-Affiliated Television and Paxson Radio
segments. The results of operations for the Paxson Network-Affiliated Television
and Paxson Radio segments for the three months ended March 31, 1997, net of
applicable income taxes, have been presented as discontinued operations in the
accompanying Consolidated Statements of Operations. The Paxson Network
Affiliated Television operations generated revenues of approximately $5,284,000
for the three months ended March 31, 1997. The Paxson Radio operations generated
revenues of approximately $24,139,000 for the three months ended March 31, 1997.
The net assets of discontinued operations, totaling approximately $3 million at
March 31, 1998 and December 31, 1997 consist of the assets of two remaining
radio stations which are under contract to be sold for aggregate consideration
of $3 million.
3. CASH HELD BY QUALIFIED INTERMEDIARY
At December 31, 1997, the Company had placed a portion of the proceeds received
from the Paxson Radio segment sale with a qualified intermediary in order to
reinvest such proceeds and, to the extent reinvested, qualify for tax deferred
exchange treatment in connection with such sale. All but approximately $66
million of these funds were reinvested in broadcast properties acquisitions
during the first quarter of 1998. The funds not reinvested in like kind
broadcasting properties were returned to the Company and placed in its operating
cash accounts. The Company does not anticipate paying current income taxes on
the non-deferred gain as it has sufficient net operating loss carryforwards to
offset such gain.
4. INVESTMENT IN CABLE NETWORK
The Company's investment in cable network represents a 30% interest in The
Travel Channel, L.L.C., a joint venture with Discovery Communications, Inc. The
results of operations of The Travel Channel, L.L.C. have been included in the
Company's March 31, 1998 consolidated statement of operations using the equity
method of accounting.
5. LONG-TERM DEBT
In order to address the Company's business plan related to the PAX NET launch,
the Company refinanced, in May 1998, substantially all of its long-term debt
with a $122 million senior credit facility maturing June 2002 (the "Senior
Credit Facility"). Under the terms of the Senior Credit Facility, the
outstanding debt will be secured by substantially all of the Company's assets
and bear interest at a base rate plus 1.75% or LIBOR plus 2.75%, at the
Company's option. The Senior Credit Facility requires the Company to maintain
compliance with certain financial ratios subsequent to March 2000 and also
contains other restrictions. The Senior Credit Facility requires quarterly
principal payments commencing December 31, 2000.
6. COMMON STOCK WARRANTS
In March 1998, the holders of the Company's Class A and B common stock warrants
exercised 16.6217 warrants for 460,000 shares of Class A common stock. The
Company has 16.5036 common stock warrants outstanding which entitle the holders
to purchase 342,929 Class A common shares and 114,309 Class B common shares.
8
<PAGE> 9
7. PER SHARE DATA
Basic and diluted loss per share from continuing operations was computed by
dividing the loss from continuing operations before extraordinary item less
dividends and accretion on redeemable preferred stock by the weighted average
number of common shares outstanding during the period. Because of losses from
continuing operations, the effect of stock options and warrants is antidilutive.
Potentially dilutive common shares in the amount of 4,044,149 and 8,433,108 for
the three months ended March 31, 1998 and 1997, respectively, have been excluded
from the computation of diluted earnings per share as the effect of their
inclusion is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share.
9
<PAGE> 10
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Since its inception in 1991, the Company has grown primarily through the
acquisition or management of radio and television broadcast stations and radio
networks, as well as subsequent improvement in the operation of these
properties. Two of the Company's former business segments, Paxson Radio and
Paxson Network-Affiliated Television, have been classified as discontinued
operations in the consolidated financial statements for the three months ended
March 31, 1997 as a result of the Company's sale of these operations during
1997.
The Company currently is the largest owner and operator of broadcast television
stations in the U.S. Additionally, the Company currently operates a nationwide
network of owned, operated or affiliated television stations carrying its
proprietary network, which broadcasts long form paid programming consisting
primarily of infomercials. Certain of the Company's television stations were and
continue to be operated under time brokerage and affiliation agreements for
various periods. Pursuant to the time brokerage agreements, these stations'
operating revenues and expenses are controlled by the Company and are included
in its consolidated statements of operations. Pursuant to the affiliation
agreements, the Company includes advertising revenue, related sales costs and
affiliation fees in its consolidated statements of operations. The Company
intends to launch its PAX NET programming service on August 31, 1998. PAX NET is
the brand name for the programming that the Company expects to provide to its
television stations, cable systems and satellite television providers. PAX NET
programming will generally consist of family-friendly traditional entertainment
television programs that have had or are having successful first runs on
television. The Company also owns a 30% interest in The Travel Channel, L.L.C.,
a cable television network joint venture with Discovery Communications, Inc.
("DCI"). The Company's interest in the operating results of The Travel Channel,
L.L.C. has been included in the consolidated financial statements using the
equity method of accounting.
The Company's operating data throughout the periods discussed have been impacted
significantly by the timing and mix of television acquisitions throughout such
periods. Operating revenues are derived from the sale of advertising to local,
national and network advertisers. The Company's primary operating expenses
include commissions on revenues, employee salaries and administrative expenses.
Upon launch of PAX NET, the Company will also incur significant expenses for
syndicated program rights fees, ratings services and promotion. Presently, the
costs of operating the Company's television stations do not vary significantly
with revenue, with the exception of costs associated with sales commissions and
agency fees. As such, upon obtaining a certain level of revenue sufficient to
cover fixed costs, additional revenue levels have a significant impact on the
operating results of an individual television station. The Company currently
expects to continue acquiring additional stations which may have similar effects
on the comparability of revenues, operating expenses, interest expense and
operating cash flow as those described above.
The Company's business is subject to various risks and uncertainties which may
significantly reduce revenues and increase operating expenses. For example, a
reduction in expenditures by television advertisers in the Company's markets may
result in lower revenues. The Company may be unable to reduce expenses,
including syndicated program rights fees and certain variable expenses, in an
amount sufficient in the short term to offset lost revenues caused by poor
market conditions. The broadcasting industry continues to undergo rapid
technological change which may increase competition within the Company's markets
as new delivery systems, such as direct broadcast satellite and computer
networks, attract customers. The changing nature of audience tastes and viewing
habits may affect the continued attractiveness of the Company's broadcasting
stations to advertisers, upon whom the Company is dependent for its revenue.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount (contingent or otherwise) of assets and liabilities
at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. The fair values of the Company's
investments in broadcast properties are estimated based on recent market sale
prices for comparable stations and markets and approximates their carrying value
as of March 31, 1998. The fair values of the Company's existing long-term debt
and the senior subordinated notes (the "Notes") were estimated based on market
rates of instruments with similar risks and maturities, and approximates the
carrying value as of March 31, 1998. As a result of the foregoing, the estimates
presented in the Company's financial statements are not necessarily indicative
of the amounts that the Company could realize in a current market exchange and
have not been comprehensively revalued for purposes of the Company's financial
statements.
The Company believes that its network of television stations comprise a valuable
national television broadcasting distribution infrastructure. Including all
pending station acquisitions, construction projects, divestitures and other
transactions, the Company will broadcast via a total of 78 owned, operated or
affiliated stations in markets reaching more than 72 million U.S. television
households, including stations in each of the nation's top
10
<PAGE> 11
20 markets as well as 43 of the nation's top 50 markets. Additionally, the
Company has entered into an agreement with a subsidiary of Tele-Communications,
Inc. ("TCI"), whereby the Company will receive cable carriage of its PAX NET
programming on certain TCI cable systems in markets not currently served by the
Company's broadcast television station group in return for the payment by the
Company to TCI of certain fees based on the number of cable television
subscribers actually reached and the right to sell certain amounts of
advertising airtime during such programming.
This report contains forward-looking statements which are made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995.
Statements as to what the Company "believes", "intends", "expects" or
"anticipates", and other similarly anticipatory expressions, are generally
forward-looking and are made only as of the date of this Report. Readers of this
Report are cautioned not to place undue reliance on such forward-looking
statements, as they are subject to risks and uncertainties which could cause
actual results to differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the risks and
uncertainties which could cause such a difference are those relating to the
Company's high level of indebtedness and the restrictions placed on the
Company's business and operations by the terms of its indebtedness and its
outstanding preferred stock, the risks relating to the comprehensive
governmental regulation of the Company's businesses, including the restrictions
on multiple broadcast property ownership, the broadcast licensing renewal
requirements, the risks of industry and economic conditions which could
adversely affect the Company's business operations, and the other factors
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. In addition, the Company's launch of PAX NET entails certain
additional risks and uncertainties, including, those risks associated with the
launch of a new programming service, the ability to obtain desirable programming
at a financially feasible cost and the ability to successfully and profitably
sell advertising spots during such programming.
The following table lists those television properties that the Company owns,
operates or is affiliated with, and those properties which the Company has
agreements to acquire or operate, as identified under "Pending TV Acquisitions"
below. (Television and cable households in thousands.)
<TABLE>
<CAPTION>
CURRENT CURRENT
NATIONAL STATION CABLE STATION TOTAL STATION
TV CARRIAGE AT CABLE MARKET CABLE TOTAL
MARKET COMMENCEMENT COMMENCEMENT CARRRIAGE CABLE CARRIAGE MERKET TV
MARKET(1) RANK STATION CH OF OPERATIONS (16) (17) HOUSEHOLDS %(17) HOUSEHOLDS
- ------ ---- ------- -- ------------- ------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Owned or Operated
New York, NY 1 WPXN 31 7/97 4,141 4,469 4,825 92.6% 6,756
New York, NY 1 WIPX (whai)(4) 43 3/96 626 547 4,825 11.3% 6,756
Los Angeles, CA 2 KPXN (kzki) 30 5/95 1,453 2,742 3,133 87.5% 5,009
Philadelphia, PA 4 WPPX (wtgi) 61 2/95 1,225 1,661 2,033 81.7% 2,659
San Francisco, CA 5 KKPX (klxv) 65 6/95 650 1,349 1,640 82.3% 2,298
Boston, MA 6 WPXB (wgot) 60 5/95 604 1,193 1,694 70.4% 2,174
Boston, MA* 6 WBPX (whrc)(5) 46 4/97 0 449 1,694 26.5% 2,174
Washington, D.C. 7 WPXW (wvvi) 66 8/97 940 1,043 1,331 78.3% 1,928
Dallas, TX 8 KPXD (kinz)(6) 68 12/96 0 687 989 69.4% 1,899
Detroit, MI 9 WPXD (wbsx) 31 1/98 624 739 1,191 62.0% 1,782
Atlanta, GA 10 WPXA (wtlk) 14 4/94 300 955 1,144 83.5% 1,675
Atlanta, GA* 10 WNGM(7) 34 4/96 182 353 1,144 30.9% 1,675
Houston, TX 11 KPXB (ktfh) 49 3/95 647 931 918 101.4% 1,624
Seattle, WA 12 KWPX (kbge) 33 3/98 592 540 1,104 48.9% 1,514
Cleveland, OH 13 WVPX (wakc) 23 3/96 560 974 1,026 94.9% 1,469
Minneapolis, MN 14 KPXM (kxli) 41 10/96 605 637 746 85.4% 1,448
Tampa, FL 15 WXPX (wfct) 66 8/94 0 1,052 1,043 100.9% 1,436
Miami, FL 16 WPXM (wctd) 35 4/94 396 1,047 993 105.4% 1,386
Phoenix, AZ 17 KBPX (kwbf) 13 3/96 23 29 755 3.8% 1,289
Phoenix, AZ* 17 KPPX (kajw)(8)(9) 51 0 0 755 0.0% 1,289
Denver, CO 18 KPXC (kubd) 59 8/95 430 522 741 70.4% 1,199
Sacramento, CA* 20 KSPX (kcmy) 29 7/95 624 640 726 88.0% 1,127
Orlando, FL 22 WOPX (wirb) 56 12/94 468 780 796 97.9% 1,041
Indianapolis, IN 25 WIPX-LP(10) 51 3/98 0 0 618 0.0% 957
Hartford, CT* 27 WHPX (wtws)(5) 26 3/95 661 832 792 105.1% 916
Raleigh, NC 29 WFPX (wfay) 62 1/98 111 132 512 25.7% 826
Kansas City, MO 31 KPXE (kinb) 50 5/97 397 439 518 84.7% 792
Milwaukee, WI 32 WPXE (whke) 55 7/96 257 401 477 84.1% 791
Nashville, TN 33 WNPX (wkzx) 28 1/98 39 46 496 9.3% 789
Columbus, OH 34 WLWG-LP(10) 62 3/98 0 0 473 0.0% 739
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salt Lake City, UT 36 KUWB (koog)(11) 30 7/97 200 223 387 57.6% 690
San Antonio, TX* 38 Channel 26(8)(9) 26 0 0 422 0.0% 649
Norfolk, VA 39 WPXV (wjcb) 49 8/95 343 405 474 85.5% 636
New Orleans, LA* 41 WCCL 49 1/98 366 366 455 80.6% 623
Memphis, TN* 42 WFBI 50 1/98 259 259 390 66.2% 614
West Palm Beach, 43 WPXP (whbi) 67 0 0 496 0.0% 593
FL* (8)(12)
Oklahoma City, OK 44 KOPX (kmnz) 62 10/96 0 236 374 63.1% 593
Greensboro, NC 46 WGPX (waap) 16 7/96 323 341 367 93.0% 577
Wilkes Barre, PA* 47 WQPX (wswb) 64 0 0 452 0.0% 566
(8)(9)
Providence, RI 49 WPXQ (wost) 69 0 0 433 0.0% 559
(8)(13)
Birmingham, AL 51 WPXH (wnal) 44 10/96 31 105 363 29.0% 547
Albany, NY 52 WYPX (wocd) 55 5/96 251 281 376 74.9% 509
Dayton, OH 53 WDPX (wtjc) 26 10/95 298 310 351 88.3% 503
Jacksonville, FL 54 WDVL-LP(10) 41 4/98 0 0 376 0.0% 502
Fresno, CA 55 KPXF (kkag) 61 6/97 195 183 263 69.4% 496
Little Rock, AR* 56 KYPX (kvut) 42 0 0 301 0.0% 481
(8)(9)
Charleston, WV* 57 WKRP(8)(9) 29 0 0 353 0.0% 480
Tulsa, OK 58 KTPX (kglb) 44 10/97 0 212 299 71.1% 468
Las Vegas, NV 61 KVPX-LP(10) 59 2/98 0 0 302 0.0% 450
Knoxville, TN* 64 WPXK (wpmc) 54 1/98 161 114 299 38.2% 441
Roanoke, VA 68 WPXR (wefc) 38 10/97 182 205 263 77.7% 402
Green Bay, WI 70 WPXG (wsco)(8) 14 0 0 226 0.0% 381
Honolulu, HI* 71 KPXO (kapa)(8) 66 0 0 333 0.0% 380
Syracuse, NY* 72 WAUP(8)(9) 56 0 0 279 0.0% 378
Spokane, WA 73 Channel 34(8) 34 0 0 233 0.0% 375
Shreveport, LA 76 Channel 21(8) 21 0 0 217 0.0% 366
Portland, ME 80 Channel 23(8)(9) 23 0 0 266 0.0% 350
Champaign, IL 81 WPXU (wfhl) 23 4/98 178 178 249 71.2% 331
Ft. Myers, FL 83 W57CJ(10) 57 8/96 0 0 253 0.0% 320
Chattanooga, TN 86 W55CD(10) 55 4/94 0 0 217 0.0% 310
Cedar Rapids, IA 87 KPXR (ktvc) 48 5/97 0 168 198 85.2% 308
Odessa, TX 150 Channel 30 30 0 0 98 0.0% 134
(8)(9)
San Sebastian, PR NR WJWN 38 2/96
Ponce, PR NR WKPV 20 2/96
San Juan, PR NR WJPX (wsjn) 24 2/96 285 366 661 55.4% 1,140
------ ------ ------ ------
Total Owned or Operated(2) 19,627 29,139 41,743 69.8% 61,674
Affiliates
Philadelphia, PA 4 WTVE(14) 51 10/96 414 812 2,033 40.0% 2,659
Washington, D.C. 7 WWPX (wshe)(15) 60 10/96 0 129 1,331 9.7% 1,928
St. Louis, MO 21 WPXS (wcee)(15) 13 1/96 23 107 585 18.3% 1,109
Indianapolis, IN 25 WIIB(14) 63 1/96 401 424 618 68.6% 957
Hartford, CT 27 WHCT(14) 18 7/97 0 183 792 23.1% 916
Raleigh, NC 29 WRPX (wrmy)(15) 47 6/96 0 400 512 78.1% 826
Grand Rapids, MI 37 WZPX (wilv)(15) 43 9/96 0 416 412 101.0% 659
------ ------ ------ ------
Total Affiliates 838 2,471 6,283 39.3% 9,055
Total Owned, Operated and
Affiliates(2) 20,465 31,610 42,739 74.0% 63,443
====== ======= ====== ======
Pending TV Acquisitions or
Affiliates
Chicago, IL 3 WCFC 38 1,950 3,140
San Francisco, CA 5 KWOK(7)(8) 68 1,640 2,298
Pittsburgh, PA 19 Channel 40 40 899 1,140
Portland, OR 24 KBSP 22 611 976
Buffalo, NY 40 WAQF(8) 51 475 630
Albuquerque, NM 48 Channel 14(8) 14 332 560
Mobile, AL 62 Channel 61(8) 61 324 450
Des Moines, IA 69 Channel 39(8) 39 233 383
Davenport, IA 89 Channel 67(8) 67 202 302
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jackson, MS 90 Channel 51(8) 51 177 297
Greenville, NC 106 WEPX(8) 38 152 234
Christiansted, VI NR Channel 15(8) 15 18 36
------ ------
Total Proposed TV Stations(2)
5,373 8,150
------ ------
Total TV
Network(2)(3) 48,113 71,593
====== ======
</TABLE>
* Operated or to be operated pursuant to a time brokerage agreement, except
as noted, the Company has an agreement and/or an option to acquire a 100%
ownership interest.
NR Not ranked
(1) Each station is licensed by the FCC to serve a specific community, which
is included in the listed market.
(2) Figures represent total cable and television households in each market
only and are not necessarily indicative of the number of households
reached by each station in its market; totals do not double count markets
where the Company has more than one station.
(3) After accounting for all acquisitions, divestitures and other
transactions, including those stations which the Company does not
anticipate becoming a PAX NET affiliate (see footnote 14) as well as
additional markets served by the Company's station group, including
Rochester, NY (WAQF), Lansing, MI (WZPX), Monterey-Salinas (KKPX), and
Bakersfield, CA (KPXF), the markets served by the Company's television
stations will contain 48,826,050 cable households and 72,578,050
television households.
(4) In conjunction with its acquisition of WPXN in New York, the FCC has
required the Company to sell this station.
(5) The Company has no option to acquire this station; it will become an
affiliate upon acquisition by DP Media.
(6) The Company has an 80% ownership interest in this station.
(7) The Company has contracted to sell its interest in this station.
(8) Station is currently under construction or not operating commercially.
(9) 49% ownership interest with an option for the remaining 51%.
(10) A low power station; other low power stations the Company owns or
operates, which simulcast programs aired on an owned or operated full
power television station in the same market, are not presented.
(11) The Company has a contract to swap this station for another in Salt Lake
City, KUPX, Channel 16.
(12) The Company has a 33% ownership interest, with an option to purchase 90%.
(13) 50% ownership interest.
(14) Currently an INTV affiliate only.
(15) The Company has an option to acquire, or first right of refusal upon a
proposed sale of this station.
(16) Cable households reached at commencement of station's operations.
(17) Cable households are those reached at 4/98, per station and local cable
system management and are to be billed in 5/98. Source for total market
cable and total market television households is A.C. Nielsen, published
9/97. Households for the three markets in Puerto Rico per Strategic
Research Corporation and the Virgin Islands per BIA.
PURCHASES OF BROADCAST PROPERTIES:
During January 1998, the Company completed the acquisitions of WFPX-TV serving
the Raleigh, North Carolina market for $4,500,000, KPXF-TV serving the Fresno,
California market for $7,960,000, WNPX-TV serving the Nashville, Tennessee
market for $4,300,000, KPXR-TV serving the Cedar Rapids, Iowa market for total
consideration of $10,250,000 which included 600,000 shares of the Company's
Class A common stock with an approximate market value at the time of $5,250,000
to Fant Broadcasting of Iowa, Inc. ("Fant"), and WPXD-TV serving the Detroit,
Michigan market for $35,000,000. The shares issued to Fant were not registered
under the Securities Act of 1933 and were issued in reliance upon the exemption
from registration provided in Section 4(2) of such Act for transactions not
involving a public offering.
During February 1998, the Company completed the acquisitions of WPXV-TV serving
the Norfolk, Virginia market for $14,750,000, KVPX-LP serving the Las Vegas,
Nevada market for $500,000, and KWPX-TV serving the Seattle, Washington market,
WIPX-LP serving the Indianapolis, Indiana market and K43EK-LP serving the
Portland, Oregon market for total consideration of $24,000,000.
During March 1998, the Company completed the acquisitions of WPXN-TV serving the
New York, New York market for $257,500,000, WLWG-LP serving the Columbus, Ohio
market for $2,500,000 and WDVL-LP serving the Jacksonville, Florida market for
$600,000.
During April 1998, the Company contracted with Roberts Broadcasting of Salt Lake
City to exchange its interest in Channel 30 serving the Salt Lake City, Utah
market for Channel 16 also serving the Salt Lake City, Utah market. The Company
intends to account for this like kind exchange of television stations at book
value with no gain or loss being recognized on the transaction.
During May 1998, the Company completed the acquisition of WPXU-TV (formerly
WFHL-TV) serving the Champaign, Illinois market for $9,250,000.
13
<PAGE> 14
SALES OF BROADCAST PROPERTIES:
During March 1998, the Company sold its interest in television station WOAC-TV
serving the Cleveland, Ohio market in a transaction valued at $23,500,000. The
Company realized a gain of approximately $14,300,000 on the sale of its interest
in this station.
During March 1998, the Company contracted to sell its interest in television
station WNGM-TV serving the Atlanta, GA market for $50,000,000. Approximately
$11,000,000 of the consideration will be paid to Whitehead Media, Inc. for
exercise of the Company's option to acquire WNGM-TV. The Company expects to
realize a pre-tax gain of approximately $37 million on this sale.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected financial
information as a percentage of revenues.
Statements of Operations
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
1998 1997
----- -----
<S> <C> <C>
Revenues 100.0% 100.0%
Operating Expenses:
Direct 16.2 17.6
Programming 4.9 5.2
Sales 4.7 3.9
Promotion 3.1 0.6
Technical 9.4 10.8
General and administrative 28.1 33.5
Trade and barter 0.2 0.1
Time brokerage and affiliation agreement fees 20.8 5.4
Option plan compensation 1.0 3.8
Depreciation and amortization 25.1 21.5
------ -----
Total operating expenses 113.5 102.4
------ -----
Operating loss (13.5) (2.4)
Other income (expense):
Interest expense (33.2) (46.1)
Interest income 19.5 7.0
Other expense, net ( 0.8) 0.8
Gain on sale of television station 45.3 -
Equity in loss of unconsolidated investment (4.1) -
------ -----
Income (loss) from continuing operations before
income tax provision 13.2 (40.7)
Income tax provision (4.9) -
------ -----
Income (loss) from continuing operations before
extraordinary item 8.3 (40.7)
====== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Consolidated revenues for the three months ended March 31, 1998 increased 67%
(or $12.8 million) to $31.7 million. This increase was primarily due to
television station acquisitions and new time brokerage operations, with WPXN-TV
in New York which has been operated by the Company since June 30, 1997
accounting for $6.9 million of the increase. Same station television revenues
increased $1.7 million.
Operating expenses for the three months ended March 31, 1998 increased 85% (or
$16.5 million) to $35.9 million. The increase was primarily due to higher direct
expenses such as commissions which rise in proportion to revenues ($1.8
million), other non-direct costs, which were primarily due to operating new
television stations and to startup costs for the launch of PAX NET ($5.7
million), higher depreciation and amortization, primarily related to assets
acquired ($3.9 million), and increased time brokerage and affiliation agreement
fees, primarily related to new time brokerage operations ($5.6 million), of
which $3.6 million is attributable to WPXN-TV.
Operating cash flow for the three months ended March 31, 1998 increased 97% (or
$5.2 million) to $10.6 million. The increase in operating cash flow was
primarily a result of television station acquisitions and new time brokerage
operations, with WPXN-TV accounting for $5.4 million of the increase.
For purposes of this report, "operating cash flow" is defined as net income
excluding non-cash items, non-recurring items including terminated operations,
discontinued operations, interest, other income, income taxes and time brokerage
and affiliation agreement fees, less scheduled program rights payments
(including a ratable portion of programming deposits). The Company has included
operating cash flow data because the financial
14
<PAGE> 15
performance of broadcast companies is frequently evaluated based on some measure
of cash flow from operations. Operating cash flow is not, and should not be used
as an indicator of or alternative to, operating income, net income or cash flow
as reflected in the Consolidated Financial Statements as it is not a measure of
financial performance under generally accepted accounting principles.
Interest expense for the three months ended March 31, 1998 increased to $10.5
million or 20%, primarily due to a greater level of senior debt throughout the
period and higher interest rates. At March 31, 1998, total long-term debt and
senior subordinated notes were $350.7 million, compared with the balance of
$311.6 million outstanding a year prior.
Interest income for the three months ended March 31, 1998 increased to $6.2
million, primarily due to higher levels of cash and cash equivalents and cash
held by qualified intermediary resulting from segment asset sales, invested
throughout the period.
DISCONTINUED OPERATIONS
During 1997, the Company sold its interest in its Paxson Network-Affiliated
Television and Paxson Radio segments. Losses from these segments in the three
months ended March 31, 1997, net of tax, were $736,000. Paxson
Network-Affiliated Television generated net income of approximately $10,000 and
Paxson Radio incurred losses of approximately $746,000 in the three months ended
March 31, 1997. Paxson Network-Affiliated Television and Paxson Radio generally
experienced their lowest revenue in the first quarter of the year.
Loss from operations of these segments in the three months ended March 31, 1997
was approximately $811,000. Paxson Network-Affiliated Television generated
income from operations of approximately $10,000 and Paxson Radio incurred losses
from operations of $821,000 in the three months ended March 31, 1997,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at March 31, 1998 and December 31, 1997 was $134.8
million and $86.9 million, respectively, and the ratio of current assets to
current liabilities was 5.87:1 and 5.29:1 on such dates, respectively. Working
capital increased primarily due to the return of approximately $66 million of
cash held by qualified intermediary and not reinvested in like kind broadcasting
properties during the first quarter of 1998. The Company does not anticipate
paying current taxes on the non-deferred gain as it has sufficient net operating
loss carryforwards to offset such gain.
Cash (used in) provided by operations of approximately $(380,000) and $8.3
million for the three months ended March 31, 1998 and 1997, respectively,
reflects the operating results of existing properties, acquisitions and time
brokerage properties net of the deferred income tax provision, the equity in
loss of unconsolidated investment and the increase in programming deposits. Cash
provided by investing activities primarily reflects the use of the cash held by
qualified intermediary and proceeds from sales of broadcast properties and the
use of cash in investing activities for the acquisitions and investments
discussed above, and purchases of equipment for these and existing properties.
Cash provided by financing activities primarily reflects the proceeds from
exercise of common stock options net of debt repayments. Non-cash activity
relates to option plan compensation, stock issued for the acquisition of
KPXR-TV, reciprocal trade and barter advertising revenue and expense and
accretion of discount on senior subordinated notes, as well as dividends and
accretion on the redeemable preferred stock.
The Company's primary capital requirements are for the acquisition of
broadcasting properties and related capital expenditures, syndicated programming
rights payments and interest payments on indebtedness. The Notes require
semi-annual interest payments at a fixed rate.
In order to address the Company's business plan related to the PAX NET launch,
the Company refinanced, in May 1998, substantially all of its long-term debt
with a $122 million senior credit facility maturing June 2002 (the "Senior
Credit Facility"). Under the terms of the Senior Credit Facility, the
outstanding debt will be secured by substantially all of the Company's assets
and bear interest at a base rate plus 1.75% or LIBOR plus 2.75%, at the
Company's option. The Senior Credit Facility requires the Company to maintain
compliance with certain financial ratios subsequent to March 2000 and also
contains other restrictions. The Senior Credit Facility requires quarterly
principal payments commencing December 31, 2000.
The Company will require additional financing to enable it to complete
acquisitions which are currently pending, continue its acquisition strategy and
to fund capital expenditures on existing and acquired properties, expand
distribution through cable carriage agreements, syndicated program rights fees
and the Company's
15
<PAGE> 16
working capital requirements. The timing and amount of the Company's additional
financing needs will depend, among other things, upon the timing of closings of
pending acquisitions (which are dependent upon the satisfaction of closing
conditions, some of which are beyond the control of the Company). As the
Company's cash available for acquisitions at March 31, 1998 will not be adequate
to pay the purchase price of all pending acquisitions, the Company is
considering additional sources of financing, including public and private sales
of equity. The failure to raise funds necessary to finance the Company's future
cash requirements could adversely affect the Company's ability to pursue its
business strategy. In addition, should the Company suffer a significant
impairment to its cash flow from operations due to the occurrence of one or more
adverse events, the Company could have insufficient resources to repay
indebtedness under the revolving Senior Credit Facility or the Notes when due or
to make required payments on the outstanding preferred stock.
PROGRAMMING COMMITMENTS
In connection with the launch of PAX NET, the Company has entered into
programming contracts to air syndicated television shows as well as theatrical
and made-for-television movies from 1998 to 2005 that are not currently
available for broadcast and therefore not included in the consolidated financial
statements. As of March 31, 1998, such programming contracts require collective
payments by the Company of approximately $328.2 million over such periods as
follows:
1998 (April - December) $ 41,291,133
1999 78,589,866
2000 73,480,355
2001 63,108,277
2002 32,352,952
Thereafter 39,418,667
------------
$328,241,250
============
The Company had $43,696,250 and $36,682,500 of prepaid broadcast rights recorded
in Other Assets as of March 31, 1998 and December 31, 1997, respectively. The
Company has also committed to purchase at similar terms additional future
episodes of these programs should they be made available. The Company continues
to evaluate additional programming purchases.
INVESTMENT COMMITMENTS
The completion of each of the investments discussed below is subject to a
variety of factors and to the satisfaction of various conditions, and there can
be no assurance that any of such investments will be completed. The Company has
agreements to purchase significant assets of, or to enter into time brokerage
and financing arrangements with respect to, the following properties, which are
subject to various conditions, including the receipt of regulatory approvals:
<TABLE>
<CAPTION>
STATION MARKET SERVED* PURCHASE PRICE
- ------- -------------- --------------
<S> <C> <C>
WCFC-TV Chicago, IL (1) $135,000,000
WFBI/WCCL Memphis, TN/New Orleans, LA $ 40,000,000
Channel 40 Pittsburgh, PA $ 35,000,000
KBSP-TV Portland, OR $ 30,000,000
KSPX-TV Sacramento, CA (2) $ 17,000,000
WPXP-TV West Palm Beach, FL (3) $ 16,635,000
WFBI/WCCL Affiliation Buyout Memphis, TN/New Orleans, LA $ 15,000,000
Channel 26 San Antonio, TX $ 13,500,000
KAJW-TV Phoenix, AZ (4) $ 12,000,000
WPXU-TV Champaign, IL (7) $ 9,250,000
WKRP-TV Charleston, WV (4) $ 8,070,000
WAUP-TV Syracuse. MY (4) $ 6,750,000
Channel 61 Mobile, AL (6) $ 6,750,000
WQPX-TV Wilkes-Barre, Scranton, PA (4) $ 6,200,000
Channel 34 Spokane, WA (6) $ 5,676,667
KPXO-TV Honolulu, HI $ 5,000,000
WPXK-TV Knoxville, TN $ 5,000,000
Channel 14 Albuquerque, NM (6) $ 4,900,000
Channel 21 Shreveport, LA (6) $ 3,938,000
Channel 67 Davenport, IA (6) $ 3,900,000
Channel 39 Des Moines, IA (6) $ 3,750,000
Channel 23 Portland, ME (4)(6) $ 3,550,000
Channel 38 Greenville, NC $ 3,550,000
WAQF-TV Buffalo, NY (5) $ 3,000,000
KYPX-TV Little Rock, AR (4) $ 2,850,000
Channel 51 Jackson, MS (6) $ 2,250,000
KWOK-TV San Francisco, CA (1)(3) $ 2,215,000
Channel 30 Odessa, TX (4)(6) $ 1,306,000
Channel 15 Christiansted, Virgin Islands (6) $ 300,000
------------
Total $402,340,667
============
</TABLE>
- ----------
16
<PAGE> 17
* Each station is licensed by the FCC to serve a specific community, which
is included in the listed market.
(1) The Company is acquiring the station for consideration of $120 million
cash, the Company's interests in KWOK-TV and up to $15 million of
contingent payments to be determined based upon the seller's ability to
deliver its programming to the Chicago market via cable carriage post
closing.
(2) The Company has loaned an aggregate of $8,500,000 to the station owner and
began operating the station pursuant to a time brokerage agreement on
October 1, 1996, pending completion of the acquisition of the station. The
loan will be applied to the purchase price at the date of closing.
(3) The Company has entered into various agreements with Cocola Broadcasting,
its subsidiaries and other parties, whereby the Company will acquire 100%
and 90% of the ownership of KWOK-TV and WPXP-TV, respectively.
(4) The Company has acquired a 49% interest in this property.
(5) Includes the purchase of two low power television stations, W69CS and
W63BM.
(6) The Company participated in FCC settlements and thereby acquired a
construction permit for this property.
(7) The Company acquired this station during May 1998.
In connection with the above commitments, the Company has made deposits or
advances totaling approximately $76.4 million at March 31, 1998, recorded as
escrow deposits or investments in broadcast properties. The commitment amounts
do not include capital expenditures required to upgrade or construct the above
properties.
17
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On January 27, 1998, in connection with Company's acquisition of KPXR-TV, the
Company issued 600,000 shares of Class A Common Stock with an approximate market
value at the time of $5,250,000 to Fant Broadcasting of Iowa, Inc. The shares
were issued without registration under the Securities Act of 1933 in reliance
upon the exemption from registration provided in Section 4(2) of such Act for
transactions not involving a public offering.
On March 18, 1998, the holders of the Company's Class A and B common stock
warrants exercised 16.6217 warrants entitling them to purchase 460,511 shares of
Class A Common Stock at a price of $0.01 per share. The Company issued 460,000
shares of Class A Common Stock and the balance of the shares issuable pursuant
to the warrant exercise were surrendered in payment of the warrant exercise
price. The shares were issued without registration under the Securities Act of
1933 in reliance upon the exemption from registration provided in Section 4(2)
of such Act for transactions not involving a public offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits:
EXHIBIT NO. DESCRIPTION
- ---------- ------------
3.1.1 Certificate of Incorporation of the Company**
3.1.2 Certificate of Designations of the Company's Junior Cumulative
Compounding Redeemable Preferred Stock**
3.1.3 Certificate of Designations of the Company's 12 1/2% Cumulative
Exchangeable Preferred Stock ****
3.1.4 Bylaws of the Company***
4.1 Form of Stock Certificate of Class A Common Stock*
10.194 Asset Purchase Agreement, dated March 19, 1998, by and between
Paxson Communications of Atlanta-14, Inc. and SKMD Broadcasting
Partnership and USA Station Group of Maryland, Inc.
10.195 Asset Purchase Agreement, dated March 19, 1998, by and among
Paxson Communications of Portland-22, Inc.; Paxson
Communications Corporation; Blackstar Communications of Oregon,
Inc.; and Blackstar of Salem, Inc.
10.196 Membership Purchase Agreement, dated January 14, 1998, by and
among Dr. Joseph A. Zavaletta, South Texas Vision, L.L.C.,
Paxson Communications of San Antonio-26, Inc., and Paxson
Communications Corporation for television station Channel 26,
Uvalde, Texas
27 Financial Data Schedule (for SEC use only)
- ----------------
* Filed with the Company's Registration Statement on Form S-4,
filed September 26, 1994, Registration No. 33-84416 and
incorporated herein by reference.
** Filed with the Company's Annual Report on Form 10-K, dated
March 31, 1995 and incorporated herein by reference.
*** Filed with the Company's Registration Statement on Form S-1, as
amended, filed January 26, 1996, Registration No. 333-473 and
incorporated herein by reference.
**** Filed with the Company's Registration Statement on Form S-3, as
amended, filed August 15, 1996, Registration No. 333-10267 and
incorporated herein by reference.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K, dated March 6, 1998, reporting under
Item 2. Acquisition or Disposition of Assets the Company's acquisition of
WPXN-TV serving the New York, NY market.
18
<PAGE> 19
PAXSON COMMUNICATIONS CORPORATION
SIGNATURES
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.
PAXSON COMMUNICATIONS CORPORATION
Date: May 11, 1998 By: /s/ Lowell W. Paxson
-------------------------------
Lowell W. Paxson
Chairman of the Board, Chief
Executive Officer, Director
Date: May 11, 1998 By: /s/ Arthur D. Tek
-------------------------------
Arthur D. Tek
Vice President, Chief
Financial Officer, Director
19
<PAGE> 1
EXHIBIT 10.194
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
PAXSON COMMUNICATIONS OF ATLANTA-14, INC.
AS SELLER
AND
SKMD BROADCASTING PARTNERSHIP
AND
USA STATION GROUP OF MARYLAND, INC.
AS BUYER
Dated as of March 19, 1998
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ARTICLE 1. DEFINITIONS AND REFERENCES.............................................................................2
ARTICLE 2. SALE AND PURCHASE OF ASSETS; EXERCISE OF OPTION; PURCHASE PRICE;
ADJUSTMENTS; ASSUMPTION OF LIABILITIES.................................................................2
2.1 Asset Sale and Purchase of Assets......................................................................2
2.1.1 FCC Licenses...........................................................................................2
2.1.2 Tangible Personal Property.............................................................................2
2.1.3 Intellectual Property..................................................................................3
2.1.4 Station Contract.......................................................................................3
2.1.5 Files and Records......................................................................................3
2.1.6 Third-Party Claims.....................................................................................3
2.1.7 Permits and Licenses...................................................................................3
2.2 Excluded Assets........................................................................................4
2.2.1 Cash...................................................................................................4
2.2.2 Accounts Receivable....................................................................................4
2.2.3 Personal Property Disposed Of..........................................................................4
2.2.4 Insurance..............................................................................................4
2.2.5 Employee Plans and Assets..............................................................................5
2.2.6 Right to Tax Refunds...................................................................................5
2.2.7 Certain Books and Records..............................................................................5
2.2.8 Rights Under This Agreement............................................................................5
2.2.9 Certain Contracts and Unrelated Assets.................................................................5
2.2.10 Name...................................................................................................5
2.2.11 Other Assets...........................................................................................5
2.2.12 WPXA Assets............................................................................................5
2.3 Exercise of Option.....................................................................................6
2.4 Purchase Price.........................................................................................6
2.5 Payment of Purchase Price..............................................................................6
2.6 Adjustments to Purchase Price..........................................................................6
2.6.1 Adjustments............................................................................................6
2.6.2 Schedule of Adjustments................................................................................6
2.7 Assumption of Liabilities..............................................................................7
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLER...............................................................9
3.1 Organization and Standing..............................................................................9
3.2 Authorization.........................................................................................10
3.3 Compliance with Laws..................................................................................10
3.4 Required Consents; No Conflicts.......................................................................10
3.5 Option Documents......................................................................................11
3.6 Intentionally Omitted.................................................................................11
3.7 Absence of Litigation.................................................................................11
3.8 Totality of Assets; Encumbrances......................................................................12
3.9 FCC Matters...........................................................................................12
3.10 Real Property.........................................................................................13
3.11 Condition of Tangible Assets..........................................................................14
3.12 Intellectual Property.................................................................................14
3.13 Reports and Records...................................................................................15
3.14 Station Contract......................................................................................15
3.15 Taxes.................................................................................................16
3.16 Employee Benefit Plans................................................................................17
3.17 Labor Relations.......................................................................................18
3.18 Environmental Matters.................................................................................19
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3.19 Insurance.............................................................................................20
3.20 Cable Systems.........................................................................................20
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER...............................................................20
4.1 Organization and Standing.............................................................................20
4.2 Authorization.........................................................................................21
4.3 Compliance with Laws..................................................................................21
4.4 No Conflicts..........................................................................................21
4.5 Qualification as Licensee.............................................................................21
4.6 Blackstar Agreement...................................................................................21
ARTICLE 5. PRE-CLOSING FILINGS...................................................................................21
5.1 Applications for FCC Consent..........................................................................21
5.2 Hart-Scott-Rodino.....................................................................................22
ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLER....................................................................22
6.1 Negative Covenants....................................................................................22
6.1.1 Dispositions; Mergers.................................................................................22
6.1.2 Additional Agreements.................................................................................22
6.1.3 Breaches..............................................................................................23
6.1.4 Employee Matters......................................................................................23
6.1.5 Actions Affecting FCC Licenses or Contracts...........................................................23
6.1.6 Representations and Warranties........................................................................23
6.2 Affirmative Covenants.................................................................................23
6.2.1 Preserve Existence....................................................................................23
6.2.2 Normal Operations.....................................................................................23
6.2.3 Maintain FCC Licenses.................................................................................24
6.2.4 Notices Under Whitehead Purchase Agreement............................................................24
6.2.5 Performance Under Contracts...........................................................................24
6.2.6 Compliance With Whitehead Purchase Agreement..........................................................24
6.2.7 Taxes.................................................................................................24
6.2.8 Corporate Action......................................................................................24
6.2.9 Transfer Tax; Bulk Sales..............................................................................25
6.2.10 Access................................................................................................25
6.2.11 Other Information.....................................................................................25
6.2.12 Engineering Inspections...............................................................................25
6.2.13 Insurance.............................................................................................25
6.2.14 Violations............................................................................................26
6.2.15 Interruption in Broadcast Operations................................................................. 26
6.2.16 Consents..............................................................................................26
6.3 Confidentiality...................................................................................... 26
6.4 Cable Carriage....................................................................................... 26
ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER.................................................................... 26
7.1 Confidentiality...................................................................................... 26
7.2 Corporate Action..................................................................................... 27
7.3 Negative Covenants................................................................................... 27
ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLER AND BUYER...............................................27
8.1 Possession and Control............................................................................... 27
8.2 Risk of Loss......................................................................................... 28
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8.3 Allocation of Purchase Price......................................................................... 28
8.3.1 Allocation Schedule.................................................................................. 28
8.3.2 Appraised Allocation of Purchase Price............................................................... 28
8.4 Public Announcements................................................................................. 29
8.5 Employee Matters..................................................................................... 29
8.6 Services Agreement................................................................................... 29
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.................................................. 29
9.1 Representations and Covenants........................................................................ 29
9.2 Consents............................................................................................. 30
9.3 Delivery of Documents................................................................................ 30
9.4 FCC Order............................................................................................ 30
9.5 Legal Proceedings.................................................................................... 30
9.6 Hart-Scott-Rodino.................................................................................... 30
9.7 Absence of Material Change........................................................................... 30
9.8 Acquisition of KBSP.................................................................................. 31
9.9 Cable Carriage Entitlement........................................................................... 31
9.10 Whitehead Closing.................................................................................... 31
9.11 Blackstar Acquisition................................................................................ 31
ARTICLE 10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE................................................. 31
10.1 Representations and Covenants........................................................................ 31
10.2 Delivery by Buyer.................................................................................... 31
10.3 FCC Order............................................................................................ 32
10.4 Legal Proceedings.................................................................................... 32
10.5 Hart-Scott-Rodino.................................................................................... 32
10.6 KBSP Acquisition..................................................................................... 32
10.7 Consents............................................................................................. 32
ARTICLE 11. THE CLOSING.......................................................................................... 32
11.1 Closing.............................................................................................. 32
11.2 Delivery by Seller................................................................................... 33
11.2.1 Agreements and Instruments........................................................................... 33
11.2.2 Consents............................................................................................. 34
11.2.3 Cable Carriage Entitlement........................................................................... 34
11.2.4 UCC Report........................................................................................... 34
11.2.5 Certified Resolutions................................................................................ 34
11.2.6 Officers' Certificate................................................................................ 34
11.2.7 Seller's IRS Form 8594............................................................................... 35
11.2.8 Opinion of Counsel................................................................................... 35
11.3 Delivery by Buyer, the Exchange Agent................................................................ 35
11.3.1 Purchase Price Payment............................................................................... 35
11.3.2 Agreements and Instruments........................................................................... 35
11.3.3 Certified Resolutions................................................................................ 36
11.3.4 Officers' Certificate................................................................................ 36
11.3.5 Buyer's IRS Form 8594................................................................................ 36
11.3.6 Opinion of Counsel................................................................................... 36
11.3.7 Consents..............................................................................................36
11.4 Frustration of Closing Conditions.................................................................... 36
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ARTICLE 12. SURVIVAL; INDEMNIFICATION............................................................................ 37
12.1 Survival of Representations.......................................................................... 37
12.2 Indemnification by Seller............................................................................ 37
12.3 Indemnification by Buyer............................................................................. 38
12.4 Limitation on Indemnification........................................................................ 38
12.5 Conditions of Indemnification........................................................................ 39
12.6 Bulk Sales Indemnity................................................................................. 40
ARTICLE 13. TERMINATION.......................................................................................... 40
13.1 Termination.......................................................................................... 40
13.2 Effect of Termination................................................................................ 41
ARTICLE 14. REMEDIES............................................................................................. 41
14.1 Default by Buyer..................................................................................... 41
14.2 Default by Seller.................................................................................... 41
14.3 Specific Performance................................................................................. 42
ARTICLE 15. GENERAL PROVISIONS................................................................................... 42
15.1 Additional Actions, Documents and Information........................................................ 42
15.2 Brokers.............................................................................................. 43
15.3 Expenses and Taxes................................................................................... 43
15.4 Mail................................................................................................. 43
15.5 Notices.............................................................................................. 43
15.6 Waiver............................................................................................... 45
15.7 Benefit and Assignment............................................................................... 45
15.8 Entire Agreement; Amendment.......................................................................... 46
15.9 Severability......................................................................................... 46
15.10 Headings............................................................................................. 46
15.11 Governing Law........................................................................................ 46
15.12 Liquidated Damages................................................................................... 46
15.13 Signature in Counterparts............................................................................ 46
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SCHEDULES
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Schedule 2.1.1 FCC Licenses
Schedule 2.1.2 Tangible Personal Property
Schedule 2.1.3 Intellectual Property
Schedule 2.1.4 Station Contract
Schedule 2.2.11 Other Excluded Assets
Schedule 3.1 Equity Interests of Seller
Schedule 3.4.1 Consents
Schedule 3.7 Litigation
Schedule 3.8.2 Encumbrances
Schedule 3.18 Environmental Matters
Schedule 3.19 Insurance
Schedule 3.20(a) Cable Television Systems
Schedule 3.20(b) Market Cable Systems
Schedule 3.20(c) Retransmission Consent Agreements
Schedule 3.20(d) Retransmission Consent Elections
Schedule 3.20(e) Notifications from Market Cable Systems Regarding Deletion from Carriage
Schedule 3.20(f) Notifications from Market Cable Systems Regarding Quality of Station's Signal
Schedule 3.20(g) Must Carry Petitions
Schedule 3.20(h) Must Carry Complaints
Schedule 8.5 List of Excluded Employees
Schedule 11.2.4 Jurisdictions for UCC Reports
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EXHIBITS
EXHIBIT A Form of Assignment of Contracts
EXHIBIT B Form of Bill of Sale and Assignment of Assets
EXHIBIT C Form of Assignment of FCC Licenses
EXHIBIT D Form of Assumption Agreement
EXHIBIT E Form of Option Exercise Notice
EXHIBIT F Form of Services Agreement
EXHIBIT G Form of Escrow Agreement
EXHIBIT H Form of Assignment of Time Brokerage Agreement
EXHIBIT I Opinion Matters/Seller's Counsel
EXHIBIT J Opinion Matters/Buyer's Counsel
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of this 19th
day of March, 1998, by and among SKMD Broadcasting Partnership, a Delaware
general partnership ("SKMD"), USA Station Group of Maryland, Inc., a Delaware
corporation ("USA of Maryland", and together with SKMD, "Buyer"), and Paxson
Communications of Atlanta-14, Inc., a Florida corporation ("Seller").
WHEREAS, pursuant to the Option Documents Seller holds that
certain exclusive and irrevocable Option to purchase substantially all assets
used or useful in connection with the business and operations of Television
Station WNGM(TV), Channel 34, Athens, Georgia (the "Station");
WHEREAS, following the exercise by Seller of the Option, Seller
has the right to purchase substantially all assets used or useful in connection
with the business and operations of the Station in accordance with the terms and
conditions of a pre-negotiated Asset Purchase Agreement in the form specified by
the Option Documents (the "Whitehead Purchase Agreement");
WHEREAS, Seller desires (i) to exercise its Option on the date
hereof to purchase the assets to be acquired by Seller pursuant to the Whitehead
Purchase Agreement; (ii) to enter into the Whitehead Purchase Agreement within
ten (10) days of the date hereof; and (iii) immediately after acquiring such
assets pursuant to the Whitehead Purchase Agreement, to sell, assign and
transfer all of Seller's right, title and interest in and to the FCC Licenses to
SKMD and certain of such other assets to USA of Maryland, all in accordance with
and subject to the terms and conditions hereinafter set forth;
WHEREAS, Seller owns certain other assets that consist of
broadcast equipment used or useful in the operation of the Station; and
WHEREAS, SKMD desires to purchase from Seller all of Seller's
right, title and interest in and to the FCC Licenses, and USA of Maryland
desires to purchase from Seller all of Seller's right, title and interest in and
to all of the Assets (other than the FCC Licenses), all in accordance with and
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
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ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in ANNEX I attached hereto and incorporated
herein for all purposes of this Agreement (such definitions to be equally
applicable to both the singular and plural forms of the terms defined). Unless
otherwise specified, all references herein to "Articles" or "Sections" are to
Articles or Sections of this Agreement.
ARTICLE 2.
SALE AND PURCHASE OF ASSETS; EXERCISE OF OPTION; PURCHASE PRICE;
ADJUSTMENTS; ASSUMPTION OF LIABILITIES
2.1 ASSET SALE AND PURCHASE OF ASSETS.
Subject to the terms and conditions hereof and in reliance
upon the representations, warranties, covenants and agreements contained herein,
upon the Closing (following the Whitehead Closing), Seller shall sell, assign,
transfer, convey and deliver (i) to SKMD, and SKMD agrees to purchase from
Seller, the FCC Licenses described in Section 2.1.1 and (ii) to USA of Maryland,
and USA of Maryland agrees to purchase from Seller, the assets, rights, benefits
and privileges, both tangible and intangible, listed in Sections 2.1.2 through
2.1.7, wheresoever situated or located, owned, leased, used, held for use or
otherwise held by Seller in connection with the business and operations of the
Station (collectively, the "Assets"); but excluding the Excluded Assets
described in Section 2.2. Subject to the provisions of Section 2.2, the Assets
shall include all such assets existing on the date hereof and all such assets
acquired (pursuant to the Whitehead Purchase Agreement or otherwise) between the
date hereof and the Closing Date. The Assets are the following:
2.1.1 FCC LICENSES.
All currently existing licenses, permits and other
authorizations issued by the FCC for the operation of the Station (the "FCC
Licenses"), including without limitation those listed in SCHEDULE 2.1.1, and all
applications therefor, together with any renewals, extensions or modifications
thereof and additions thereto;
2.1.2 TANGIBLE PERSONAL PROPERTY.
The equipment, inventory, supplies, antenna installations, and
other tangible property set forth and described in SCHEDULE 2.1.2;
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2.1.3 INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises, software,
licenses (other than the FCC Licenses), trademarks, trade names, jingles, and
slogans, if any, and other similar intangible assets maintained, owned, used,
held for use or otherwise held by Seller or Whitehead in connection with the
business and operations of the Station (including any and all applications,
registrations, extensions and renewals relating thereto) (the "Intellectual
Property"), and all of the rights, benefits and privileges associated therewith
including, without limitation, those set forth and described in SCHEDULE 2.1.3
and the right to use the call letters for the Station;
2.1.4 STATION CONTRACT.
The Contract listed on SCHEDULE 2.1.4 (the "Station Contract")
(and any and all Real Property rights or interests granted to Whitehead-Georgia
thereunder) and the Additional Agreements;
2.1.5 FILES AND RECORDS.
All engineering, business and other books, papers, logs, files
and records in the possession of Seller or Whitehead pertaining to the business
and operations of the Station, but not the books, records and other documents
described in Section 2.2.7;
2.1.6 THIRD-PARTY CLAIMS.
All rights and claims of Seller whether mature, contingent or
otherwise, against third parties relating to the Assets and attributable to the
operation of the Station following the Closing, whether in tort, contract, or
otherwise, including, without limitation, causes of action, unliquidated rights
and claims under or pursuant to all warranties, representations and guarantees
made by manufacturers, suppliers or vendors; and
2.1.7 PERMITS AND LICENSES.
All permits, approvals, orders, authorizations, consents,
licenses, certificates, franchises, exemptions of, or filings or registrations
with, any court or Governmental Authority (other than the FCC) in any
jurisdiction, which have been issued or granted to or are owned or used by
Seller with respect to the Station and all pending applications therefor.
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2.2 EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this Agreement,
there shall be excluded from the Assets and retained by Seller, to the extent in
existence at midnight (Atlanta local time) on the date immediately preceding the
Closing Date, the following assets (collectively, the "Excluded Assets");
2.2.1 CASH.
All cash and cash equivalents and cash held by Seller, bank
balances and rights in and to bank accounts, marketable and other securities of
Seller.
2.2.2 ACCOUNTS RECEIVABLE.
All Accounts Receivable.
2.2.3 PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of or consumed in the
Ordinary Course of Business as permitted by this Agreement.
2.2.4 INSURANCE.
All Contracts of insurance and all insurance plans and the
assets thereof listed on SCHEDULE 3.19.
2.2.5 EMPLOYEE PLANS AND ASSETS.
All Plans, Benefit Arrangements, Qualified Plans and Welfare
Plans and the assets thereof.
2.2.6 RIGHT TO TAX REFUNDS.
Any and all claims of Seller with respect to any Tax refunds.
2.2.7 CERTAIN BOOKS AND RECORDS.
All of (a) Seller's or Whitehead's corporate minute books,
stock transfer books, corporate records relating to Seller's or Whitehead's
incorporation, and corporate seals, and originals of account books of original
entry; (b) duplicated copies of any books, records, accounts, checks, payment
records, Tax records (including payroll, unemployment, real estate and other Tax
records) and
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other similar books, records and information of Seller or Whitehead relating to
Seller's or Whitehead's operation of the business of the Station prior to the
Closing; (c) all records prepared by or on behalf of Seller or Whitehead in
connection with the sale of the Station; and (d) all records and documents
relating to any Excluded Assets.
2.2.8 RIGHTS UNDER THIS AGREEMENT.
All of Seller's rights under or pursuant to this Agreement or
any other rights in favor of Seller pursuant to the other agreements
contemplated hereby.
2.2.9 CERTAIN CONTRACTS.
Any Contract other than the Station Contract.
2.2.10 NAME.
All rights to the name "Paxson" or any logo or variation
thereof and the goodwill associated therewith.
2.2.11 OTHER ASSETS.
Those assets set forth and described on SCHEDULE 2.2.11.
2.2.12 WPXA ASSETS.
All real, personal and mixed assets, rights, benefits and
privileges, both tangible and intangible, wheresoever situated or located,
owned, leased, used, held for use or otherwise held by Seller in connection with
the business and operations of Television Station WPXA(TV) (formerly WTLK(TV)),
Rome, Georgia (collectively, the "WPXA Assets"). Notwithstanding any provision
in this Agreement to the contrary, Buyer acknowledges and agrees that Seller
shall have no obligation to assign, transfer, convey or deliver to Buyer any of
the WPXA Assets notwithstanding the fact that certain of the WPXA Assets may be
used or useful in connection with the operation of the Station.
2.3 EXERCISE OF OPTION.
Simultaneously with the execution and delivery of this
Agreement, Seller is providing written notice, in the form attached hereto as
EXHIBIT E, of Seller's exercise of the Option in accordance with the terms of
the Option Documents, and, except as set forth in the following sentence, Seller
shall execute and deliver the Whitehead Purchase Agreement in accordance with
the
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terms of the Option Documents within ten (10) days of the date of such written
notice by Seller. Notwithstanding the terms of this Section 2.3 or any other
provision in this Agreement to the contrary, Seller shall be permitted to modify
any provision in the Option Documents or the Whitehead Purchase Agreement as may
be required to (a) obtain Whitehead's consent to amend the Whitehead Time
Brokerage Agreement to delete Section 6.1(e) thereof giving either party the
right to terminate upon six months prior notice to the other party and to insert
a provision that the Whitehead Time Brokerage Agreement automatically shall
terminate upon the Whitehead Closing, (b) obtain Whitehead's consent to the
assignment of the Whitehead Time Brokerage Agreement, as amended, to SKMD as
contemplated by Section 11.1.2.1, (c) extend the upset date contained in the
Whitehead Purchase Agreement, or (d) otherwise conform the provisions of the
Option Documents or the Whitehead Purchase Agreement to the requirements of
Article 11 hereof, so long as such modification does not materially adversely
affect Buyer.
2.4 PURCHASE PRICE.
For and in consideration of the conveyances and assignments
described herein and in addition to the assumption of liabilities as set forth
in the Assumption Agreement, Buyer agrees to pay to Seller, and Seller agrees to
accept from Buyer, a purchase price equal to Fifty Million Dollars
($50,000,000), payable in cash at the Closing, as adjusted by the net amount of
the adjustments provided in Section 2.6 (the "Purchase Price"). SKMD shall cause
the Exchange Agent to pay, on behalf of SKMD, the portion of the Purchase Price
allocable to the FCC Licenses as determined by Section 8.3, and USA of Maryland
shall pay the remainder of the Purchase Price. The Purchase Price shall be
payable as described in Section 2.5. The Purchase Price shall be allocated among
the Assets in accordance with Section 8.3.
2.5 PAYMENT OF PURCHASE PRICE.
The Purchase Price shall be payable to Seller on the Closing
Date by federal wire transfer of immediately available funds to an account which
will be identified by Seller not less than three (3) days prior to the Closing
Date.
2.6 ADJUSTMENTS TO PURCHASE PRICE.
2.6.1 ADJUSTMENTS.
All revenues and expenses arising from the business and
operations of the Station shall be prorated or allocated in cash between Buyer
and Seller as of the end of the broadcast day immediately preceding the Closing
Date. Such expenses shall include, without limitation, all assessments, taxes
and other similar charges, general and special, ordinary and extraordinary,
whether the same
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are then due or are payable thereafter (in installments or otherwise), or which
have been confirmed by any public authority at the Closing Date; and all
business and license fees, prepaid expenses, taxes and utility expenses arising
from the business and operations of the Assets, lease rental agreements,
insurance, rents payable or receivable, and all other items normally prorated in
the sale of the assets of a business and of a television broadcast station in
particular.
2.6.2 SCHEDULE OF ADJUSTMENTS.
On the Closing Date, Seller shall deliver to Buyer an
estimated schedule of adjustments (the "Estimated Schedule of Adjustments"). To
the extent that Buyer and Seller agree on the Estimated Schedule of Adjustments,
any payment required thereunder by Buyer or Seller, as the case may be, shall be
made on the Closing Date. Within thirty (30) days following the Closing Date,
Buyer shall deliver to Seller a final schedule of adjustments (the "Final
Schedule of Adjustments") that shall set forth the adjustments contemplated by
Section 2.6.1, taking into effect any payment made pursuant to the Estimated
Schedule of Adjustments. Seller shall have thirty (30) days following receipt of
the Final Schedule of Adjustments to notify Buyer either that it accepts or
rejects the Final Schedule of Adjustments. If Seller provides notice of
objection to the Final Schedule of Adjustments, the parties shall endeavor for a
period of thirty (30) days to resolve such dispute in a mutually satisfactory
manner. If Buyer and Seller are unable to reach agreement within such thirty
(30) day period, Buyer and Seller shall request a mutually acceptable nationally
recognized independent public accounting firm to resolve the dispute and
determine the Final Schedule of Adjustments. Such accounting firm shall, within
thirty (30) days of such submission, deliver to Seller and Buyer a written
report resolving the disputed matters, and its determination shall be final,
conclusive and binding upon Buyer and Seller. Any payment required under the
Final Schedule of Adjustments shall be made by federal wire transfer of
immediately available funds to the bank account designated by Buyer or Seller,
as the case may be, within three (3) days of the final determination of the
Final Schedule of Adjustments. The parties shall cooperate with each other and
such public accounting firm in order to facilitate the determination of the
Final Schedule of Adjustments.
2.7 ASSUMPTION OF LIABILITIES.
2.7.1 At the Closing, Buyer shall assume and become liable
for the following: (a) the Liabilities of Seller to be performed on and after
the Closing Date under the Station Contract listed on SCHEDULE 2.1.4; (b) the
Liabilities of Seller to be performed on and after the Closing Date under the
Additional Agreements, if any; and (c) the Liabilities of Seller to be performed
on and after the Closing Date under the FCC Licenses (collectively, the "Assumed
Liabilities"). Buyer is assuming Liabilities of Seller only to the extent such
Liabilities are not overdue or delinquent
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on the Closing Date without regard to any grace period and without the
incurrence of any increase in amounts due.
2.7.2 Except for those Liabilities expressly assumed by Buyer
pursuant to Section 2.7.1 hereof, Buyer assumes no other Liabilities of any kind
or description whether connected with the business and operations of the
Station, Seller or otherwise, including, without limitation, all claims,
Liabilities, obligations, requirements, penalties, fines or costs (including
costs of environmental remediation or removal) arising from the ownership or
operation of any of the Assets or the business and operations of the Station,
Seller or Whitehead prior to the Closing Date (the Liabilities of the Station,
Seller or Whitehead which are not assumed by Buyer are hereinafter collectively
referred to as the "Non-Assumed Liabilities"). Except for those Liabilities
expressly assumed by Buyer pursuant to Section 2.7.1, Seller shall indemnify and
hold Buyer harmless from all Non-Assumed Liabilities in accordance with Section
12.2 hereof.
2.7.3 Without limiting the generality of Section 2.7.1 and
Section 2.7.2 and notwithstanding any other provision hereof, each of the
following is a Non-Assumed Liability of Seller which Buyer does not assume:
(a) any Liabilities of Seller hereunder;
(b) any Liability of Seller arising from indebtedness of
Seller;
(c) any liability of Seller or Whitehead arising under
the Whitehead Purchase Agreement;
(d) any Liability of Seller arising from, or in
connection with, the business and operations of the Station or the ownership of
the Station or the Assets prior to the Closing Date, including, without
limitation, any such Liabilities arising by reason of any violation or claimed
violation by Seller of any Law;
(e) any Liability of Seller for Taxes owed, due or
payable to any Governmental Authority;
(f) any Liability of Seller arising out of, resulting
from or related to past, present or future litigation involving Seller or Seller
as an owner or operator of the Station, whether the relevant cause of action
accrues before or after the Closing;
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(g) any Liability in respect of any Contract to which
Seller is a party or a beneficiary which is not a contract identified in the
Assumption Agreement;
(h) any Liability under any Station Employee Benefit
Plan;
(i) any Liability arising out of the employment or
termination of employment, in either case prior to the Closing, of any current
(active or non-active), former or retired employee of Seller;
(j) any Liability that represents any amounts past due
or contractually due prior to the Closing Date on any Contract identified in the
Assumption Agreement;
(k) any Liability of Seller or any present or former
director or officer of Seller arising from any claim, action or proceeding,
including, without limitation, any derivative action, brought by or on behalf of
any present or former holder of any debt or equity security of Seller or by any
lender to Seller, including, without limitation, any Liability arising from any
indemnification, reimbursement or advance in connection therewith; and,
(l) any Liability of Seller which is not an Assumed
Liability under Section 2.7.1.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND STANDING.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of Florida and is duly qualified to do business
as a foreign corporation and is in good standing under the laws of the State of
Georgia. Paxson is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Neither the nature of the business
conducted by Seller, nor the character of the properties owned, leased or
otherwise held by Seller makes any such qualification necessary in any other
state, country, territory or jurisdiction. Seller has the full and unrestricted
power and authority, corporate and otherwise, to own, lease and otherwise to
hold and operate the Assets (other than the FCC Licenses), to carry on the
business of the Station as now conducted by Seller under the Whitehead Time
Brokerage Agreement, and Seller and Paxson each has the full
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and unrestricted power and authority, corporate and otherwise to enter into and
perform the terms of this Agreement, the other Seller Documents to which each is
a party and the transactions contemplated hereby and thereby. Copies of the
articles of incorporation and bylaws of Seller have been delivered to Buyer, are
complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof. Except as set forth on SCHEDULE 3.1, Seller
does not own any capital stock of or other equity interest in any corporation,
partnership or other Person.
3.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
of the other Seller Documents, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action of the board of directors of Seller and Paxson and by any other
necessary corporate or shareholder actions of Seller and Paxson (none of which
actions has been modified or rescinded and all of which actions are in full
force and effect). This Agreement constitutes, and upon execution and delivery
each other Seller Document will constitute, valid and binding agreements and
obligations of Seller and Paxson, enforceable against Seller and Paxson, as
applicable, in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
3.3 COMPLIANCE WITH LAWS.
Seller is in compliance in all material respects with Laws
applicable to the Assets owned or held by Seller, and the Station's business and
operations as now conducted by Seller under the Whitehead Time Brokerage
Agreement, and to Seller's knowledge, Whitehead is in compliance in all material
respects with the Communications Act and all other material Laws applicable to
the Assets owned or held by Whitehead, the Station and the Station's business
and operations. Subject to consummation of the Whitehead Closing and Seller's
obligation to immediately thereafter transfer to SKMD the FCC Licenses, Seller
has obtained (or will obtain) and holds (or will hold) all Licenses (none of
which has been rescinded and all of which are in full force and effect) from the
FCC and all other material Licenses from all other Governmental Authorities
necessary in order to conduct the operations of the Station as presently
conducted and to own, use and maintain the Assets.
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3.4 REQUIRED CONSENTS; NO CONFLICTS.
3.4.1 Except as set forth on SCHEDULE 3.4.1, the execution
and delivery of this Agreement, and the performance of the transactions
contemplated herein by Seller, will not require any consent, approval,
authorization or permit of or filing with, or notification to any person, entity
or Governmental Authority. All of the Assets to be sold hereunder are
transferable by Seller by Seller's sole act and deed, and no consent on the part
of any other person is necessary to validate the transfer to Buyer, except as
follows: (a) the FCC Licenses described in SCHEDULE 2.1.1 are not assignable
without the consent of the FCC as provided by law; (b) the Station Contract may
be assigned only with the consent of the licensor identified therein, as
specified in SCHEDULE 3.4.1; (c) certain of the Assets may be transferred only
after the consummation of the Whitehead Closing; (d) the requirement of filing
pre-merger notification reports under Hart-Scott-Rodino; and (e) those consents
that may be required solely by reason of Buyer's (as opposed to any other third
party's) participation in the transactions contemplated hereby.
3.4.2 Subject to the consummation of the Whitehead Closing,
obtaining the FCC Order and the consent identified on SCHEDULE 3.4.1, and the
satisfaction of the requirements of Hart-Scott-Rodino, the execution and
delivery of this Agreement and the other Seller Documents, the fulfillment of
and the compliance with the respective terms and provisions of each, and the
consummation of the transactions described in each, do not and will not (a)
conflict with or violate any Law, order, award, judgment, injunction or decree
applicable to Seller or Paxson, the Assets or the Station or by which any of the
Assets or the Station is subject or affected that would prevent Seller or Paxson
from performing their respective obligations hereunder or otherwise materially
interfere with the ownership or operation of the Assets; (b) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) of any Contract to which Seller
or Paxson is a party or by which Seller or Paxson is bound or to which any of
the Assets or the Station is subject or affected that would prevent Seller or
Paxson from performing their respective obligations hereunder or otherwise
materially interfere with the ownership or operation of the Assets, or result in
the creation of any Encumbrance upon the Assets; or (c) conflict with or violate
the articles of incorporation or bylaws of Seller or Paxson.
3.5 OPTION DOCUMENTS; KBSP AGREEMENT.
Seller has delivered to Buyer full, correct and complete
copies of the Option Documents, and the Option Documents consist of the only
agreements, instruments or documents executed by Seller or Paxson in connection
with the Option. Seller is the sole and exclusive legal and equitable owner of
all right, title and interest in and to the Option, free and clear of any
Encumbrances, except for
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and subject only to those Encumbrances that shall be removed prior to or
contemporaneously with the Closing. All amounts payable to Whitehead under the
Whitehead Time Brokerage Agreement are specified in Section 1.5 of the Whitehead
Time Brokerage Agreement and Attachments I and II thereto. Paxson Communications
of Oregon-22, Inc. and Paxson Oregon License, Inc. (collectively, the "Paxson
Entities") are in negotiations to enter into the KBSP Agreement with the other
parties thereto with respect to the purchase by the Paxson Entities of KBSP.
Upon execution and delivery of the KBSP Agreement by all of the parties thereto,
the KBSP Agreement will be a valid and binding agreement. Seller promptly will
deliver to Buyer a correct and complete copy of the KBSP Agreement. Seller will
cause the Paxson Entities to (i) comply in all material respects with the terms
of the KBSP Agreement applicable to the Paxson Entities; (ii) enforce their
rights thereunder; (iii) as soon as practicable after the time of receipt or
delivery by the Paxson Entities, deliver to Buyer copies of all notices and
other documents received or delivered by the Paxson Entities under the KBSP
Agreement, and (iv) subject to any rights to terminate contained herein or in
the KBSP Agreement, consummate the closing under the KBSP Agreement on the
earliest date permitted hereunder and thereunder.
3.6 INTENTIONALLY OMITTED.
3.7 ABSENCE OF LITIGATION.
Except for any proceedings generally affecting the
broadcasting industry and not particular to Seller and except as set forth and
described in SCHEDULE 3.20 or SCHEDULE 3.7, as of the date hereof, there is no
action, suit, investigation, arbitration or litigation pending or, to Seller's
knowledge, threatened against Seller that affects the Assets, the Station or the
Station's business and operations, or the transactions contemplated by this
Agreement or any other Seller Document, at law or in equity, or before or by any
court, arbitrator or Governmental Authority, and neither Seller nor the Station
is operating under or subject to any order, award, judgment, writ, decree,
determination or injunction of any court or arbitrator. No Governmental
Authority has at any time challenged, questioned, or commenced, or given notice
of intention to commence any investigation relating to, the legal right of
Seller to conduct the operations of the Station as now or heretofore conducted
by Seller.
3.8 TOTALITY OF ASSETS; ENCUMBRANCES.
3.8.1 The Assets include all of the transmission equipment
necessary to broadcast programming from the Station's transmitter facilities as
currently broadcast.
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3.8.2 Except for the Licenses and subject to the consummation
of the Whitehead Closing, Seller is or will be the sole and exclusive legal and
equitable owner of, and has good title to, the Assets free and clear of any
Encumbrances, except for and subject only to those Encumbrances listed in
SCHEDULE 3.8.2, which shall be discharged and removed by the Closing Date, and
Permitted Encumbrances.
3.8.3 At the Closing, Buyer shall acquire good title to, and
all of Seller's right, title and interest in and to the Assets, free and clear
of all Encumbrances other than the Permitted Encumbrances, and at the Closing,
Buyer shall acquire all of Whitehead's right, title and interest in and to the
FCC Licenses. For the purpose of this Section 3.8.3, the terms "Closing" and
"Closing Date" shall not be deemed to refer to any Closing or Closing Date that
occurs pursuant to Section 11.1.2.1.
3.9 FCC MATTERS.
3.9.1 Following the Whitehead Closing, Seller will hold the
FCC Licenses set forth and described on SCHEDULE 2.1.1. The FCC Licenses
constitute all of the licenses, permits and authorizations issued by the FCC
that are necessary or required for the lawful conduct of and/or used in the
business and operations of the Station as currently conducted. The FCC Licenses
are valid and in full force and effect and expire on the dates set forth on
SCHEDULE 2.1.1, unimpaired by any condition, other than the conditions set forth
on the authorizations for the FCC Licenses or in the rules, regulations or
policies of the FCC. No application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses. Except for actions or
proceedings affecting broadcast stations generally, including, without
limitation, the FCC rulemaking identified as IN THE MATTER OF ADVANCED
TELEVISION SYSTEMS, MM Docket No. 87-268, any and all collateral and subsequent
FCC or court proceedings relating thereto (the "DTV Rulemaking"), to Seller's
knowledge, no application, complaint, notice of violation, action or proceeding
is pending or threatened by or before the FCC against Seller or the Station that
could reasonably be expected to result in the (a) denial of an application for
renewal of any FCC License; (b) the revocation, adverse modification,
non-renewal or suspension of any of the FCC Licenses; (c) the issuance of a
cease-and-desist order by the FCC against the Station; or (d) the imposition of
any material administrative or judicial sanction with respect to the Station.
3.9.2 As of the date hereof, no person has notified any
officer of Seller of his or her intention to contest the renewal of the current
term of any FCC License for the Station.
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3.9.3 The Station's transmitting equipment is being and has
been operated in compliance in all material respects with the Communications
Act, and the rules and regulations of the FCC. To Seller's knowledge, Whitehead
has complied in all material respects with all requirements of the FCC and the
Federal Aviation Administration applicable to Whitehead with respect to the
construction and/or alteration of the Station's antenna structures.
3.9.4 To Seller's knowledge, there are no facts, conditions
or events relating to Seller, Paxson or the Station that could reasonably be
expected to cause the FCC to deny the assignment of the FCC Licenses as provided
for in this Agreement.
3.10 REAL PROPERTY.
3.10.1 Seller does not own (and after the Whitehead Closing
will not own) any real property in connection with the business and operation of
the Station.
3.10.2 Except for Excluded Assets, SCHEDULE 2.1.4 lists all
licenses, leases and subleases pursuant to which any Real Property is occupied
or used by Seller or Whitehead with respect to the business or operations of the
Station. Following the Whitehead Closing, Seller will be the holder of the
license purported to be granted to Whitehead-Georgia pursuant to the Station
Contract identified in SCHEDULE 2.1.4 free and clear of all Encumbrances, other
than the Permitted Encumbrances and those Encumbrances set forth in the Station
Contract. The license granted under the Station Contract is in full force and
effect and constitutes a legal, valid and binding obligation of, and is legally
enforceable against, Whitehead-Georgia, and to the knowledge of Seller, the
licensor named therein. Whitehead-Georgia and, to Seller's knowledge, such
licensor have complied with all of the material provisions of the Station
Contract and are not in default thereunder in any material respect, and, to
Seller's knowledge, there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default.
3.10.3 All buildings, structures, fixtures and other
improvements that are occupied or used by Whitehead-Georgia pursuant to the
Station Contract are in good repair (ordinary wear and tear excepted). To the
knowledge of Seller, all such buildings, structures, fixtures and improvements
conform in all material respects with all applicable building, zoning,
subdivision, environmental, land-use, fire and other Laws pertaining to or
affecting such buildings, structures, fixtures and other improvements.
3.10.4 To Seller's knowledge, no portion of any building,
structure, fixture or improvement used by Whitehead-Georgia pursuant to the
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Station Contract is the subject of, or affected by, any condemnation, eminent
domain or inverse condemnation proceeding currently instituted or pending.
3.11 CONDITION OF TANGIBLE ASSETS.
All tangible Assets are in good operating condition and
repair, (ordinary wear and tear excepted), and are appropriate for the uses for
which they are being used; and such Assets and the present use thereof do not
violate in any material respect any applicable licenses, statutes, building,
fire, zoning, health and safety or any other Laws or generally accepted
engineering standards.
3.12 INTELLECTUAL PROPERTY.
SCHEDULE 2.1.3 contains a true, correct and complete listing
of all Intellectual Property owned or licensed by or registered in the name of
Seller with respect to the business and operations of the Station, all of which
are transferable to Buyer (following the consummation of the Whitehead Closing)
by the sole act and deed of Seller, subject to obtaining the FCC Order; and no
consent on the part of any other person, other than the FCC Order, is necessary
to validate the transfer to Buyer of such Intellectual Property. Seller pays no
royalty to anyone with respect to the Intellectual Property and, after the
consummation of the Whitehead Closing, will have the right to bring action for
the infringement thereof. Subject to the consummation of the Whitehead Closing,
Seller owns or possesses all rights to use all such Intellectual Property
necessary to the conduct of the business of the Station as currently conducted.
Seller does not have any knowledge and Seller has not received any notice to the
effect that any service rendered by Seller relating to the business of the
Station may infringe on any Intellectual Property right or other legally
protectable right of another. Seller will have following the consummation of the
Whitehead Closing the right to the use of the call letters "WNGM-TV" pursuant to
the rules and regulations of the FCC.
3.13 Reports and Records.
All returns, reports and statements relating to the Station
currently required to be filed by Seller (or, to Seller's knowledge, by
Whitehead) with the FCC or any other Governmental Authority have been filed and
complied with except for such returns, reports and statements, the failure to
file or comply with which could not reasonably be expected to have a material
adverse effect on the business or operations of the Station and are true,
correct and complete in all material respects. All such reports, returns and
statements shall continue to be filed in all material respects on a current
basis until the Closing Date, and will be true, correct, and complete in all
material respects. To the knowledge of Seller, the Station's public file has
been maintained in all material respects in accordance with the rules and
regulations of the FCC and all logs and business records relating to
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the business and operations of the Station that are required to be maintained by
the FCC, including without limitation, political and public files, program,
operating and maintenance logs, equipment performance measurements, have been
maintained in all material respects in accordance with the rules and regulations
of the FCC and are in the possession of Seller at the Station's transmitter or
studio location.
3.14 STATION CONTRACT.
The Station Contract set forth and described in SCHEDULE 2.1.4
is the only Contract relating to the Assets. Neither Seller nor Whitehead has
entered into any Contract or any amendment or modification which waives any of
its respective rights under the Station Contract. Seller has delivered a true
and complete copy of such Station Contract (and all amendments and modifications
thereto) to Buyer prior to the execution of this Agreement. The Station Contract
is in full force and effect, and constitutes a legal, valid and binding
obligation of, and is legally enforceable against Whitehead-Georgia and to
Seller's knowledge against the licensor thereunder. Except as specified on
SCHEDULE 3.18, Whitehead-Georgia has complied in all material respects with the
Station Contract and is not in default thereunder in any material respect, and
to Seller's knowledge, there has not occurred any event which (whether with or
without notice, lapse of time, or the happening or occurrence of any other
event) would constitute such a default. To Seller's knowledge, there has not
been (i) any threatened cancellation of the Station Contract or (ii) any
outstanding dispute regarding a matter that would constitute a default
thereunder.
3.15 TAXES.
3.15.1 Except where the failure to file, pay or accrue any
Taxes does not result in an Encumbrance on the Assets or in the imposition of
transferee or other liability on Buyer for the payment of Taxes, (a) Seller has
(or, in the case of Seller Tax Returns becoming due after the date hereof and on
or before the Closing Date, will have prior to the Closing Date) filed all
Seller Tax Returns required to be filed by Seller on or before the Closing Date
with respect to all applicable Taxes, (b) all Seller Tax Returns are (or, in the
case of Seller Tax Returns becoming due after the date hereof and on or before
the Closing Date, will be) true and complete in all material respects, and (c)
Seller has paid or properly accrued all Taxes due or claimed to be due by any
Governmental Authority in connection with any of Seller Tax Returns (without
regard to whether or not such Taxes are shown as due on such Seller Tax
Returns).
3.15.2 There is no action, suit, proceeding, audit,
investigation or claim pending or, to the knowledge of Seller, threatened in
respect of any Taxes that could result in an Encumbrance on the Assets or in the
imposition of transferee or other liability on Buyer for the payment of Taxes.
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3.15.3 Seller does not hold and is not required to hold a
retail sales tax permit (or the equivalent) and has not taken any actions that
would prevent the parties from relying on applicable casual or occasional sales
tax exemptions under relevant sales tax statutes in connection with this
transaction.
3.16 EMPLOYEE BENEFIT PLANS.
Seller has not incurred and will not incur as a result of the
consummation of the transactions contemplated under this Agreement any material
liability with respect to any Plan or any Benefit Arrangement which could give
rise to any material liability of Buyer.
3.17 LABOR RELATIONS.
There are no strikes, work stoppages, or grievance
proceedings, or other material controversies pending, or to the knowledge of
Seller, threatened between Seller and (a) any of the Station's current or former
employees, or (b) any union or collective bargaining unit representing such
employees. Seller has complied and is in compliance in all material respects
with all Laws applicable to Seller's employees and relating to employment or the
workplace, including, without limitation, provisions relating to wages, hours,
collective bargaining, safety and health, work authorization, equal employment
opportunity, immigration and the withholding of income taxes, unemployment
compensation, worker's compensation, employee privacy and right to know and
social security contributions. There are no collective bargaining agreements,
employment agreements, or professional service Contracts to which Seller is a
party (or to which Seller will become a party after the Whitehead Closing)not
terminable at will relating to the Station or the business and operations
thereof. The consummation of the transactions contemplated hereby will not cause
Buyer to incur or suffer any Liability relating to, or obligation to pay,
severance, termination, or other payments to any existing or former employee of
Seller or Whitehead. Except as set forth in SCHEDULE 3.17.1 hereto, no employee
of the Station has any contractual right to continued employment by Buyer
following consummation of the transactions contemplated by this Agreement. To
the knowledge of Seller, there is no union campaign being conducted to represent
employees of the Station.
3.18 ENVIRONMENTAL MATTERS.
3.18.1 Except as specified on SCHEDULE 3.18, Seller's (and,
to Seller's knowledge, Whitehead's) operations at the Station's transmitter site
have complied and are in compliance in all material respects with all
Environmental Laws.
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3.18.2 Except as specified on SCHEDULE 3.18, there are no
pending or, to the Knowledge of Seller, threatened actions, suits, claims, legal
proceedings or other proceedings based on, and neither Seller nor any officer,
director or stockholder thereof has received any notice of any complaint, order,
directive, citation, notice of responsibility, notice of potential
responsibility, or information request from any Governmental Authority or any
other person or entity or knows any fact(s) which could reasonably be expected
to form the basis for any such actions or notices arising out of or attributable
to: (a) the current or past release or threatened release into the environment
from the Real Property (including, without limitation, into any storm drain,
sewer, septic system or publicly owned treatment works) of any Hazardous
Materials or any substances that pose a hazard to human health or an impediment
to working conditions; (b) the off-site disposal of Hazardous Materials
originating on or from the Real Property or the business or Assets of Seller
located on the Real Property; (c) any facility operations or procedures of
Seller (or to Seller's knowledge, of Whitehead) at the Real Property which do
not conform in any material respect to requirements of the Environmental Laws;
or (d) any violation of Environmental Laws at any part of the Real Property or
otherwise arising from Seller's activities at the Real Property involving
Hazardous Materials.
3.18.3 Except as disclosed on SCHEDULE 3.18, to Seller's
knowledge based solely on inquiry to the Licensor identified in the Station
Contract and to Whitehead, the Real Property contains no underground storage
tanks, or underground piping associated with such tanks, used currently for
Hazardous Materials. Seller makes no representation or warranty whatsoever
regarding the condition, operation or use of such storage tanks.
3.18.4 Seller, has furnished to Buyer accurate and complete
copies of all environmental assessments performed by Seller or in Seller's
possession with respect to the Real Property.
3.18.5 The operation of the Station does not cause or result
in exposure of workers or the general public to levels of radio frequency
radiation in excess of the "Radio Frequency Protection Guides" recommended in
"American National Standard Safety Levels with Respect to Human Exposure to
Radio Frequency Electromagnetic Fields 300 kHz to 100 gHz" (ANSI C95.1-1982),
issued by the American National Standards Institute, and renewal of the FCC
Licenses on the date hereof would not constitute a "major action" within the
meaning of Section 1.1301, ET SEQ., of the FCC's rules.
3.19 INSURANCE.
SCHEDULE 3.19 contains a list and brief summary of all
policies of title, property, fire, casualty, liability, life, workmen's
compensation, libel and
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slander, and other forms of insurance of any kind relating to the Assets or the
business and operations of the Station and owned or held by Seller or Whitehead.
All such policies: (a) are in full force and effect and (b) are valid,
outstanding, and enforceable policies.
3.20 CABLE SYSTEMS.
(a) SCHEDULE 3.20(a) hereto contains a complete and accurate
list of all cable television systems carrying the Station's signal;
(b) SCHEDULE 3.20(b) hereto contains a complete and accurate
list of all Market Cable Systems on which the Station made a must-carry election
for the current must-carry election period (by default or otherwise) and on
which the Station is not currently carried;
(c) SCHEDULE 3.20(c) hereto contains a complete and accurate
list of all retransmission consent agreements and/or copyright indemnification
agreements, if any, entered into on behalf of the Station;
(d) SCHEDULE 3.20(d) hereto contains a complete and accurate
list of all retransmission consent elections made by the Station;
(e) SCHEDULE 3.20(e) hereto contains a complete and accurate
list of all Market Cable Systems, if any, which are carrying the Station and
which have notified Seller or the Station 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 (c) above;
(f) SCHEDULE 3.20(f) hereto contains copies of each notice, if
any, received by the Station from any Market Cable System alleging that the
Station does not deliver an adequate quality signal, 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 the
Station and any such Market Cable System relating to such notice;
(g) SCHEDULE 3.20(g) hereto contains a complete and accurate
list of all pending petitions for special relief to modify the area in which the
Station is entitled to demand must-carriage pursuant to Sections 76.55(c) and
(e) of the FCC Regulations;
(h) SCHEDULE 3.20(h) hereto contains a complete and accurate
list of must- carry complaints, if any, filed on behalf of the Station;
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Seller as follows:
4.1 ORGANIZATION AND STANDING.
SKMD is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware, and USA of
Maryland is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. By the Closing Date USA of Maryland
will be duly qualified to do business as a foreign corporation in Georgia. Buyer
has the full and unrestricted power and authority, corporate or otherwise, to
enter into and perform the terms of this Agreement and the other Buyer Documents
to which Buyer is a party and to carry out the transactions contemplated hereby
and thereby.
4.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
of the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary actions of Buyer and by any other necessary corporate or shareholder
action of Buyer (none of which actions has been modified or rescinded and all of
which actions are in full force and effect). This Agreement constitutes, and
upon execution and delivery each other Buyer Document will constitute, valid and
binding agreements and obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
4.3 COMPLIANCE WITH LAWS.
As of the Closing Date, Buyer shall have obtained and shall
hold all permits, licenses and approvals (none of which will have been modified
or rescinded and all of which shall be in full force and effect) from all
Governmental Authorities necessary in order to conduct the operations of the
Station as presently conducted and to own, use and maintain the Assets.
4.4 NO CONFLICTS.
Subject to obtaining the FCC Order and the consents identified
on Schedule 3.4.1, and satisfaction of the requirements of Hart-Scott-Rodino,
the
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execution and delivery of this Agreement and the other Buyer Documents, the
fulfillment of and the compliance with the respective terms and provisions of
this Agreement and the other Buyer Documents, and the consummation of the
transactions described herein and therein, do not and will not (a) conflict with
or violate any Law, order, award, judgment, injunction or decree applicable to
Buyer that would prevent Buyer from performing its obligations hereunder or
thereunder; (b) conflict with or result in any breach of or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) of any Contract to which Buyer is a party or by which Buyer is bound,
that would prevent Buyer from performing its obligations hereunder or
thereunder; or (c) conflict with or violate the Articles of Incorporation or
Bylaws of Buyer.
4.5 QUALIFICATION AS LICENSEE.
To Buyer's Knowledge, Buyer is legally, financially and
otherwise qualified to enter into and perform its obligations hereunder and to
be the licensee of and operate the Station under the Communications Act and the
rules, regulations and policies of the FCC. To Buyer's Knowledge, there are no
facts, conditions or events relating to Buyer or USA that could reasonably be
expected to cause the FCC to deny the assignment of the FCC Licenses as provided
for in this Agreement. Chicago Deferred Exchange Corporation currently is
holding on behalf of Buyer approximately $80,000,000 in proceeds from the sale
by Buyer of other broadcast station assets and, as of the Closing, Chicago
Deferred Exchange Corporation will hold on behalf of Buyer no less than
$50,000,000 to enable it to consummate the transactions contemplated by this
Agreement.
4.6 BLACKSTAR AGREEMENT.
USA is in negotiations to enter into the Blackstar Agreement
with all of the members of Blackstar L.L.C. with respect to the purchase by USA
of all of the membership interests of such members. Upon execution and delivery
of the Blackstar Agreement by all of the parties thereto, the Blackstar
Agreement will be a valid and binding agreement. USA promptly will deliver to
Buyer a correct and complete copy of the Blackstar Agreement. USA will (i)
comply in all material respects with the terms of the Blackstar Agreement
applicable to it; (ii) enforce USA's rights thereunder; (iii) as soon as
practicable after the time of receipt or delivery by USA, deliver to Seller
copies of all notices and other documents received or delivered by USA under the
Blackstar Agreement, and (iv) subject to any rights to terminate contained
herein or in the Blackstar Agreement, consummate the closing under the Blackstar
Agreement on the earliest date permitted hereunder and thereunder.
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ARTICLE 5.
PRE-CLOSING FILINGS
5.1 APPLICATIONS FOR FCC CONSENT.
Whitehead-Georgia and Buyer have jointly filed an application
for the Station with the FCC requesting its consent to the assignment of the FCC
Licenses for the Station from Whitehead-Georgia to SKMD. Seller and Buyer will
diligently take, or fully cooperate in the taking of, all necessary and proper
steps, and provide any additional information reasonably requested in order to
obtain promptly the requested consents and approvals of the applications by the
FCC; provided, however, that none of the parties hereto shall have any
obligation to take any unreasonable steps to satisfy complainants, if any, or to
participate in any evidentiary hearing. Each party agrees to comply with any
condition imposed on it by the FCC Order unless such condition (a) would have a
materially adverse effect on such party's rights or interests hereunder and (b)
does not result from events or circumstances that constitute a breach of the
representations, warranties and covenants of such party hereunder. Buyer and
Seller shall oppose any request for reconsideration or judicial review of the
FCC Order. If the Closing shall not have occurred for any reason within the
original effective period of the FCC Order, and neither party shall have
terminated this Agreement under Section 13.1, the parties shall jointly request
an extension of the effective period of the FCC Order. No extension of the FCC
Order shall limit the exercise by either party of its rights under Section 13.1.
5.2 HART-SCOTT-RODINO.
As promptly as practicable and no later than fifteen (15) days
following the execution of this Agreement, Seller and Buyer shall complete any
filing that may be required pursuant to Hart-Scott-Rodino (each an "HSR
Filing"). Seller and Buyer shall diligently take, or fully cooperate in the
taking of, all necessary and proper steps, and provide any additional
information requested by the Department of Justice or the Federal Trade
Commission in order to comply with, the requirements of such Act.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF SELLER
Seller covenants and agrees with Buyer as follows:
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6.1 NEGATIVE COVENANTS.
Pending and prior to the Closing, Seller will not, without the
prior written approval of Buyer, do or agree to do any of the following:
6.1.1 DISPOSITIONS; MERGERS.
Sell, assign, lease or otherwise transfer or dispose of any of
the Assets, the Option or the Whitehead Purchase Agreement; or merge or
consolidate with or into any other entity or enter into any Contracts relating
thereto; PROVIDED, HOWEVER, that Seller may sell, assign, lease or otherwise
transfer or dispose of any tangible Asset if such tangible Asset is expended in
the Ordinary Course of Business.
6.1.2 ADDITIONAL AGREEMENTS.
Acquire or enter into any new contract (or authorize Whitehead
under the terms of the Whitehead Purchase Agreement to acquire or enter into any
new Contract which is not terminable on 90-days notice), including without
limitation, any program contracts, affiliation agreements, local marketing
arrangements, joint operating agreements, time brokerage agreements or other
similar contracts, or renew, extend, amend, alter, modify or otherwise change
(or authorize Whitehead under the terms of the Whitehead Purchase Agreement to
renew, extend, amend, alter, modify or otherwise change) the Station Contract;
provided, however, that nothing contained herein shall be deemed to prevent
Seller from entering into any Contract that does not relate to the Assets or the
Station; provided further, however, that Buyer shall not be obligated to assume
any such Contract. Notwithstanding the terms of this Section 6.1.2 or any other
provision in this Agreement to the contrary, Seller shall be permitted to enter
into an affiliation or other similar agreement with respect to the programming
to be broadcast on the Station prior to the Closing Date (which programming may
be different than the programming broadcast on the Station on the date hereof),
provided that Buyer shall not be obligated to assume any such agreement and
provided further that the operation of the Station under such agreement shall
comply in all material respects with all requirements of the FCC Licenses and
the rules and regulations of the FCC.
6.1.3 BREACHES.
Do or omit to do any act (or permit such action or omission)
which will cause a material breach of the Station Contract by Seller, the Option
Documents, the Whitehead Purchase Agreement or any other Contract to which
Seller is a party or by which Seller is bound which would have a material
adverse effect on the Station or the Assets.
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6.1.4 EMPLOYEE MATTERS.
Enter into (or authorize Whitehead under the terms of the
Whitehead Purchase Agreement to enter into or become subject to) any employment,
labor, union, or professional service Contract for any employee of the Station
that is not terminable at will, or any bonus, pension, insurance, profit
sharing, incentive, deferred compensation, severance pay, retirement,
hospitalization, employee benefit, or other similar plan covering any such
employee of the Station other than in the Ordinary Course of Business; or
authorize Whitehead under the terms of the Whitehead Purchase Agreement to
increase the compensation payable or to become payable to any employee of the
Station other than in the Ordinary Course of Business.
6.1.5 ACTIONS AFFECTING FCC LICENSES OR CONTRACTS.
Take any action (and use its commercially reasonable efforts
to prohibit Whitehead from taking any action) which may jeopardize the validity
or enforceability of or rights under the FCC Licenses, the Option, the Option
Documents, the Whitehead Purchase Agreement, or which may prevent the
satisfaction or fulfillment of a condition precedent hereunder.
6.1.6 REPRESENTATIONS AND WARRANTIES.
Take any action or fail to take any action which would cause
any of Seller's representations or warranties contained herein to be untrue in
any material respect or Seller's covenants contained herein to be incapable of
being performed or satisfied in any material respect on the Closing Date.
6.2 AFFIRMATIVE COVENANTS.
Pending and prior to the Closing Date, Seller will:
6.2.1 PRESERVE EXISTENCE.
Preserve its corporate existence and its business organization
with respect to the Station intact, and keep all Assets in good working order
and repair, ordinary wear and tear excepted.
6.2.2 NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement
(including, without limitation, Section 6.1), (a) carry on the business and
activities of the Station in the usual and Ordinary Course of Business in
accordance with and subject to the Whitehead Time Brokerage Agreement; (b) pay
or otherwise satisfy in
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all material respects all obligations of Seller (cash and barter) with respect
to the Station as they come due and payable; and (c) maintain its books of
account, records, and files relating to the Station in substantially the same
manner as heretofore.
6.2.3 MAINTAIN FCC LICENSES.
Maintain (or use its commercially reasonable efforts to cause
Whitehead to maintain) the FCC Licenses in full force and effect, and comply (or
use its commercially reasonable efforts to cause Whitehead to comply) in all
material respects with all requirements of the FCC Licenses and the rules and
regulations of the FCC.
6.2.4 NOTICES UNDER WHITEHEAD PURCHASE AGREEMENT.
Deliver to Buyer any notices, demands, requests,
correspondence or other documents delivered by Seller under the Option
Documents, including, without limitation, the documents contemplated under
Section 2.3, simultaneously with such delivery by Seller, and deliver to Buyer
any notices, demands, requests, correspondence or other documents received by
Seller under the Option Documents within two (2) days of the date received by
Seller.
6.2.5 PERFORMANCE UNDER CONTRACTS.
Pay and perform in all material respects its obligations under
the Option Documents, and the Whitehead Purchase Agreement, the Station
Contract, and any Additional Agreements that shall be entered into between the
date hereof and the Closing by Seller pursuant to Section 6.1.2, in accordance
with the respective terms and conditions of such Contracts.
6.2.6 COMPLIANCE WITH WHITEHEAD PURCHASE AGREEMENT.
Use its commercially reasonable efforts to cause Whitehead to
perform its obligations under the Whitehead Purchase Agreement, including,
without limitation, Whitehead's obligations to comply with its covenants under
Section 5 of the Whitehead Purchase Agreement, and use its commercially
reasonable efforts to cause Whitehead to close under the Whitehead Purchase
Agreement notwithstanding the absence of a Final Order. Notwithstanding any
provision in this Agreement to the contrary, Seller shall not be deemed to be in
breach of its obligations hereunder if Whitehead fails to perform its
obligations under the Option Documents unless Seller has failed to use its
commercially reasonable efforts to cause Whitehead to perform thereunder.
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6.2.7 TAXES.
Pay or discharge when due and payable all Taxes, except where
the failure to pay Taxes would not result in an Encumbrance on the Assets or the
imposition of transferee or other liability on Buyer for the payment of Taxes.
6.2.8 CORPORATE ACTION.
Take all corporate action under the Laws of the State of
Florida necessary to effectuate the transactions contemplated by this Agreement
and by the other Seller Documents.
6.2.9 TRANSFER TAX; BULK SALES.
Notwithstanding any other provision of this Agreement, Buyer
hereby waives compliance by Seller with the provisions of any so-called "bulk
transfer law" of any jurisdiction in connection with the transactions
contemplated hereby. Seller shall indemnify and hold harmless Buyer, without
regard to the Basket Amount, against any and all liabilities which may be
asserted by third parties against Buyer as a result of noncompliance with any
"bulk transfer law."
6.2.10 ACCESS.
Seller will give (and will use its commercially reasonable
efforts to cause Whitehead to give) Buyer, and Buyer's accountants, counsel,
consultants, employees and agents, full and complete access during normal
business hours and upon reasonable prior notice to Seller to, and furnish (or
use its commercially reasonable efforts to cause Whitehead to furnish) them with
all documents, records, work papers and information with respect to, all of the
properties, assets, books, contracts, commitments, reports and records relating
to the Station, as the Buyer shall from time to time reasonably request. In
addition, Seller will permit (or use its commercially reasonable efforts to
cause Whitehead to permit) the Buyer, and its accountants, counsel, consultants,
employees and agents, reasonable access to such personnel during normal business
hours as may be necessary or useful to the Buyer in its review of the
properties, assets and business affairs of the Station.
6.2.11 OTHER INFORMATION.
Provide to Buyer (or use its commercially reasonable efforts
to cause Whitehead to provide to Buyer) all such other information and copies of
documents, at Buyer's expense, concerning Seller, the operation of the Station
and the Assets, the Option, and the Station's customers and suppliers, as Buyer
may reasonably request.
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6.2.12 ENGINEERING INSPECTIONS.
Prior to the Closing, permit (or use its commercially
reasonable efforts to cause Whitehead to permit) Buyer and Buyer's consulting
engineers and other representatives, agents, employees and independent
contractors, at Buyer's expense, to conduct engineering and other inspections of
the Station and the Assets during normal business hours and upon reasonable
prior notice to Seller; PROVIDED, HOWEVER, that any such inspection shall be
conducted in a manner that does not unreasonably interfere with the business or
operations of the Station and the Assets.
6.2.13 INSURANCE.
Maintain in full force and effect all of its existing
casualty, liability, and other insurance with respect to the Assets and the
business and operations of the Station through the day following the Closing
Date in amounts not less than those in effect on the date hereof.
6.2.14 VIOLATIONS.
Upon receiving notice or otherwise becoming aware of any
material violation relating to the FCC Licenses, any material violation by
Seller, Whitehead or the Station of any rules and regulations of the FCC, or any
material violations under any other applicable Laws, promptly notify Buyer and,
at Seller's expense, cure (or use its commercially reasonable efforts to cause
Whitehead to cure) all such violations prior to the Closing Date.
6.2.15 INTERRUPTION IN BROADCAST OPERATIONS.
Promptly notify Buyer in writing if the Station ceases to
broadcast at its authorized power for more than 48 consecutive hours. Such
notice shall specify the reason or reasons for such cessation and the corrective
measures taken or to be taken by Seller.
6.2.16 CONSENTS.
Seller shall use commercially reasonable efforts to obtain the
third party consent required to assign to Buyer the Station Contract listed on
SCHEDULE 3.4.1. Buyer, upon request of Seller, shall cooperate with Seller in
any commercially reasonable manner requested by Seller in connection with
obtaining such consent, including, without limitation, providing such guarantees
as may be required to release Paxson from its guarantee set forth in the Station
Contract insofar as such guarantee applies to the period following the Closing
Date. Notwithstanding any provision in this Agreement to the contrary, Buyer
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acknowledges that Seller shall have no liability whatsoever to Buyer arising out
of or relating to the failure to obtain any such consent if the licensor refuses
to release such guarantee.
6.3 CONFIDENTIALITY.
Seller shall, at all times, maintain strict confidentiality
with respect to all documents and information furnished to Seller by or on
behalf of Buyer. Nothing shall be deemed to be confidential information that:
(a) is known to Seller at the time of its disclosure to Seller; (b) becomes
publicly known or available other than through disclosure by Seller; (c) is
received by Seller from a third party not actually known by Seller to be bound
by a confidentiality agreement with or obligation to Buyer; or (d) is
independently developed by Seller. Notwithstanding the foregoing provisions of
this Section 6.3, Seller may disclose such confidential information (a) to the
extent required or deemed advisable to comply with applicable Laws, (b) to its
officers, directors, employees, representatives, financial advisors, attorneys,
accountants, agents and Whitehead with respect to the transactions contemplated
hereby (so long as such parties agree to maintain the confidentiality of such
information), and (c) to any Governmental Authority in connection with the
transactions contemplated hereby. In the event this Agreement is terminated,
Seller will return to Buyer all documents and other material prepared or
furnished by Buyer relating to the transactions contemplated hereunder, whether
obtained before or after the execution of this Agreement.
6.4 CABLE CARRIAGE.
Seller shall use its commercially reasonable efforts, prior to
and following the Closing Date, to cause Whitehead to file with the FCC within
the time periods specified by the rules and regulations of the FCC all necessary
and desirable petitions, responses and other information relating to Whitehead's
petitions for carriage under applicable must carry regulations by cable
operators serving subscribers in the Atlanta, Georgia Area of Dominant
Influence, and Seller will diligently take (and it will use its commercially
reasonable efforts to cause Whitehead to take), all necessary, desirable and
proper steps, and provide any additional information reasonably requested, in
order to obtain promptly such cable carriage by cable operators serving at least
900,000 subscribers in the Atlanta, Georgia Area of Dominant Influence;
provided, however, Seller shall not be required to pay any consideration to such
cable operators to obtain such carriage. Seller shall indemnify Buyer pursuant
to Section 12.2 for any Losses incurred by Buyer as a result of Whitehead's
failure to file a complaint with the FCC on or before April 10, 1998, regarding
MediaOne's refusal to carry the Station, which date is sixty days after the date
the Station received a letter from MediaOne that effectively denied carriage to
the Station.
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ARTICLE 7.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Seller as follows:
7.1 CONFIDENTIALITY.
Buyer shall, at all times prior to the Closing, maintain
strict confidentiality with respect to all documents and information furnished
to Buyer by or on behalf of Seller. Nothing shall be deemed to be confidential
information that: (a) is known to Buyer at the time of its disclosure to Buyer;
(b) becomes publicly known or available other than through disclosure by Buyer;
(c) is received by Buyer from a third party not actually known by Buyer to be
bound by a confidentiality agreement with or obligation to Seller; or (d) is
independently developed by Buyer. Notwithstanding the foregoing provisions of
this Section 7.1, Buyer may disclose such confidential information (a) to the
extent required or deemed advisable to comply with applicable Laws, (b) to its
officers, directors, employees, representatives, financial advisors, attorneys,
accountants, agents, and underwriters, with respect to the transactions
contemplated hereby (so long as such parties agree to maintain the
confidentiality of such information), and (c) to any Governmental Authority in
connection with the transactions contemplated hereby. In the event this
Agreement is terminated, Buyer will return to Seller all documents and other
material prepared or furnished by Seller relating to the transactions
contemplated by this Agreement, whether obtained before or after the execution
of this Agreement.
7.2 CORPORATE ACTION.
Prior to the Closing, Buyer shall take all partnership and
corporate action, as the case may be, under the Laws of the State of Delaware
necessary to effectuate the transactions contemplated by this Agreement and the
other Buyer Documents.
7.3 NEGATIVE COVENANTS.
Prior to the Closing, Buyer will not, without the prior
written approval of Seller, do or agree to do any of the following: (a) take any
action which may prevent the satisfaction or fulfillment of a condition
precedent hereunder or (b) take any action or fail to take any action which
would cause any of Buyer's representations and warranties to be untrue in any
material respect or Buyer's covenants contained herein to be incapable of being
performed or satisfied in any material respect on the Closing Date.
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ARTICLE 8.
MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLER AND BUYER
8.1 POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, Buyer shall not
directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the business and operations of the Station, and such
operation, including complete control and supervision of all programming, shall
be the ultimate responsibility of the licensee of the Station; PROVIDED,
HOWEVER, that Buyer shall be entitled to inspect the Assets as provided in
Section 6.2.10 so that an uninterrupted and efficient transfer of ownership may
be effected. On and after the Closing Date, Seller shall have no control over,
or right to intervene, supervise, direct or participate in, the business and
operations of the Station.
8.2 RISK OF LOSS.
8.2.1 Until the Closing, any loss of or damage to the Assets
from fire or other casualty or cause (other than any loss or damage resulting
from any act or omission of Buyer or any of Buyer's employees or
representatives) shall be the responsibility of Seller. In the event of such
loss or damage prior to the Closing Date, Seller shall use commercially
reasonable efforts to promptly restore, replace or repair the damaged Assets, at
Seller's sole cost and expense, to their condition prior to such loss or damage.
8.2.2 If, prior to the Closing, any loss to or damage of the
Assets occurs (other than any loss or damage resulting from any act or omission
of Buyer or any of Buyer's employees or agents) that causes the Station to cease
broadcasting operations for a period of seven (7) consecutive days, or prevents
in any material respect signal transmission by the Station in the normal and
usual manner for a period of fourteen (14) consecutive days, Buyer may, in its
sole discretion, upon written notice to Seller delivered within five (5) days
following either such period, (a) postpone the Closing until the Assets have
been restored or replaced such that normal and usual transmission of the
Station's signal is resumed (in which event the Closing shall be held within ten
(10) business days following such resumption), (b) proceed to consummate the
transactions contemplated by this Agreement and complete the restoration and
replacement of the Assets after the Closing Date (in which event Seller shall
deliver to Buyer all insurance and other proceeds received in connection with
such loss or damage), or (c) terminate this Agreement pursuant to Article XIII
hereunder.
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8.3 ALLOCATION OF PURCHASE PRICE.
8.3.1 ALLOCATION SCHEDULE.
Seller and Buyer shall attempt to agree to allocate the
Purchase Price among classes of Assets for the Station in accordance with an
allocation schedule to be agreed to by the parties (the "Allocation Schedule");
provided, however, in the event that Seller and Buyer are unable to agree on the
Allocation Schedule within sixty (60) days following execution of this
Agreement, the parties will proceed under Section 8.3.2.
8.3.2 APPRAISED ALLOCATION OF PURCHASE PRICE.
If Buyer and Seller are unable to agree on the Allocation
Schedule within such sixty (60) day period as contemplated under Section 8.3.1,
Seller and Buyer agree to retain Bond & Pecaro to appraise the classes of Assets
of the Station. Bond & Pecaro shall be instructed to perform an appraisal of the
classes of Assets of the Station and deliver a report to Seller and Buyer as
soon as reasonably practicable (the "Appraisal Report"). Seller and Buyer shall
share equally the fees, costs and expenses of the Bond & Pecaro whether or not
the transactions contemplated hereby are consummated. Seller and Buyer each
represent, warrant, covenant, and agree with each other that the Purchase Price
shall be allocated among the classes of Assets for the Station as set forth in
the Appraisal Report. Seller and Buyer agree, pursuant to Section 1060 of the
Code that the Purchase Price shall be allocated in accordance with this Section
8.3.2, and that all Tax returns and reports shall be filed consistent with such
allocation. Notwithstanding any other provision of this Agreement, the
provisions of this Section 8.3.2 shall survive the Closing Date without
limitation.
8.4 PUBLIC ANNOUNCEMENTS.
Seller and Buyer shall consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated herein and shall not issue any such
press release or make any such public statement without the prior consent of the
other party, which shall not be unreasonably withheld; provided, however, that a
party may, without the prior written consent of the other party, issue such
press release or make such public statement as may be required by Law or any
listing agreement with a national securities exchange to which Seller or Buyer
is a party if it has used all reasonable efforts to consult with the other party
and to obtain such party's consent but has been unable to do so in a timely
manner.
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8.5 EMPLOYEE MATTERS.
Buyer shall have the right but not the obligation to offer
employment to the employees of the Station listed on SCHEDULE 8.5 hereto on
terms and conditions determined by Buyer. No later than five (5) days prior to
Closing, Buyer shall provide Seller a written notice listing any such employees
of Seller that Buyer, upon Closing, desires to retain as employees.
8.6 SERVICES AGREEMENT.
Pending Buyer's search for alternative studio space and studio
equipment following the Closing, Seller and Buyer shall enter into the Services
Agreement in the form attached hereto as EXHIBIT F whereby Seller shall lease to
Buyer for a period of not longer than eighteen (18) months following the Closing
certain studio space and studio equipment; provided that such Services Agreement
may be terminated by Buyer upon sixty (60) days' notice which may be given at
any time after the date hereof, as more fully set forth in the Services
Agreement.
ARTICLE 9.
CONDITIONS PRECEDENT TO
BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Assets and to proceed
with the Closing are subject to the satisfaction (or waiver in writing by Buyer)
at or prior to the Closing of each of the following conditions:
9.1 REPRESENTATIONS AND COVENANTS.
(a) The representations and warranties of Seller made in this
Agreement or in any other Seller Document shall have been true and correct when
made, and shall be true and correct on the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
to the extent any such representation or warranty is expressly stated only as of
a specified earl'ier date or dates, in which case such representation and
warranty shall be true and correct in all material respects as of such earlier
specified date or dates; and (b) Seller shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
or any other Seller Document required to be performed or complied with by Seller
prior to the Closing.
9.2 CONSENTS.
Seller shall have obtained prior to the Closing Date all
consents, authorizations or approvals necessary to effect the valid assignment
to Buyer of the
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Station Contract, and all other consents necessary to consummate the
transactions contemplated hereby (except for the FCC Order, which shall be
governed by Section 9.4, and except for any HSR Filing, which shall be governed
by Section 9.6), each of which consents, authorizations and approvals shall be
in form and substance reasonably satisfactory to Buyer.
9.3 DELIVERY OF DOCUMENTS.
Seller shall have delivered to Buyer (or to the Escrow Agent,
as applicable) all Contracts, agreements, instruments, and documents required to
be delivered by Seller pursuant to Section 11.2.
9.4 FCC ORDER.
The FCC Order consenting to the assignment by
Whitehead-Georgia to SKMD shall have been issued; provided, however, in the
event that any opposition has been filed with respect to the grant of such FCC
Order and the parties agree, in their reasonable judgment, that such opposition
is reasonably likely to preclude such FCC Order from becoming a Final Order,
then the parties agree that the foregoing condition shall not have been
satisfied.
9.5 LEGAL PROCEEDINGS.
Other than the DTV Rulemaking and any action or proceeding
relating to the FCC Order (which action or proceeding shall be governed by
SECTION 9.4), no action or proceeding by or before any Governmental Authority
shall be pending (and not subsequently dismissed, settled or otherwise
terminated) which could reasonably be expected to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or any other Seller
Document or prevent, restrict or impair in any material respect the ownership or
use of the Assets or the operation of the Station (as currently used or
operated) by Buyer, other than an action or proceeding instituted or threatened
by Buyer.
9.6 HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall
have expired or terminated.
9.7 ABSENCE OF MATERIAL CHANGE.
Since the date of this Agreement, there shall not have been a
material adverse change in the Assets or a material increase in the Liabilities
of the Station (regardless of whether or not such events or changes are
consistent with the representations and warranties given herein by Seller).
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9.8 ACQUISITION OF KBSP.
The KBSP Acquisition shall have been consummated or shall be
consummated concurrently with the Closing.
9.9 CABLE CARRIAGE ENTITLEMENT.
Buyer shall have received reasonable assurance that following
the Closing the Station will be entitled to carriage under applicable must carry
regulations by cable operators serving at least 900,000 subscribers in the
Atlanta, Georgia Area of Dominant Influence.
9.10 WHITEHEAD CLOSING.
The Whitehead Closing shall have been consummated or shall be
consummated concurrently with the Closing consistent with the terms of the
Whitehead Asset Purchase Agreement without any waivers by Seller of the
conditions precedent set forth in Section 7 of the Whitehead Purchase Agreement
(except for waivers that would not have a material adverse effect on Buyer, the
Assets or the Station); provided, however, this Section 9.10 shall not be a
condition precedent to a Closing pursuant to Section 11.1.2.
9.11 BLACKSTAR ACQUISITION.
The acquisition by USA or one of its affiliates of all of the
membership interests outstanding of Blackstar L.L.C. shall have been consummated
or shall be consummated concurrently with the Closing.
9.12 WAIVER OF KBSP CLOSING CONDITION.
Notwithstanding Section 9.8, in the event that on or before
July 16, 1998 all conditions precedent in this Article 9 have been satisfied (or
waived by Buyer) except for the condition set forth in Section 9.8 and provided
that the failure of such condition to be satisfied shall not be due to a breach
by Paxson Communications of Oregon-22, Inc. or Paxson Oregon License, Inc. under
the KBSP Agreement, then, in such event, Seller may require Buyer to waive such
Section 9.8 and close under Section 11.1.1.
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ARTICLE 10.
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATION TO CLOSE
The obligations of Seller to sell, transfer, convey and deliver
the Assets and to proceed with the Closing are subject to the satisfaction (or
waiver in writing by Seller) at or prior to the Closing of each of the following
conditions:
10.1 REPRESENTATIONS AND COVENANTS.
(a) The representations and warranties of Buyer made in this
Agreement or in any other Buyer Document shall have been true and correct when
made, and shall be true and correct on the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
to the extent any such representation or warranty is expressly stated only as of
a specified earlier date or dates, in which case such representation and
warranty shall be true and correct in all material respects as of such earlier
specified date or dates; and (b) Buyer shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
or any other Buyer Document required to be performed or complied with by Buyer
prior to the Closing.
10.2 DELIVERY BY BUYER.
Buyer or the Exchange Agent, as the case may be, shall have
delivered to Seller (or the Escrow Agent, as applicable), on Buyer's behalf,
the Purchase Price and all Contracts, agreements, instruments and documents
required to be delivered by Buyer to Seller pursuant to Section 11.3.
10.3 FCC ORDER.
The FCC Order consenting to the assignment by
Whitehead-Georgia to SKMD shall have been issued; provided, however, in the
event that any opposition has been filed with respect to the grant of such FCC
Order and the parties agree, in their reasonable judgment, that such opposition
is reasonably likely to preclude such FCC Order from becoming a Final Order,
then the parties agree that the foregoing condition shall not have been
satisfied.
10.4 LEGAL PROCEEDINGS.
Other than any action or proceeding relating to the FCC Order
(which action or proceeding shall be governed by SECTION 10.3), no action or
proceeding by or before any Governmental Authority shall be pending (and not
subsequently dismissed, settled, or otherwise terminated) that could reasonably
be expected to restrain, prohibit, or invalidate the transactions contemplated
by this
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Agreement or any other Buyer Document, other than an action or proceeding
instituted or threatened by Seller.
10.5 HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall
have expired or terminated.
10.6 CONSENTS.
Prior to the Closing Date all consents, authorizations or
approvals necessary to effect the valid assignment to Buyer of the Station
Contract shall have been obtained, and all other consents necessary to
consummate the transactions contemplated hereby (except for the FCC Order, which
shall be governed by Section 10.3, and except for any HSR Filing, which shall be
governed by Section 10.5), each of which consents, authorizations and approvals
shall be in form and substance reasonably satisfactory to Seller; provided,
however, obtaining the Whitehead Consent shall be governed by Section 15.14.2.
ARTICLE 11.
THE CLOSING
11.1 CLOSING.
11.1.1 Subject to Section 11.1.2, the Closing hereunder shall
be held on a date specified by Buyer on no less than five (5) days notice to
Seller (which notice may be waived in whole or in part by Seller) (the "Closing
Date"), and in any event not later than ten (10) days following the date that
the FCC Order has been issued; subject to satisfaction or waiver of all other
conditions precedent to the holding of the Closing; provided, however, under no
circumstance shall the Closing Date be later than July 16, 1998, if the FCC
Order is issued on or before such date and all other conditions precedent to the
holding of the Closing shall have been satisfied or waived. If Buyer fails to
specify the date for Closing prior to the fifth day after the date the FCC Order
is issued, the Closing shall take place on the tenth day after such date.
11.1.2 Notwithstanding Section 11.1.1. hereof, in the event
that the FCC Order has not been issued to permit the Closing to occur by July
10, 1998, SKMD shall have the option, in its sole discretion by delivering
written notice to Seller between July 10, 1998 and July 14, 1998, to require
Seller to proceed with the Closing under this Section 11.1.2 on July 16, 1998,
subject to satisfaction or waiver of all other conditions precedent to the
holding of the Closing other than the issuance of the FCC Order, or to terminate
this Agreement pursuant to Section
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13.1.6 and pay Seller liquidated damages in the amount of $5,000,000 (the
"Liquidated Damages"). The parties agree that the option to terminate and pay
the Liquidated Damages is for the benefit of SKMD, not Seller, and may be
exercised only by SKMD.
11.1.2.1 In the event that the Closing proceeds pursuant to
Section 11.1.2, the deliveries to be made under Section 11.2 and under Section
11.3 (the "Closing Deliveries") shall be delivered to the Escrow Agent. Prior to
the disbursement of the Purchase Price by the Escrow Agent, all interest earned
on the Purchase Price shall be paid each month by the Escrow Agent to Seller.
The Escrow Agent shall hold the Closing Deliveries in accordance with the terms
and conditions of the Escrow Agreement substantially in the form attached hereto
as EXHIBIT G (with such changes requested by the Escrow Agent which are
agreeable to Buyer and Seller), which shall be entered into by Buyer, Seller and
the Escrow Agent. On the first business day immediately following the date of
the FCC Order, and without the need for the satisfaction of any other terms or
conditions, Buyer and Seller shall notify the Escrow Agent in writing to, no
later than three (3) days following the parties' notification to the Escrow
Agent of the issuance of the FCC Order, transfer the Closing Deliveries to the
appropriate parties as contemplated by this Agreement and the Escrow Agreement
and the interest accrued and unpaid with respect to the Purchase Price to
Seller. In the event that the Closing proceeds pursuant to this Section 11.1.2,
Seller and SKMD also shall enter into an agreement, in the form attached hereto
as EXHIBIT H, to assign to SKMD all of Seller's rights under the Whitehead Time
Brokerage Agreement (the "Time Brokerage Agreement") and Buyer shall assume all
of Seller's obligations under the Whitehead Time Brokerage Agreement to be
performed following the Closing Date, except Seller's obligations under Section
1.5 thereof and Attachments I and II thereto and except for obligations arising
under Section 4.1 thereof which relate to the time period prior to the Closing
Date, which shall remain the responsibility of Seller. Pursuant to the Time
Brokerage Agreement, SKMD shall provide programming for broadcast on the Station
commencing on the Closing Date under this Section 11.1.2 and continuing until
the date on which the escrow arrangement contemplated hereunder is terminated
and Seller shall be liable for paying all amounts payable to Whitehead under
Section 1.5 of the Whitehead Time Brokerage Agreement and Attachments I and II
thereto. In the event of a Closing under this Section 11.1.2, until such time as
the escrow arrangement contemplated hereunder is terminated (but not to exceed
sixty (60) days from the Closing Date under this Section 11.1.2), upon the
termination of the Escrow Agreement, Seller shall pay a consulting fee to Buyer
equal to $7,275.00 per day for providing consulting services during such sixty
(60) day period relating to Seller's other television station in the Atlanta,
Georgia market pursuant to a consulting agreement in form and substance
reasonably acceptable to Buyer and Seller. From and after a Closing pursuant to
this Section 11.1.2.1, all operating and other income or loss of the Station
shall be for the account of Buyer, and all interest accruing on the Purchase
Price shall be for
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the account of Seller, subject to disbursement at the times and in the manner
provided in the Escrow Agreement and the Closing shall be deemed to have
occurred for all purposes under this Agreement. Accordingly, for all federal,
state and local income or franchise Tax purposes, (i) Buyer and Seller shall
treat the Closing pursuant to Section 11.1.2 as a "sale or other disposition" of
the Station (within the meaning of Section 1001(a) of the Code) by Seller on the
date of such Closing, (ii) Buyer and Seller shall treat SKMD as having
"received" the FCC Licenses on the date of such Closing, within the meaning of
Section 1031(a)(3)(B) and Treasury Regulation Section 1.1031(k)-1(b)(1)(ii),
(iii) Seller shall include all interest accrued on the Purchase Price in its
income for the year in which such interest accrues, without regard to whether
such interest is disbursed to Seller in such year in accordance with the terms
of the Escrow Agreement.
11.1.2.2 In the event that Buyer exercises its option under
Section 11.1.2 to terminate this Agreement and to pay the Liquidated Damages
(the "Termination Option"), upon payment of the Liquidated Damages by Buyer,
Buyer shall be discharged from all further liability under this Agreement except
as provided in Sections 6.3, 7.1 and 15.3. Buyer shall notify Seller in writing
of its exercise of the Termination Option within the period specified in Section
11.1.2 (the date of such notification hereinafter being referred to as the
"Termination Date"). Buyer shall pay the Liquidated Damages on the date and in
the manner specified in the Letter Agreement.
11.1.3 In the event that the Closing has occurred pursuant to
Section 11.1.2,, SKMD shall have the option, in its sole discretion, so long as
the FCC Order has not been issued, of (i) assigning and transferring its rights
under this Agreement, the Escrow Agreement, the Services Agreement and the
Whitehead Time Brokerage Agreement to Seller (a "Sale to Seller") or (ii)
assigning and transferring its rights under this Agreement, the Escrow
Agreement, the Services Agreement and the Whitehead Time Brokerage Agreement to
a third party (a "Sale to a Third Party"), which assignment and transfer will be
subject to the approval of the FCC, but shall not require the consent of Seller
so long as such third party is legally, financially and otherwise qualified to
hold the FCC Licenses. If SKMD fails to notify Seller in writing of its
intention to exercise its option hereunder to make a Sale to Seller or a Sale to
a Third Party on or prior to the first anniversary date of the Closing under
Section 11.1.2, Seller shall have the right to require SKMD to make a Sale to
Seller under Section 11.1.4, and if Seller exercises such right SKMD shall have
no further right to make a Sale to a Third Party; provided, however, that any
Sale to Seller under this sentence shall not be subject to the $50,000,000
limitation referenced in Section 11.1.4. Upon notifying Seller of its exercise
of its option to make a Sale to a Third Party, Buyer shall authorize the Escrow
Agent to release from escrow the amount of $5,000,000 to Seller (the "Sale to
Third Party Payment"). If SKMD fails to close any Sale to a Third Party on or
before the date which is nine (9) months following the date of Buyer's notice
regarding a Sale to a
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Third Party, such sale to a Third Party shall have no force or effect, and Buyer
shall be required to immediately make a Sale to Seller. Upon the release of the
Closing Deliveries to Buyer under Section 2.04 of the Escrow Agreement pursuant
to a Sale to a Third Party or under Section 2.05 of the Escrow Agreement
pursuant to a Sale to Seller, Buyer shall return to Seller all originals of the
Assignment of FCC Licenses. Upon the release of the Closing Deliveries to Seller
under Section 2.04 of the Escrow Agreement pursuant to the Sale to a Third
Party, Seller shall (i) revise the Closing Deliveries set forth and described in
EXHIBIT B and EXHIBIT C attached to the Escrow Agreement to reflect the transfer
by Seller to the Third Party, and Seller and Buyer shall make no other revisions
to such Closing Deliveries unless Buyer and Seller mutually agree to additional
revisions and (ii) deliver to Buyer originals, executed in quadruplicate, of
such Closing Deliveries for Buyer's delivery pursuant to the closing of the Sale
to a Third Party. Notwithstanding any provision in this Agreement to the
contrary, Seller shall have no obligation or liability to the Third Party as a
result of events occurring after the Closing Date.
11.1.4 In the event that SKMD elects to make a Sale to Seller
under Section 11.1.3(i), Seller shall be obligated to purchase, or designate a
third party to purchase, the Assets and the Station in accordance with this
Section 11.1.4 and Section 11.1.5. The purchase price for a Sale to Seller shall
be equal to the fair market value, as of the date of the notice of a Sale to
Seller, of the Station and the Assets (which shall include any assets acquired
after the date hereof), as determined by an appraisal based on events occurring
subsequent to the Closing Date and performed by the Appraiser selected pursuant
to the provisions of Section 11.1.5 ("Fair Market Value"). Notwithstanding the
foregoing, if Fair Market Value is more than $50,000,000, the amount Seller
shall be obligated to pay to SKMD shall be limited to $50,000,000. The
representations, warranties, covenants and conditions relating to a Sale to
Seller shall be, to the extent applicable, similar to those set forth herein and
in the Seller Documents and the Buyer Documents.
11.1.5 In the event that SKMD elects to make a Sale to Seller
under Section 11.1.3(i), within five (5) business days of notifying Seller of
such election, SKMD shall provide Seller with a list of three independent
appraisers, who are qualified and experienced in appraising the value of
television stations. Within five (5) business days of receiving such list of
appraisers, Seller shall select one appraiser from such list to perform the
appraisal contemplated under Section 11.1.4; provided, however, if Seller fails
to make such selection during such five-day period, SKMD shall have the right to
select the appraiser (the "Appraiser"). The determination by the Appraiser of
Fair Market Value shall be final, conclusive and binding upon the parties.
Seller and Buyer shall share equally the fees, costs and expenses of the
Appraiser. In the event that SKMD elects to make a Sale to Seller under Section
11.1.3(i), the Purchase Price (and the interest accrued thereon and unpaid)
owing to Seller under the Escrow Agreement shall be disbursed to
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Seller by the Escrow Agent at the closing of a Sale to Seller in accordance with
the terms of the Escrow Agreement, and immediately thereafter Seller shall pay
to SKMD an amount equal to the Fair Market Value of the Assets and the Station
(subject to the limitation that Seller shall not be required to pay more than
$50,000,000) in accordance with the instructions signed by Buyer and Seller and
delivered to the Escrow Agent under Section 2.05 of the Escrow Agreement. The
instructions to the Escrow Agent delivered under Section 2.05 of the Escrow
Agreement shall include a provision that the Purchase Price (and the interest
accrued thereon and unpaid) owing to Seller ("Seller's Funds") shall not be
released to Seller by the Escrow Agent unless the Escrow Agent confirms in
writing to Buyer that Seller has delivered to the bank receiving the Purchase
Price irrevocable wire instructions requiring the bank, immediately upon receipt
of Seller's Funds, to wire the amount owing to SKMD under this Section 11.1.5 in
accordance with SKMD's wire instructions.
11.1.6 In the event that SKMD elects to make a Sale to a
Third Party under Section 11.1.3(ii), SKMD shall be entitled to any gain
recognized from such sale and shall bear the risk of any loss recognized from
such sale, and the Purchase Price and the interest accrued thereon owing to
Seller under the Escrow Agreement shall be disbursed to Seller by the Escrow
Agent at the closing of a Sale to a Third Party in accordance with the terms of
the Escrow Agreement.
11.1.7 Buyer and Seller, promptly when due, shall execute and
deliver to the Escrow Agent all instructions, notifications and other documents
required to be executed and delivered to the Escrow Agent under Section 2 of the
Escrow Agreement, and Buyer and Seller each agrees that it will (and Seller will
use its commercially reasonable efforts to cause Whitehead), at any time, prior
to, at or after the Closing Date, take or cause to be taken such further
actions, and execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments and obtain such consents, as may be
necessary or reasonably requested by the other party in connection with a Sale
to a Third Party, a Sale to Seller or in order to fully effectuate the purposes,
terms and conditions set forth in this Article 11.
11.1.8 The Closing shall be held at 10:00 A.M. local time at
the offices of Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C.
or at such other time and place as the parties may agree.
11.2 DELIVERY BY SELLER.
At or before the Closing, Seller shall deliver to Buyer (or in
the case of a Closing pursuant to Section 11.1.2, to the Escrow Agent) the
following:
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11.2.1 AGREEMENTS AND INSTRUMENTS.
The following bills of sale, statements, assignments and other
instruments of transfer, dated as of the Closing Date and duly executed by
Seller:
(a) the Bill of Sale;
(b) the Assignment of FCC Licenses;
(c) the Assignment of Contracts;
(d) the Assumption Agreement;
(e) the Services Agreement; and
(f) such other certificates, opinions, instruments or
documents as Buyer may reasonably request in order to
effect and document the transactions contemplated hereby.
11.2.2 CONSENTS.
Originals of all consents necessary to effect the valid
assignment to Buyer of the Station Contract and any other consents Seller is
required to obtain.
11.2.3 CABLE CARRIAGE ENTITLEMENT.
Evidence reasonably satisfactory to Buyer with respect to the
Station's cable carriage entitlement as contemplated by Section 9.9.
11.2.4 UCC REPORT.
A report dated not more than ten (10) days prior to the
Closing Date of the appropriate filing officers in the jurisdictions specified
in SCHEDULE 11.2.4 evidencing no judgments, financing statements, tax liens,
mechanics, materialmen or other statutory liens on file with respect to the
Assets, and, if such report evidences that judgments, financing statements, tax
liens, mechanic's, materialmen's or other statutory liens are on file with
respect to any of the Assets, a termination statement or other appropriate
document signed by the secured party or lienholder evidencing the release or
termination of such financing statement or such lien and, if applicable, a
pay-off letter from such secured party or lienholder; provided, however, in the
event of a Closing pursuant to Section
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11.1.2.1, Seller shall not be required to deliver any termination statement,
pay-off letter or other release document until the date the Purchase Price is
released to Seller by the Escrow Agent under the Escrow Agreement.
Notwithstanding anything in this Agreement to the contrary, Seller agrees that
Buyer shall not authorize (or be required to authorize) the Escrow Agent to
release the Purchase Price under the Escrow Agreement unless and until Seller
delivers to Buyer all pay-off letters and termination statements or releases
evidencing the release or termination of any financing statements or other liens
on file with respect to the Assets; provided, however, that the foregoing
restriction shall not apply to any release of the Sale to Third Party Payment.
11.2.5 CERTIFIED RESOLUTIONS.
A copy of (a) the resolutions of directors and shareholders of
Seller, certified as being correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement,
and of the other Seller Documents, and the consummation of the transactions
contemplated hereby and thereby (b) a copy of the by-laws of Seller, and (c) a
copy of the certificate of incorporation of Seller, all certified by the
Secretary of Seller as being true, correct and complete as of the Closing Date.
11.2.6 OFFICERS' CERTIFICATE.
A certificate of Seller signed by any authorized officer of
Seller certifying that the representations and warranties of Seller made herein
and in the other Seller Documents were true and correct in all material respects
as of the date of this Agreement and are true and correct in all material
respects as of the Closing Date, except to the extent any such representation or
warranty is expressly stated only as of a specified earlier date or dates, in
which case such representation and warranty shall be true and correct in all
material respects as of such earlier specified date or dates, and that Seller
has performed and complied in all material respects with all covenants and
agreements contained in this Agreement or any other Seller Document required to
be performed or complied with by Seller on or prior to the Closing.
11.2.7 SELLER'S IRS FORM 8594.
Internal Revenue Service Form 8594 completed by Seller in
connection with the acquisition of the Assets by Buyer prepared in a manner
consistent with Section 8.3.
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11.2.8 OPINION OF COUNSEL.
An opinion of Dow, Lohnes & Albertson, PLLC, counsel to
Seller, dated the Closing Date, addressed to Buyer, containing the opinions set
forth in EXHIBIT I hereto and such limitations and qualifications that are
reasonably satisfactory to Buyer and Buyer's counsel.
11.3 DELIVERY BY BUYER, THE EXCHANGE AGENT.
At or before the Closing, USA of Maryland, SKMD or the
Exchange Agent, as applicable, shall deliver to Seller (or in the case of a
Closing pursuant to Section 11.1.2, to the Escrow Agent) the following:
11.3.1 PURCHASE PRICE PAYMENT.
The Purchase Price in the amount and manner set forth in
Section 2.
11.3.2 AGREEMENTS AND INSTRUMENTS.
The following Contracts, agreements and instruments:
(a) the Assumption Agreement;
(b) the Assignment of Purchase Agreement and any other
necessary documents or instruments necessary in order to effect Buyer's deferred
like kind exchange in accordance with applicable requirements of the Code and
the regulations of the Department of Treasury thereunder in form and substance
reasonably satisfactory to Seller;
(c) the Services Agreement; and
(d) such other certificates, opinions, instruments or
documents as Seller may reasonably request in order to effect and document the
transactions contemplated hereby.
11.3.3 CERTIFIED RESOLUTIONS.
Copies of (a) the resolutions of the directors of USA of
Maryland, certified as being correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement
and of the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby; (b) a copy of the by-laws of USA of Maryland;
(c) the articles of incorporation of USA of Maryland; and (d) the Partnership
Agreement of SKMD, all
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certified by the Secretary of USA of Maryland as being true, correct and
complete as of the Closing Date.
11.3.4 OFFICERS' CERTIFICATE.
A certificate of Buyer signed by any authorized officer of USA
of Maryland certifying that the representations and warranties of Buyer made
herein were true and correct as of the date of this Agreement and are true and
correct as of the Closing Date, except to the extent any such representation or
warranty is expressly stated only as of a specified earlier date or dates, in
which case such representation and warranty shall be true and correct in all
material respects as of such earlier specified date or dates, and that Buyer has
performed and complied with all covenants and agreements contained in this
Agreement or any Buyer Document required to be performed or complied with by
Buyer prior to the Closing.
11.3.5 BUYER'S IRS FORM 8594.
Internal Revenue Service Form 8594 completed by Buyer in
connection with the acquisition of the Assets by Buyer prepared in a manner
consistent with Section 8.3.
11.3.6 OPINION OF COUNSEL.
An opinion of Hogan & Hartson, counsel to Buyer, dated the
Closing Date, addressed to Seller, containing the opinions set forth in EXHIBIT
J hereto and such limitations and qualifications that are reasonably
satisfactory to Seller and Seller's counsel.
11.3.7 CONSENTS.
Originals of any consents that Buyer is required to obtain.
11.4 FRUSTRATION OF CLOSING CONDITIONS.
Buyer may not rely on the failure of any condition set forth
in Article IX to be satisfied if such failure was caused by Buyer's failure to
act in good faith or to comply with its obligations hereunder. Seller may not
rely on the failure of any condition set forth in Article X to be satisfied if
such failure was caused by Seller's failure to act in good faith or to comply
with its obligations hereunder.
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11.5 LIQUIDATED DAMAGES.
In the event that Buyer fails to give Seller notice on or
prior to the first anniversary date of the Closing as required by the second
sentence of Section 11.1.3 and Seller exercises its right to demand a Sale to
Seller thereunder, Buyer shall pay Seller liquidated damages equal to the amount
(if any) by which the Fair Market Value as determined pursuant to Section 11.1.4
exceeds $50,000,000. Such liquidated damages shall be paid by Buyer to Seller
(by wire transfer of immediately available funds) simultaneously with the
payment by Seller to Buyer (by wire transfer of immediately available funds) of
the payment required by Seller under the second sentence of Section 11.1.4.
ARTICLE 12.
SURVIVAL; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS.
Unless otherwise set forth herein, all representations and
warranties, covenants and agreements of Seller and Buyer contained in or made
pursuant to this Agreement or in any certificate furnished pursuant hereto shall
survive the Closing Date and shall remain in full force and effect as follows:
(a) representations and warranties shall survive for a period of twelve (12)
months after the Closing Date; (b) Seller's obligations with respect to all
obligations and liabilities not assumed by Buyer shall survive until such
obligations and liabilities have been paid, performed or discharged in full; (c)
Buyer's obligation with respect to all obligations and liabilities assumed by
Buyer hereunder shall survive until such obligations and liabilities have been
paid, performed or discharged in full; (d) the covenants and agreements in this
ARTICLE 12 shall continue in full force and effect until fully discharged; and
(e) any representation, warranty, covenant or agreement that is the subject of a
claim which is asserted in a reasonably detailed writing prior to the expiration
of the applicable period set forth above shall survive with respect to such
claim or dispute until the final resolution thereof. All such representations
and warranties, covenants, and agreements shall also survive and be unaffected
by (and shall not be deemed waived by) any investigation, audit, appraisal, or
inspection at any time made by or on behalf of any party hereto.
12.2 INDEMNIFICATION BY SELLER.
Subject to the conditions and provisions of Section 12.4 and
Section 12.5, Seller agrees to indemnify, defend and hold harmless Buyer,
Buyer's Affiliates, each of their respective directors, officers, employees and
agents and each of the successors and assigns of any of the foregoing ("Buyer
Indemnified Parties") from and against and in any respect of, on a net after-tax
basis, all Losses, asserted
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against, resulting to, imposed upon or incurred by the Buyer Indemnified
Parties, directly or indirectly, by reason of or resulting from (a) any
liability or obligation of or claim against Buyer (whether absolute, accrued,
contingent or otherwise and whether a contractual, Tax or any other type of
liability or obligation or claim) not expressly assumed by Buyer pursuant to
Section 2.7, arising out of, relating to or resulting from the businesses of
Seller, or relating to or resulting from the Assets or the business and
operations of the Station during the period prior to the Closing Date; (b) any
breach of the representations and warranties of Seller contained in this
Agreement (including the Schedules hereto) or any other Seller Document; (c) any
breach by Seller of any covenants, agreements or undertakings of Seller
contained in this Agreement or any other Seller Document; or (d) any employment
related practices, policies, Contracts, decisions, actions or omissions by
Seller for the period ending on the Closing Date with respect to any of Seller's
employees or former employees.
12.3 INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of Section 12.4 and
Section 12.5, Buyer hereby agrees to indemnify, defend and hold harmless Seller,
Seller's Affiliates, each of their respective directors, officers, employees and
agents and each of the successors and assigns of any of the foregoing ("Seller
Indemnified Parties") from, against and with respect of, on a net after-tax
basis, any and all Losses, asserted against, resulting to, imposed upon or
incurred by Seller Indemnified Parties, directly or indirectly, by reason of or
resulting from (a) any liability or obligation of or claims against Seller
Indemnified Parties (whether absolute, accrued, contingent or otherwise and
whether contractual, Tax or any other type of liability or obligation or claim)
expressly assumed by Buyer pursuant to Section 2.7; (b) any breach of the
representations and warranties of Buyer contained in this Agreement or any other
Buyer Document; (c) any breach by Buyer of any covenants, agreements or
undertakings of Buyer contained in this Agreement or any other Buyer Document;
(d) any litigation, proceeding or claim arising from the business or operations
of the Assets or the Station on or after the Closing Date; or (e) in the event
of a Closing pursuant to Section 11.1.2, any liability or obligation of or
claims against Seller Indemnified Parties (whether absolute, accrued, contingent
or otherwise and whether contractual or any other type of liability or
obligation or claim) arising under or relating to the Whitehead Time Brokerage
Agreement with respect to the period after the Closing Date (other than any
liability or obligation for the payments to Whitehead required by the terms of
Section 1.5 and Attachments I and II of the Whitehead Time Brokerage Agreement).
12.4 LIMITATION ON INDEMNIFICATION.
Neither Seller nor Buyer shall be liable to the other in
respect of any indemnification hereunder (a) except to the extent that the
aggregate Losses of
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the party to be indemnified under this Agreement exceed Fifty Thousand Dollars
($50,000) (the "Basket Amount"), whereupon the party to be indemnified shall be
entitled to indemnification from the other party hereunder for all Losses
suffered or incurred by the party to be indemnified; provided, however, any
Losses of Buyer in respect of (i) Seller's Taxes, (ii) Seller's failure to
comply with any bulk transfer law in accordance with Section 6.2.9, or (iii)
Buyer's compliance with its indemnification obligation set forth in clause (iii)
in the proviso of the third sentence of Section 15.7 shall not be subject to the
Basket Amount; and (b) for any Losses which exceed in the aggregate One Million
Dollars ($1,000,000) (the "Cap"). The parties further agree that any Losses
received by the Indemnified Party hereunder shall be net of any insurance
proceeds received by the Indemnified Party with respect to the event giving rise
to the Losses. The parties hereto acknowledge and agree that it is their
intention that no standard of materiality or reasonableness shall be implied (by
law, in equity or otherwise) in any representation, warranty, covenant or other
agreement of Seller or Buyer contained in this Agreement or the other agreements
executed by or on behalf of Seller or Buyer in connection herewith, unless such
a standard is expressly set forth in such representation, warranty, covenant or
agreement. Following the Closing, the sole and exclusive remedy for Buyer or
Seller for any claim arising out of a breach of any representation, warranty,
covenant or other agreement contained herein or the other Buyer Documents or
Seller Documents or otherwise arising out of or in connection with the
transactions contemplated by this Agreement or the other Buyer Documents or
Seller Documents, whether such claim is framed in tort, contract or otherwise,
shall be a claim for indemnification pursuant to this Section 12.
12.5 CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Seller and of Buyer
hereunder with respect to their respective indemnities pursuant to this Section
12, resulting from any Losses, shall be subject to the following terms and
conditions:
12.5.1 The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Losses promptly after the Indemnified
Party receives notice thereof; provided that the failure to give such notice
shall not affect the rights of the Indemnified Party hereunder except to the
extent that the Indemnifying Party shall have suffered actual damage by reason
of such failure.
12.5.2 The Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
of such Losses at the Indemnifying Party's risk and expense.
12.5.3 In the event that the Indemnifying Party shall elect
not to undertake such defense, or, within a reasonable time after notice from
the
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Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final determination thereof). In such event, the
Indemnifying Party shall pay to the Indemnified Party, in addition to the other
sums required to be paid hereunder, the costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred.
12.5.4 Anything in this Section 12.5 to the contrary
notwithstanding, (i) if there is a reasonable probability that Losses may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense, compromise or
settlement of the Losses, (ii) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Losses or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Losses in form and substance
satisfactory to the Indemnified Party, and (iii) in the event that the
Indemnifying Party undertakes defense of any Losses, the Indemnified Party, by
counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Losses and the Indemnifying
Party and the Indemnified Party and their respective counsel or other
representatives shall cooperate with respect to such Losses and (iv) in the
event that the Indemnifying Party undertakes defense of any Losses, the
Indemnifying Party shall have an obligation to keep the Indemnified Party
informed of the status of the defense of such Losses and furnish the Indemnified
Party with all documents, instruments and information that the Indemnified party
shall reasonably request in connection therewith.
12.6 BULK SALES INDEMNITY.
Seller further agrees to indemnify, defend and hold harmless
the Buyer Indemnified Parties from and against and in respect of any and all
Losses, including without limitation any claims made by creditors, with respect
to non-compliance with any bulk transfer law.
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ARTICLE 13.
TERMINATION
13.1 TERMINATION.
This Agreement may be terminated at any time prior to the
Closing by:
13.1.1 the mutual written consent of Seller and Buyer;
13.1.2 Buyer or Seller, upon written notice of termination
delivered to the other, if the Closing does not occur on or prior to March 15,
1999;
13.1.3 Buyer, pursuant to Section 8.2.2(c) hereof, upon
written notice of termination delivered to Seller;
13.1.4 Buyer or Seller, upon written notice of termination
delivered to the other, if the FCC Order contains any condition that is
materially adverse to the party seeking to terminate pursuant to this Section
13.1.4 and such condition does not result from events or circumstances that
constitute a breach by the terminating party of its respective representations,
warranties or covenants set forth herein;
13.1.5 Buyer, upon written notice of termination delivered to
Seller, if the KBSP Agreement or the Blackstar Agreement is terminated in
accordance with their respective terms; and
13.1.6 Buyer, upon written notice to Seller of its election to
exercise the Termination Option and the payment to Seller of the Liquidated
Damages;
provided, however, that the party seeking termination pursuant to Sections
13.1.2 through 13.1.6 is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in this Agreement
13.2 EFFECT OF TERMINATION.
In the event this Agreement is terminated as provided in this
ARTICLE 13, this Agreement shall be deemed null, void and of no further force or
effect, and the parties hereto shall be released from all future obligations
hereunder; PROVIDED, HOWEVER, that the obligations of Buyer and Seller set forth
in Sections 6.3, 7.1, and 15.3, shall survive such termination and the parties
hereto shall have any and all remedies to enforce such obligations provided at
law or in equity or otherwise (including, without limitation, specific
performance).
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<PAGE> 57
ARTICLE 14.
REMEDIES
14.1 DEFAULT BY BUYER.
If Buyer shall default in the performance of its obligations
under this Agreement or if, as a result of Buyer's action or failure to act, the
conditions precedent to Seller's obligation to close specified in Section 10 are
not satisfied, and for such reason or reasons this Agreement is not consummated,
and provided that Seller shall not then be in default in the performance of
Seller's obligations hereunder, Seller shall be entitled by written notice to
Buyer, at Seller's sole option:
(a) to require Buyer (i) to consummate and specifically
enforce its rights and perform its obligations under the Definitive Agreements
governing the Blackstar Acquisition and (ii) to consummate and specifically
perform its obligations in accordance with the terms of this Agreement and the
other Buyer Documents, if necessary, in each case, through injunction or other
court order or process; or
(b) by written notice to Buyer, to terminate this Agreement
and to pursue any other remedies Seller has at law or in equity or otherwise.
14.2 DEFAULT BY SELLER.
If Seller shall default in the performance of Seller's
obligations under this Agreement, or if, as a result of Seller's action or
failure to act, the conditions precedent to Buyer's obligation to close
specified in Section 9 are not satisfied and for such reason or reasons this
Agreement is not consummated, and provided that Buyer shall not then be in
default in the performance of Buyer's obligations hereunder, Buyer shall be
entitled by written notice to Seller, at Buyer's sole option:
(a) to require Seller (i) to consummate and specifically
enforce its rights and perform its obligations under the Whitehead Purchase
Agreement and the KBSP Acquisition and (ii) to consummate and specifically
perform its obligations in accordance with the terms of this Agreement and the
other Seller Documents, if necessary, in each case, through injunction or other
court order or process; or
(b) by written notice to Seller, to terminate this Agreement
and to pursue any other remedies Buyer has at law or in equity or otherwise.
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14.3 SPECIFIC PERFORMANCE.
Seller and Buyer acknowledge that the transactions
contemplated by this Agreement are unique and that neither party has an adequate
remedy at law if the other party shall fail to perform any of its obligations
hereunder, and Seller and Buyer therefore confirm and agree that the right to
specific performance is essential to protect the rights and interests of Buyer
and Seller. Accordingly, in addition to any other remedies which Buyer or Seller
may have hereunder or at law or in equity or otherwise, Seller and Buyer hereby
agree that Seller and Buyer each shall have the right to have all obligations,
undertakings, agreements and other provisions of this Agreement specifically
performed by the other party and that Seller and Buyer shall have the right to
obtain an order or decree of such specific performance in any of the courts of
the United States or of any state or other political subdivision thereof.
ARTICLE 15.
GENERAL PROVISIONS
15.1 Additional Actions, Documents and Information.
Buyer hereto agrees that it will, at any time, prior to, at or
after the Closing Date, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments and obtain such consents, as may be necessary
or reasonably requested by Seller in connection with the consummation of the
purchase and sale contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement. Seller hereto agrees that
it will, at any time, prior to, at or after the Closing Date, take or cause to
be taken such further actions, and execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments and obtain
such consents, as may be necessary or reasonably requested by Buyer in
connection with the consummation of the purchase and sale contemplated by this
Agreement or in order to fully effectuate the purposes, terms and conditions of
this Agreement. Prior to the Closing Date, Seller shall provide to Buyer and
Buyer's counsel, accountants and other representatives, at Buyer's expense, all
information concerning the Assets and the Station reasonably requested thereby
in connection with the preparation by Buyer of any disclosure document or
registration statement to be filed with the Securities and Exchange Commission.
15.2 BROKERS.
Seller represents to Buyer that Seller has not engaged, or
incurred any unpaid liability (for any brokerage fees, finders' fees,
commissions or
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<PAGE> 59
otherwise) to, any broker, finder or agent in connection with the transactions
contemplated by this Agreement; Buyer represents to Seller that Buyer has not
engaged, or incurred any unpaid liability (for any brokerage fees, finders'
fees, commissions or otherwise) to, any broker, finder or agent in connection
with the transactions contemplated by this Agreement; and Seller agrees to
indemnify Buyer, and Buyer agrees to indemnify Seller, against any claims
asserted against the other parties for any such fees or commissions by any
person purporting to act or to have acted for or on behalf of the indemnifying
party. Notwithstanding any other provision of this Agreement, this
representation and warranty shall survive the Closing without limitation and
shall not be subject to the Basket Amount contained in Section 12.4.
15.3 EXPENSES AND TAXES.
Each party hereto shall pay its own expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein. Notwithstanding the foregoing, Seller and
Buyer shall each pay one-half of (i) any sales (including, without limitation,
bulk sales), use, documentary, stamp, gross receipts, registration, transfer,
conveyance, excise, recording, license and other similar Taxes and fees
("Transfer Taxes") applicable to, imposed upon or arising out of the
transactions contemplated hereby whether now in effect or hereinafter adopted
and regardless of which party such Tax or fee is imposed upon; provided that
Buyer shall not be required to pay any portion of Transfer Taxes relating to the
transfer by Whitehead of the Assets to Seller, (ii) any filing fees incurred in
connection with the assignment of the FCC Licenses, and (iii) any filing fees
incurred in connection with any HSR Filings.
15.4 MAIL.
Seller hereby authorize and empower Buyer from and after the
Closing Date (a) to receive and open mail addressed to Seller and (b) to deal
with the contents thereof in any commercially reasonable manner, provided such
mail and the contents thereof relate to the Assets or to any of the Assumed
Liabilities hereunder. Seller agrees to deliver to Buyer any mail, checks or
other documents received by it pertaining to the Assets or any of the Assumed
Liabilities hereunder. Buyer agrees to deliver to Seller any mail which it
receives that does not pertain to the Assets or the Assumed Liabilities.
15.5 NOTICES.
All notices, demands, requests, or other communications which
may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered,
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid,
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<PAGE> 60
delivered by overnight air courier, or transmitted by telegram or facsimile
transmission addressed as follows:
(i) If to Buyer:
USA Networks, Inc.
152 West 57th Street, 38th Floor
New York, New York 10019
Attn.: Jonathan F. Miller
President/Chief Executive Officer
Fax: (212) 977-2377
with copies (which shall not constitute notice) to:
USA Networks, Inc.
152 West 57th Street, 38th Floor
New York, New York 10019
Attn.: Julius Genachowski
General Counsel/Senior Vice President
of Corporate Development
Fax: (212) 977-2377
and
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
(ii) If to Seller:
Paxson Communications, Inc.
601 Clearwater Park Road
West Palm Beach, Florida 33401
Attn.: Mr. Lowell W. Paxson
Fax: (561) 655-9424
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<PAGE> 61
with a copy (which shall not constitute notice) to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
Attn.: John R. Feore, Esq.
Fax: (202) 776-2222
or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, the affidavit of messenger or the
answerback being deemed conclusive but not exclusive evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.
15.6 WAIVER.
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
15.7 BENEFIT AND ASSIGNMENT.
Except as hereinafter specifically provided in this Section
15.7 or in Section 11.1.3, no party hereto shall assign this Agreement, in whole
or in part, whether by operation of law or otherwise, without the prior written
consent of Seller (if the assignor is Buyer) or Buyer (if the assignor is
Seller); and any purported assignment contrary to the terms hereof shall be
null, void and of no force and effect. In no event shall any assignment by any
party of its rights and obligations under this Agreement, whether before or
after the Closing, release such party from its liabilities hereunder.
Notwithstanding the foregoing, Buyer or any permitted assignee of Buyer may
assign all or any portion of its rights and interest herein, (i) to any
subsidiary of Buyer or to one or more entities controlling,
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<PAGE> 62
controlled by, or under common control with Buyer and/or to the Exchange Agent
in order to effect Buyer's deferred like-kind exchange in accordance with
applicable requirements of the Code and the regulations of theDepartment of
Treasury thereunder; provided, however, that such assignment shall not deprive
Seller of any material rights or benefits or relieve Buyer of any obligations or
liabilities under this Agreement or the other Buyer Documents, (ii) Seller shall
not be obligated to expend funds or incur obligations or liabilities in
connection therewith, (iii) Buyer shall indemnify and hold harmless Seller from
and against any and all Losses arising or resulting from such like-kind exchange
transaction, and (iv) such assignment shall not delay the grant of the FCC
Order.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns as
permitted hereunder. No person or entity other than the parties hereto is or
shall be entitled to bring any action to enforce any provision of this Agreement
against any of the parties hereto, and the covenants and agreements set forth in
this Agreement shall be solely for the benefit of, and shall be enforceable only
by, the parties hereto or their respective successors and assigns as permitted
hereunder.
15.8 ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto,
and the other instruments and documents referred to herein or delivered pursuant
hereto (including the Letter Agreement), contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior oral
or written agreements, commitments or understandings with respect to such
matters. No amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by the party or
parties against whom enforcement of the amendment, modification or discharge is
sought.
15.9 SEVERABILITY.
If any part of any provision of this Agreement or any other
Contract, agreement, document or writing given pursuant to or in connection with
this Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said Contract, agreement, document or writing.
15.10 HEADINGS.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
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<PAGE> 63
15.11 GOVERNING LAW.
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed under and in accordance with the laws of the State of New York,
excluding the choice of law rules thereof.
15.12 LIQUIDATED DAMAGES.
Seller and Buyer have provided for liquidated damages as a
remedy for Seller under Section 11.1.2 after having considered carefully the
anticipated and actual harms and losses that would be incurred if Buyer
exercises its Termination Option and thus fails to perform its obligations to
close, the difficulty of ascertaining at this time the actual amount of damages,
special and general, that Seller will suffer in such event, and the
inconvenience or non-feasibility of otherwise obtaining an adequate remedy in
such event.
15.13 SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none
of which need contain the signatures of all parties, each of which shall be
deemed to be an original, and all of which taken together constitute one and the
same instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
15.14 EARLY TERMINATION RIGHTS
15.14.1 EXECUTION OF AGREEMENT WITH BLACKSTAR L.L.C.;
WHITEHEAD CONSENT. Notwithstanding anything herein to the contrary, in the
event that USA and Blackstar L.L.C. fail to enter into a Definitive Agreement
within thirty (30) days of the date hereof with respect to the Blackstar
Acquisition, Buyer shall have the right to terminate this Agreement by providing
written notice of such termination to Seller no later than thirty (30) days
following the date hereof. In addition, Buyer shall have the right to terminate
this Agreement by providing written notice of such termination to Seller no
later than five (5) days after Seller has notified Buyer that it has been unable
to obtain the Whitehead Consent (including, without limitation the amendment
described in Section 2.3(a)). Upon any such termination, neither Buyer nor
Seller shall have any obligations hereunder except as set forth in Section 6.3,
Section 7.1 and Section 15.3. If Buyer fails to deliver a termination notice in
accordance with the requirements of this Section 15.14.1, then Buyer shall be
deemed to have waived its termination rights under this Section 15.14.1.
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<PAGE> 64
15.14.2 WHITEHEAD CONSENT. Notwithstanding anything herein to
the contrary, Seller shall use its commercially reasonable efforts to obtain as
soon as possible Whitehead's consent to the transactions contemplated hereby as
set forth in Section 2.3, but shall not be required to pay or deliver any
consideration to Whitehead other than as set forth in the Option Documents (the
"Whitehead Consent"); provided, however, in the event that Seller has failed to
obtain the Whitehead Consent within thirty (30) days of the date hereof, Seller
shall have the right to terminate this Agreement by providing written notice of
such termination to Buyer no later than thirty (30) days following the date
hereof. Upon such termination, neither Buyer nor Seller shall have any
obligations hereunder except as set forth in Section 6.3, Section 7.1 and
Section 15.3. If Seller fails to deliver a termination notice in accordance with
the requirements of this Section 15.14.2, then Seller shall be deemed to have
waived its termination right under this Section 15.14.
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<PAGE> 65
IN WITNESS WHEREOF, each of the parties hereto has executed
this Asset Purchase Agreement, or has caused this Asset Purchase Agreement to be
duly executed and delivered in its name on its behalf, all as of the day and
year first above written.
BUYER:
SKMD BROADCASTING
PARTNERSHIP
By USA Station Group of
Maryland, Inc., General Partner
By
---------------------------------
USA STATION GROUP OF
MARYLAND, INC.
By
---------------------------------
SELLER:
PAXSON COMMUNICATIONS OF
ATLANTA-14, INC.
By
---------------------------------
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<PAGE> 1
EXHIBIT 10.195
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated as of the 19th day of March,
1998, by and among Paxson Communications of Portland-22, Inc., a Florida
corporation ("Buyer"); Paxson Communications Corporation, a Delaware corporation
("PCC"); Blackstar Communications of Oregon, Inc., a Delaware corporation
("Blackstar Oregon"); and Blackstar of Salem, Inc., a Delaware corporation
("Blackstar Salem"; Blackstar Oregon and Blackstar Salem are referred to herein
individually as a "Seller" and collectively as the "Sellers").
R E C I T A L S
- - - - - - - -
A. Sellers own and operate television station KBSP(TV), Channel 22,
Salem, Oregon (the "Station") pursuant to licenses issued by the Federal
Communications Commission ("FCC") to Blackstar Salem.
B. Sellers desire to sell, and Buyer desires to buy, substantially all
the assets that are used or useful in the business or operations of the Station,
for the price and on the terms and conditions set forth in this Agreement.
A G R E E M E N T S
- - - - - - - - - -
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, Buyer and Sellers, intending to be bound
legally, agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section:
"Accounts Receivable" means all accounts receivable of Sellers with
respect to the Station.
"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (i) all Contracts listed in Schedule 3.7 that
are specifically designated on Schedule 3.7 as Contracts that are to be assumed
by Buyer upon its purchase of the Station, (ii) any Contracts entered into by
Sellers between the date of this Agreement and the Closing Date that Buyer
agrees in writing to assume, and (iii) time sales contracts entered into by
Sellers in compliance with Section 5.3.
<PAGE> 2
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"Closing" means the consummation of the purchase and sale of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs, as
determined pursuant to Section 8.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyer or
otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) to which either Seller is a party or which are binding upon either
Seller and which relate to or affect the Assets or the business or operations of
the Station, and (i) which are in effect on the date of this Agreement or (ii)
which are entered into by either Seller between the date of this Agreement and
the Closing Date.
"FCC" means the Federal Communications Commission.
"FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC Licenses to Buyer as contemplated by this Agreement.
"FCC Licenses" means all Licenses issued by the FCC to either Seller in
connection with the business or operations of the Station.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no requests are pending for administrative or judicial review, reconsideration,
appeal, or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion have expired.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests applied for, issued
to, or owned by either Seller or under which either Seller is licensed or
franchised and which are used or useful in the business and operations of the
Station, together with any additions thereto between the date of this Agreement
and the Closing Date.
<PAGE> 3
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"Licenses" means all licenses, permits, and other authorizations issued
by the FCC, the Federal Aviation Administration, or any other federal, state, or
local governmental authorities to either Seller in connection with the conduct
of the business or operations of the Station, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Purchase Price" means the purchase price specified in Section 2.3.
"Real Property" means all real property and interests in real property,
including fee estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all buildings and
other improvements thereon, and other real property interests which are used or
useful in the business or operations of the Station, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, and other tangible personal property which are used or useful in
the conduct of the business or operations of the Station, together with any
additions thereto between the date of this Agreement and the Closing Date.
SECTION 2. PURCHASE AND SALE OF ASSETS
2.1 AGREEMENT TO SELL AND BUY. Subject to the terms and conditions set
forth in this Agreement, each Seller hereby agrees to sell, transfer, and
deliver to Buyer on the Closing Date, and Buyer agrees to purchase, all of the
tangible and intangible assets used or useful in connection with the conduct of
the business or operations of the Station, together with any additions thereto
between the date of this Agreement and the Closing Date, but excluding the
assets described in Section 2.2, free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever (except for liens for current taxes not
yet due and payable), including the following:
(a) The Tangible Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
(e) The Intangibles and all other intangible assets of each
Seller relating to the Station that are not specifically included within the
Intangibles;
<PAGE> 4
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(f) All of each Seller's proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints, and schematics, including filings with
the FCC relating to the business and operation of the Station;
(g) All choses in action of either Seller relating to the
Station, other than any claims made or to be made by either Seller in the
litigation described in Schedule 3.15; and
(h) All books and records relating to the business or
operations of the Station, including executed copies of the Assumed Contracts,
and all records maintained by Sellers pursuant to the rules and regulations of
the FCC.
2.2 EXCLUDED ASSETS. The Assets shall exclude the following assets:
(a) Each Seller's cash on hand as of the Closing and all other
cash in any of each Seller's bank or savings accounts; any insurance policies,
letters of credit, or other similar items and cash surrender value in regard
thereto; and any stocks, bonds, certificates of deposit and similar investments;
(b) All books and records that either Seller is required by
law to retain and that pertain to such Seller's corporate organization;
(c) Any pension, profit-sharing, or employee benefit plans,
and any collective bargaining agreements;
(d) The Accounts Receivable as of 11:59 p.m., Portland time,
on the day prior to the Closing Date; and
(e) All property listed on Schedule 2.2 hereto.
2.3 PURCHASE PRICE. The Purchase Price for the Assets shall be Thirty
Million Dollars ($30,000,000) adjusted as provided below:
(a) PRORATIONS. The Purchase Price shall be increased or
decreased as required to effectuate the proration of expenses. All expenses
arising from the operation of the Station, including business and license fees,
utility charges, real and personal property taxes and assessments levied against
the Assets, property and equipment rentals, applicable copyright or other fees,
sales and service charges, taxes (except for taxes arising from the transfer of
the Assets under this Agreement), FCC annual regulatory fees and similar prepaid
and deferred items, shall be prorated between Buyer and Sellers in accordance
with the principle that Sellers shall be responsible for all expenses, costs,
and liabilities allocable to
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the period prior to the Closing Date, and Buyer shall be responsible for all
expenses, costs, and obligations allocable to the period on and after the
Closing Date. Notwithstanding the preceding sentence, there shall be no
adjustment for, and Sellers shall remain solely liable with respect to, any
Contracts not included in the Assumed Contracts and any other obligation or
liability not being assumed by Buyer in accordance with Section 2.5.
(b) MANNER OF DETERMINING ADJUSTMENTS.
(1) Any adjustments will, insofar as feasible, be
determined and paid on the Closing Date in accordance with the following
procedures: Sellers shall prepare and deliver to Buyer not later than five (5)
days before the Closing Date a preliminary settlement statement which shall set
forth Sellers' good faith estimate of the adjustments to the Purchase Price
under Section 2.3(a). The preliminary settlement statement (i) shall contain all
information reasonably necessary to determine the adjustments to the Purchase
Price under Section 2.3(a), to the extent such adjustments can be determined or
estimated as of the date of the preliminary settlement statement, and such other
information as may be reasonably requested by Buyer, and (ii) shall be certified
by Sellers to be true and complete in all material respects as of the date
thereof.
(2) Final settlement and payment of any adjustments
by the appropriate party shall occur no later than ninety (90) days after the
Closing Date, or upon such other date as the parties shall mutually agree, in
accordance with the following procedures: Buyer shall prepare and deliver to
Sellers no later than sixty (60) days following the Closing Date a final
settlement statement which shall set forth Buyer's good faith estimate of the
adjustment to the Purchase Price under Section 2.3(a). The final settlement
statement (i) shall contain all information reasonably necessary to determine
the adjustments to the Purchase Price under Section 2.3(a) and such other
information as may be reasonably requested by Sellers, and (ii) shall be
certified by Buyer to be true and complete in all material respects as of the
date thereof. Buyer and Sellers shall use good faith efforts to resolve any
disputes involving the determination of the Purchase Price.
2.4 PAYMENT OF PURCHASE PRICE. The Purchase Price, as adjusted, shall
be paid by Buyer to Sellers at Closing by wire transfer of same-day funds
pursuant to wire instructions which shall be delivered by Sellers to Buyer, at
least two (2) days prior to the Closing Date.
2.5 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge, and perform all obligations
and liabilities of Sellers under the Licenses and the Assumed Contracts insofar
as they relate to the time on and after the Closing Date, and arise out of
events related to Buyer's ownership of the Assets or its operation of the
Station on or after the Closing Date. Buyer shall not assume any other
obligations or liabilities of either Seller, including (i) any obligations or
liabilities under any Contract not included in the Assumed Contracts, (ii) any
obligations or liabilities under
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the Assumed Contracts relating to the period prior to the Closing Date, (iii)
any claims or pending litigation or proceedings relating to the operation of the
Station prior to the Closing, (iv) any obligations or liabilities arising under
capitalized leases or other financing agreements, (v) any obligations or
liabilities arising under agreements entered into other than in the ordinary
course of business, (vi) any obligations or liabilities of either Seller under
any employee pension, retirement, health and welfare or other benefit plans or
collective bargaining agreements, (vii) any obligation to any employee of the
Station for severance benefits, vacation time, or sick leave accrued prior to
the Closing Date, or (viii) any obligations or liabilities caused by, arising
out of, or resulting from any action or omission of either Seller prior to the
Closing, and all such obligations and liabilities shall remain and be the
obligations and liabilities solely of Sellers.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION, STANDING, AND AUTHORITY. Each Seller is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and Blackstar Oregon is duly qualified to conduct business
in, and is in good standing under, the laws of the State of Oregon. Each Seller
has all requisite power and authority (i) to own, lease, and use the Assets as
now owned, leased, and used, (ii) to conduct the business and operations of the
Station as now conducted, and (iii) to execute and deliver this Agreement and
the documents contemplated hereby and thereby, and to perform and comply with
all of the terms, covenants, and conditions to be performed and complied with by
such Seller hereunder and thereunder. Neither Seller is a participant in any
joint venture or partnership with any other person or entity with respect to any
part of the operations of the Station or any of the Assets.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance of this Agreement by each Seller have been duly authorized by all
necessary actions on the part of each Seller and its shareholders. This
Agreement has been duly executed and delivered by each Seller and constitutes
the legal, valid, and binding obligations of each Seller, enforceable against it
in accordance with its terms except as the enforceability of this Agreement may
be affected by bankruptcy, insolvency, or similar laws affecting creditors'
rights generally, and by judicial discretion in the enforcement of equitable
remedies.
3.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the FCC
Consent provided for in Section 6.1, the other Consents listed on Schedule 3.3
and any filing required under the HSR Act, the execution, delivery, and
performance of this Agreement and the documents contemplated hereby and thereby
(with or without the giving of notice, the lapse of time, or both): (i) do not
require the consent of any third party; (ii) will not conflict with
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any provision of the Articles of Incorporation or Bylaws of either Seller; (iii)
will not conflict with, result in a breach of, or constitute a default under,
any law, judgment, order, ordinance, injunction, decree, rule, regulation, or
ruling of any court or governmental instrumentality; (iv) will not conflict
with, constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
either Seller is a party or by which either Seller may be bound; and (v) will
not create any claim, liability, mortgage, lien, pledge, condition, charge, or
encumbrance of any nature whatsoever upon any of the Assets.
3.4 GOVERNMENTAL LICENSES. Schedule 3.4(a) includes a true and complete
list of the Licenses. Sellers have delivered to Buyer true and complete copies
of all material Licenses (including any amendments and other modifications
thereto). The Licenses have been validly issued, and Blackstar Salem is the
authorized legal holder thereof. The Licenses listed on Schedule 3.4(a) comprise
all of the licenses, permits, and other authorizations required from any
governmental or regulatory authority for the lawful conduct of the business and
operations of the Station in the manner and to the full extent they are now
conducted, except for such licenses, permits and other authorizations the
failure of which to obtain could not reasonably be expected to have a material
adverse effect on the conduct of the business or operations of the Station, and
none of the Licenses is subject to any restriction or condition that would limit
the full operation of the Station as now operated. The Licenses are in full
force and effect, and the conduct of the business and operations of the Station
is in accordance therewith. Sellers have no reason to believe that any of the
Licenses would not be renewed by the FCC or other granting authority in the
ordinary course. Except as specified on Schedule 3.4(b), Sellers have delivered
written requests for must carry with respect to each cable system identified in
Schedule 3.4(b) and, except as identified on Schedule 3.4(b), no cable system
has advised Sellers of any signal quality or copyright indemnity or other
prerequisite to cable carriage of the Station's signal, and no cable system has
declined or threatened to decline such carriage or failed to respond to a
request for carriage or sought any form of relief from carriage from the FCC.
Except as described in Schedule 3.4(b), the Sellers have elected must-carry for
the Station in the Portland ADI. Other than the FCC Licenses, Blackstar Salem
does not own, hold or lease any Assets.
3.5 TITLE TO AND CONDITION OF REAL PROPERTY. Schedule 3.5 contains a
complete and accurate description of all the Real Property and Sellers'
interests therein (including, to the extent available, street address, legal
description, owner, and use and the location of all improvements thereon). The
Real Property listed on Schedule 3.5 comprises all real property interests
necessary to conduct the business and operations of the Station as now
conducted. None of the Real Property consists of fee estates. With respect to
each leasehold or subleasehold interest included in the Real Property being
conveyed under this Agreement, so long as Sellers fulfill their obligations
under the lease therefor, Sellers have enforceable
<PAGE> 8
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rights to nondisturbance and quiet enjoyment, and no third party holds any
interest in the leased premises with the right to foreclose upon Sellers'
leasehold or subleasehold interest. All towers, guy anchors, and buildings and
other improvements included in the Assets are located entirely on the Real
Property listed in Schedule 3.5. All Real Property (including the improvements
thereon) (i) is in good condition and repair consistent with its present use,
(ii) is available for immediate use in the conduct of the business and
operations of the Station, and (iii) complies with all applicable building or
zoning codes and the regulations of any governmental authority having
jurisdiction. Sellers have full legal and practical access to the Real Property.
3.6 TITLE TO AND CONDITION OF TANGIBLE PERSONAL PROPERTY. Schedule 3.6
lists all material items of Tangible Personal Property. The Tangible Personal
Property listed on Schedule 3.6 comprises all material items of tangible
personal property necessary to conduct the business and operations of the
Station as now conducted. Except as described in Schedule 3.6, Sellers own and
have good title to each item of Tangible Personal Property, and none of the
Tangible Personal Property owned by Sellers is subject to any security interest,
mortgage, pledge, conditional sales agreement, or other lien or encumbrance,
except for liens for current taxes not yet due and payable. Each item of
Tangible Personal Property is available for immediate use in the business and
operations of the Station. All items of transmitting and studio equipment
included in the Tangible Personal Property (i) have been maintained in a manner
consistent with generally accepted standards of good engineering practice, and
(ii) will permit the Station and any auxiliary broadcast facilities related to
the Station to operate in accordance with the terms of the FCC Licenses and the
rules and regulations of the FCC, and with all other applicable federal, state,
and local statutes, ordinances, rules, and regulations.
3.7 CONTRACTS. Schedule 3.7 is a true and complete list of all
Contracts except contracts with advertisers for the sale of advertising time on
the Station for cash at prevailing rates and which have not been prepaid and
which may be canceled by the Station without penalty on not more than thirty
days' notice. Schedule 3.7 includes true and complete copies of all written
Contracts, true and complete memoranda of all oral Contracts (including any
amendments and other modifications to such Contracts), and a schedule
summarizing Sellers' obligations under trade and barter agreements relating to
the Station. Other than the Contracts listed on Schedule 3.7 and cash
programming contracts, neither Seller requires any contract, lease, or other
agreement to enable it to carry on its business as now conducted. All of the
Assumed Contracts are in full force and effect, and are valid, binding, and
enforceable in accordance with their terms. There is not under any Assumed
Contract any default by any party thereto or any event that, after notice or
lapse of time or both, could constitute a default. Sellers are not aware of any
intention by any party to any Assumed Contract (i) to terminate such contract or
amend the terms thereof, (ii) to refuse to renew the Assumed Contract upon
expiration of its term, or (iii) to renew the Assumed Contract upon expiration
only on terms and conditions which are more onerous than those now existing.
<PAGE> 9
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Except for the need to obtain the Consents listed in Schedule 3.3, Sellers have
full legal power and authority to assign their rights under the Assumed
Contracts to Buyer in accordance with this Agreement, and such assignment will
not affect the validity, enforceability, or continuation of any of the Assumed
Contracts.
3.8 CONSENTS. Except for the FCC Consent provided for in Section 6.1,
the other Consents described in Schedule 3.3, and any filing required under the
HSR Act, no consent, approval, permit, or authorization of, or declaration to or
filing with any governmental or regulatory authority, or any other third party
is required (i) to consummate this Agreement and the transactions contemplated
hereby, (ii) to permit each Seller to assign or transfer the Assets to Buyer, or
(iii) to enable Buyer to conduct the business and operations of the Station in
essentially the same manner as such business and operations are now conducted.
3.9 INTANGIBLES. Schedule 3.9 is a true and complete list of all
Intangibles (exclusive of those listed in Schedule 3.4), all of which are valid
and in good standing and uncontested. Sellers have delivered to Buyer copies of
all documents establishing or evidencing all Intangibles. To the best of
Sellers' knowledge, neither Seller is infringing upon or otherwise acting
adversely to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications, know-how, methods, or processes owned
by any other person or persons, and there is no claim or action pending, or to
the knowledge of Sellers threatened, with respect thereto. The Intangibles
listed on Schedule 3.9 comprise all intangible property interests necessary to
conduct the business and operations of the Station as now conducted.
3.10 FINANCIAL STATEMENTS. Schedule 3.10 hereto contains true and
complete copies of financial statements of Sellers, including balance sheets,
statements of operations and a statement of operating cash flow for the period
ending December 31, 1997 (collectively, the "Financial Statements"). The
Financial Statements have been prepared from the books and records of Sellers,
have been prepared in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated, accurately
reflect the books, records, and accounts of the Station (which books, records,
and accounts are complete and correct), are complete and correct in all material
respects, and present fairly the financial condition of the Station as at their
respective dates and the results of operations for the periods then ended. None
of the Financial Statements understates the true costs and expenses of
conducting the business or operations of the Station, fails to disclose any
material contingent liabilities, or inflates the revenues of the Station.
3.11 INSURANCE. Schedule 3.11 is a true and complete list of all
insurance policies of Sellers that insure any part of the Assets or the business
of the Station. All policies of insurance listed in Schedule 3.11 are in full
force and effect. The insurance policies listed in Schedule 3.11 are adequate in
amount with respect to, and for the full value (subject to customary
deductibles) of, the Assets, and insure the Assets and the business of the
Station
<PAGE> 10
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against all customary and foreseeable risks. During the past three years, no
insurance policy of Sellers on the Assets or the Station has been canceled by
the insurer and no application of Sellers for insurance has been rejected by any
insurer.
3.12 REPORTS. All material returns, reports, and statements required to
be filed by the Station with the FCC or with any other governmental agency
during the three-year period ending on the date hereof have been filed, and,
during such period, all reporting requirements of the FCC and other governmental
authorities having jurisdiction over each Seller and the Station have been
complied with in all material respects. All of such returns, reports, and
statements are substantially complete and correct as filed. Sellers have timely
paid to the FCC all annual regulatory fees payable with respect to the FCC
Licenses.
3.13 PERSONNEL.
(a) All of Sellers' Employee Plans and Compensation
Arrangements are listed in Schedule 3.13, and complete and accurate copies of
any such written Employee Plans and Compensation Arrangements (or related
insurance policies) have been furnished to Buyer, along with copies of any
employee handbooks or similar documents describing such Employee Plans and
Compensation Arrangements. Descriptions of any unwritten Employee Plans or
Compensation Arrangements also are provided in Schedule 3.13. Schedule 3.13 also
contains a true and complete list of all employees of the Station, title, date
of hire, salary and amount and date of last salary increase.
(b) Each Employee Plan and Compensation Arrangement has been
administered in all material respects in compliance with its own terms and in
material compliance with the provisions of ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable Federal or state laws.
Sellers are not aware of the existence of any governmental audit or examination
of any Employee Plan or Compensation Arrangement or of any facts which would
lead them to believe that any such audit or examination is pending or
threatened. There exists no action, suit or claim (other than routine claims for
benefits) with respect to any Employee Plan or Compensation Arrangement pending
or, to the best knowledge of Sellers, threatened against any of such plans or
arrangements, and Sellers possess no knowledge of any facts which could give
rise to any such action, suit or claim.
(c) Sellers do not contribute to and are not required to
contribute to any Multi-employer Plan with respect to the employees of the
Station, and neither Sellers nor any other trade or business under common
control with Sellers (within the meaning of Sections 414(b), (c), (m) or (o) of
the Code) has incurred or reasonably expects to incur any "withdrawal
liability," as defined under Section 4201 ET SEQ. of ERISA.
<PAGE> 11
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(d) Except as described in Schedule 3.13, neither Sellers nor
any other trade or business under common control with Sellers (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or
contributes to any Employee Plan or Compensation Arrangement that provides
retiree medical or retiree life insurance coverage to former employees of
Sellers at the Station.
(e) Except as described in Schedule 3.13, with respect to each
Employee Plan and, to the extent applicable, each Compensation Arrangement: (i)
each Employee Plan that is intended to be tax-qualified, and each amendment
thereto, is the subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination letter would
affect the validity of an Employee Plan's letter; (ii) no prohibited
transaction, within the definition of section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject either Seller to any liability; and
(iii) all contributions, premiums or payments accrued, in whole or in part,
under each Employee Plan or Compensation Arrangement or with respect thereto as
of the Closing will be paid by the Sellers prior to the Closing, including, but
not limited to, contributions thereto with respect to the plan year ending
immediately prior to the Closing.
(f) For purposes of this Agreement, the following terms shall
have the meaning indicated: (i) "Employee Plan" shall mean any pension,
profit-sharing, deferred compensation, vacation, bonus, incentive, medical,
vision, dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA to which Sellers or any entity related to
Sellers (under the terms of Section 414(b), (c), (m) or (o) of the Code)
contributes or to which Sellers or any entity related to Sellers (under the
terms of Sections 414(b), (c), (m) or (o) of the Code) sponsors, maintains or
otherwise is bound which provides benefits to persons employed or previously
employed at the Station; (ii) "Code" shall mean the Internal Revenue Code of
1986, as amended, any successor thereto and any regulations promulgated
thereunder; (iii) "Compensation Arrangement" shall mean any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees, former employees, officers, directors and shareholders of
Sellers or any entity related to Sellers (under the terms of Section 414(b),
(c), (m) or (o) of the Code) employed or previously employed at the Station any
compensation or other benefits, whether deferred or not, in excess of base
salary or wages, including, but not limited to, any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life insurance, stock
purchase plan, severance pay plan and any other employee fringe benefit plan;
(iv) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, any successor thereto and any regulations promulgated thereunder; and
(v) "Multi-employer Plan" means a plan, as defined in ERISA Section 3(37), to
which Sellers or any entity related to Sellers (under the terms of Section
414(b) or (c) of the Code) contributes or is required to contribute.
<PAGE> 12
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(g) Neither Seller is a party to or subject to any collective
bargaining agreements with respect to the Station. Neither Seller has any
written or oral contracts of employment with any employee of the Station, other
than those listed in Schedule 3.7. Each Seller has complied in all material
respects with all laws, rules, and regulations relating to the employment of
labor, including those related to wages, hours, collective bargaining,
occupational safety, discrimination, and the payment of social security and
other payroll related taxes, and neither Seller has received any notice alleging
that it has failed to comply in any material respect with any such laws, rules,
or regulations. No controversies, disputes, or proceedings are pending or, to
the best of Sellers' knowledge, threatened, between Sellers and any employee
(singly or collectively) of the Station. No labor union or other collective
bargaining unit represents or claims to represent any of the employees of the
Station. To the best of Sellers' knowledge, there is no union campaign being
conducted to represent any employees of the Station or to solicit cards from
employees to authorize a union to request a National Labor Relations Board
certification election with respect to any employees at the Station.
3.14 TAXES. Sellers have filed or caused to be filed all federal income
tax returns and all other federal, state, county, local, or city tax returns
which are required to be filed and have paid or caused to be paid all taxes
shown on those returns or on any tax assessment received by Sellers to the
extent that such taxes have become due, or has set aside on their books adequate
reserves (segregated to the extent required by generally accepted accounting
principles) with respect thereto. There are no legal, administrative, or tax
proceedings or, to the best of Sellers' knowledge, governmental investigations,
pursuant to which either Seller is or could be made liable for any taxes,
penalties, interest, or other charges, the liability for which could extend to
Buyer as transferee of the business of the Station, and no event has occurred
that could impose on Buyer any transferee liability for any taxes, penalties, or
interest due or to become due from either Seller.
3.15 CLAIMS AND LEGAL ACTIONS. Except as disclosed on Schedule 3.15 and
except for any FCC rulemaking proceedings generally affecting the broadcasting
industry, there is no claim, legal action, counterclaim, suit, arbitration,
governmental investigation or other legal, administrative, or tax proceeding,
nor any order, decree or judgment, in progress or pending, or to the knowledge
of Sellers threatened, against or relating to either Seller with respect to the
ownership or operation of the Station or otherwise relating to the Assets or the
business or operations of the Station, nor do Sellers know or have reason to be
aware of any basis for the same. In particular, but without limiting the
generality of the foregoing, there are no applications, complaints or
proceedings pending or, to the best of Sellers' knowledge, threatened (i) before
the FCC relating to the business or operations of the Station other than rule
making proceedings which affect the television industry generally, (ii) before
any federal or state agency relating to the business or operations of the
Station involving charges of illegal discrimination under any federal or state
employment laws or regulations, or (iii)
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before any federal, state, or local agency relating to the business or
operations of the Station involving zoning issues under any federal, state, or
local zoning law, rule, or regulation.
3.16 ENVIRONMENTAL MATTERS.
(a) To the best of Sellers' knowledge, Sellers have complied
in all material respects with all laws, rules, and regulations of all federal,
state, and local governments (and all agencies thereof) concerning the
environment, public health and safety, and employee health and safety, and no
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against either Seller in
connection with its ownership or operation of the Station alleging any failure
to comply with any such law, rule, or regulation.
(b) To the best of Sellers' knowledge, Sellers have no
liability relating to their ownership and operation of the Station (and there is
no basis related to the past or present operations, properties, or facilities of
Sellers for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against Sellers giving rise to any such
liability) under any law, rule, or regulation of any federal, state, or local
government (or agency thereof) concerning release or threatened release of
hazardous substances, public health and safety, or pollution or protection of
the environment.
(c) To the best of Sellers' knowledge, Sellers have no
liability relating to their ownership and operation of the Station (and Sellers
have not handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in any manner that
could form the basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law or
pursuant to any statute) against Sellers giving rise to any such liability) for
damage to any site, location, or body of water (surface of subsurface) or for
illness or personal injury.
(d) To the best of Sellers' knowledge, Sellers have no
liability relating to their ownership and operation of the Station (and there is
no basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against Sellers giving rise to any such
liability) under any law, rule, or regulation of any federal, state, or local
government (or agency thereof) concerning employee health and safety.
(e) To the best of Sellers' knowledge, Sellers have no
liability relating to their ownership and operation of the Station (and Sellers
have not exposed any employee to any substance or condition that could form the
basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand (under the common law or pursuant to
statute) against Sellers giving rise to any such liability) for any illness or
personal injury to any employee.
<PAGE> 14
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(f) In connection with their ownership or operation of the
Station, Sellers have obtained and been in compliance in all material respects
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and have complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all federal, state, and local laws, rules, and regulations
(including all codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
(g) No pollutant, contaminant, or chemical, industrial,
hazardous, or toxic material or waste has ever been manufactured, buried,
stored, spilled, leaked, discharged, emitted, or released by Sellers in
connection with their ownership and operation of the Station or, to the best of
Sellers' knowledge, by any other party on any Real Property.
3.17 COMPLIANCE WITH LAWS. Sellers have complied in all material
respects with the Licenses and all federal, state, and local laws, rules,
regulations, and ordinances applicable or relating to the ownership and
operation of the Station. To the best of Sellers' knowledge, neither the
ownership or use of the properties of the Station nor the conduct of the
business or operations of the Station conflicts with the rights of any other
person or entity.
3.18 CONDUCT OF BUSINESS IN ORDINARY COURSE. Since December 31, 1997,
Sellers have conducted the business and operations of the Station only in the
ordinary course and has not:
(a) Suffered any material adverse change in the business,
assets, or properties of the Station, including any damage, destruction, or loss
affecting any assets used or useful in the conduct of the business of the
Station;
(b) Made any material increase in compensation payable or to
become payable to any of the employees of the Station, or any bonus payment made
or promised to any employee of the Station, or any material change in personnel
policies, employee benefits, or other compensation arrangements affecting the
employees of the Station;
(c) Made any sale, assignment, lease, or other transfer of any
of the Station's properties other than in the normal and usual course of
business with suitable replacements being obtained therefor;
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(d) Canceled any debts owed to or claims held by either Seller
with respect to the Station, except in the normal and usual course of business;
(e) Suffered any material write-down of the value of any
Assets or any material write-off as uncollectible of any accounts receivable of
the Station; or
(f) Transferred or granted any right under, or entered into
any settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, franchise, or similar right, or modified any
existing right relating to the Station.
3.19 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3.19, neither Seller has been involved in any business arrangement or
relationship relating to the Station with any affiliate of either Seller, and no
affiliate of either Seller owns any property or right, tangible or intangible,
which is used in the business of the Station. As used in this paragraph,
"affiliate" has the meaning set forth in Rule 12b-2 promulgated under the
Securities and Exchange Act of 1934.
3.20 BROKER. Neither Seller nor any person acting on Sellers' behalf
has incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement.
3.21 FULL DISCLOSURE. No representation or warranty made by Sellers in
this Agreement or in any certificate, document, or other instrument furnished or
to be furnished by Sellers pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make any statement made herein or therein not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION, STANDING, AND AUTHORITY. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida and at Closing will be duly qualified to conduct business as a foreign
corporation in the State of Oregon. Buyer has all requisite power and authority
to execute and deliver this Agreement and the documents contemplated hereby and
thereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by Buyer hereunder and thereunder.
4.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery, and
performance of this Agreement by Buyer have been duly authorized by all
necessary actions on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and
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constitutes the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally and by judicial discretion in the enforcement of
equitable remedies.
4.3 ABSENCE OF CONFLICTING AGREEMENTS. Subject to obtaining the
Consents and making any filing required under the HSR Act, the execution,
delivery, and performance by Buyer of this Agreement and the documents
contemplated hereby and thereby (with or without the giving of notice, the lapse
of time, or both): (i) do not require the consent of any third party; (ii) will
not conflict with the Articles of Incorporation or Bylaws of Buyer; (iii) will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, injunction, decree, rule, regulation, or ruling of any
court or governmental instrumentality; or (iv) will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
Buyer is a party or by which Buyer may be bound, such that Buyer could not
acquire or operate the Assets.
4.4 BROKER. Neither Buyer nor any person acting on Buyer's behalf has
incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement.
4.5 QUALIFICATIONS. Buyer is legally, financially and otherwise
qualified to be the licensee of, acquire, own and operate the Station under the
Communications Act of 1934, as now in effect, and the rules, regulations and
published policies of the FCC, as now in effect. Between the date hereof and the
Closing Date, Buyer shall not take or fail to take any action that could
reasonably be expected to cause the foregoing representation and warranty to be
untrue.
4.6 FULL DISCLOSURE. No representation or warranty made by Buyer in
this Agreement or in any certificate, document, or other instrument furnished or
to be furnished by Buyer pursuant hereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to make any statement made herein or therein not misleading.
SECTION 5. OPERATIONS OF THE STATION PRIOR TO CLOSING
5.1 GENERALLY. Sellers agree that, between the date of this Agreement
and the Closing Date, Sellers shall operate the Station diligently in the
ordinary course of business in accordance with their past practices (except
where such conduct would conflict with the following covenants or with Sellers'
other obligations under this Agreement), and in accordance with the other
covenants in this Section 5.
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5.2 COMPENSATION. Sellers shall not increase the compensation, bonuses,
or other benefits payable or to be payable to any person employed in connection
with the conduct of the business or operations of the Station, except in
accordance with past practices.
5.3 CONTRACTS. Neither Seller will enter into any contract or
commitment relating to the Station or the Assets, or amend or terminate any
Contract (or waive any material right thereunder), or incur any obligation
(including obligations relating to the borrowing of money or the guaranteeing of
indebtedness) that will be binding on Buyer after Closing, except for cash time
sales agreements that are cancellable by the Station without penalty on no more
than 30-days' notice and that are entered into in the ordinary course of
business consistent with Sellers' past practices. Prior to the Closing Date,
Sellers shall deliver to Buyer a list of all Contracts entered into between the
date of this Agreement and the Closing Date, together with copies of such
Contracts.
5.4 DISPOSITION OF ASSETS. Neither Seller shall sell, assign, lease, or
otherwise transfer or dispose of any of the Assets, except where no longer used
or useful in the business or operations of the Station or in connection with the
acquisition of replacement property of equivalent kind and value.
5.5 ENCUMBRANCES. Neither Seller shall create, assume or permit to
exist any claim, liability, mortgage, lien, pledge, condition, charge, or
encumbrance of any nature whatsoever upon the Assets, except for (i) liens
disclosed on Schedule 3.5 and Schedule 3.6, which shall be removed on or prior
to the Closing Date, (ii) liens for current taxes not yet due and payable, and
(iii) mechanics' liens and other similar liens, which shall be removed on or
prior to the Closing Date.
5.6 LICENSES. Neither Seller shall cause or permit, by any act or
failure to act, any of the Licenses to expire or to be revoked, suspended, or
modified, or take any action that could cause the FCC or any other governmental
authority to institute proceedings for the suspension, revocation, or adverse
modification of any of the Licenses. Sellers shall not fail to prosecute with
due diligence any applications to any governmental authority in connection with
the operation of the Station.
5.7 RIGHTS. Neither Seller shall waive any right relating to the
Station or any of the Assets. Neither Seller shall cause, by any act or failure
to act, any cable system located within the Station's Area of Dominant Influence
to refuse to carry the Station's signal.
5.8 NO INCONSISTENT ACTION. Neither Seller shall take any action that
is inconsistent with its obligations under this Agreement or that could hinder
or delay the consummation of the transactions contemplated by this Agreement.
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5.9 ACCESS TO INFORMATION. Sellers shall give Buyer and its counsel,
accountants, engineers, appraisers and other authorized representatives
reasonable access to the Assets and to all other properties, equipment, books,
records, Contracts, and documents relating to the Station for the purpose of
audit and inspection, including inspections incident to the environmental study
described in Section 6.5, the engineering study described in Section 6.6 and the
appraisal described in Section 6.11, and will furnish or cause to be furnished
to Buyer or its authorized representatives all information with respect to the
affairs and business of the Station that Buyer may reasonably request (including
any financial reports and operations reports produced with respect to the
affairs and business of the Station). Without limiting the generality of the
foregoing, Sellers shall give Buyer and its counsel, accountants and other
authorized representatives reasonable access to Sellers' financial records and
Sellers' employees, counsel, accountants and other representatives for the
purpose of preparing and auditing such financial statements as Buyer determines,
in its sole judgment, are required or advisable to comply with federal or state
securities laws and the rules and regulations of securities markets as a result
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
5.10 MAINTENANCE OF ASSETS. Each Seller shall use its best efforts and
take all reasonable actions to maintain all of the Assets in good condition
(ordinary wear and tear excepted), and use, operate, and maintain all of the
Assets in a reasonable manner and in accordance with the terms of the FCC
Licenses, all rules and regulations of the FCC and generally accepted standards
of good engineering practice. Sellers shall maintain inventories of spare parts
and expendable supplies at levels consistent with past practices. If any loss,
damage, impairment, confiscation, or condemnation of or to any of the Assets
occurs, Sellers shall repair, replace, or restore the Assets to their prior
condition as represented in this Agreement as soon thereafter as possible, and
Sellers shall use the proceeds of any claim under any insurance policy solely to
repair, replace, or restore any of the Assets that are lost, damaged, impaired,
or destroyed.
5.11 INSURANCE. Sellers shall maintain the existing insurance policies
on the Station and the Assets.
5.12 CONSENTS. Sellers shall obtain the Consents designated on Schedule
3.3 as "Material Consents" and shall use commercially reasonable efforts to
obtain each other Consent and the estoppel certificates described in Section
8.2(b), without any change in the terms or conditions of any Contract or License
that could be less advantageous to the Station than those pertaining under the
Contract or License as in effect on the date of this Agreement. Sellers shall
promptly advise Buyer of any difficulties experienced in obtaining any of the
Consents and of any conditions proposed, considered, or requested for any of the
Consents. Upon Buyer's request, Sellers shall cooperate with Buyer and use
commercially reasonable efforts to obtain from the lessors under each Real
Property lease such estoppel
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certificates and consents to the collateral assignment of the lessee's interest
under each such lease as Buyer's senior lenders may request.
5.13 BOOKS AND RECORDS. Sellers shall maintain the books and records
relating to the Station in accordance with past practices.
5.14 NOTIFICATION. Sellers shall promptly notify Buyer in writing of
any material change in any of the information contained in Sellers'
representations and warranties contained in Section 3 of this Agreement.
5.15 FINANCIAL INFORMATION. Sellers shall furnish to Buyer within
thirty days after the end of each month ending between the date of this
Agreement and the Closing Date a statement of income and expense and a statement
of operating cash flow for the month just ended and such other financial
information (including information on payables and receivables) as Buyer may
reasonably request. All financial information delivered by Sellers to Buyer
pursuant to this Section shall be prepared from the books and records of Sellers
in accordance with generally accepted accounting principles consistently
applied, shall accurately reflect the books, records, and accounts of the
Station, shall be complete and correct in all material respects, and shall
present fairly the financial condition of the Station as at their respective
dates and the results of operations for the periods then ended.
5.16 COMPLIANCE WITH LAWS. Sellers shall comply in all material
respects with all laws, rules, and regulations applicable or relating to the
ownership and operation of the Station.
5.17 FINANCING LEASES. Sellers will satisfy at or prior to Closing all
outstanding obligations under capital and financing leases with respect to any
of the Assets and obtain good title to the Assets leased by either Seller
pursuant to those leases so that those Assets shall be transferred to Buyer at
Closing free of any interest of the lessors.
5.18 PROGRAMMING. Sellers shall not make any material changes in the
broadcast hours or in the percentages of types of programming broadcast by the
Station, or make any other material change in the Station's programming
policies, except such changes as in the good faith judgment of the Sellers are
required by the public interest.
5.19 PRESERVATION OF BUSINESS. Sellers shall use their best efforts to
preserve the business and organization of the Station and use their best efforts
to keep available to the Station its present employees and to preserve the
audience of the Station and the Station's present relationships with suppliers,
advertisers, and others having business relations with it, to the end that the
business, operations, and prospects of the Station shall be unimpaired at the
Closing Date. The ordinary and customary operating, marketing, promotional,
sales, and advertising practices of the Station shall be maintained.
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5.20 PERSONNEL RECOMMENDATIONS. Sellers shall promptly notify Buyer as
personnel vacancies occur at the Station and consider for employment all
personnel recommended by Buyer for such vacant positions.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC CONSENT.
(a) The assignment of the FCC Licenses in connection with the
purchase and sale of the Assets pursuant to this Agreement shall be subject to
the prior consent and approval of the FCC.
(b) Sellers and Buyer filed on March 10, 1998, an appropriate
application for the FCC Consent. The parties shall prosecute the application
with all reasonable diligence and otherwise use their best efforts to obtain a
grant of the application as expeditiously as practicable. Each party agrees to
comply with any condition imposed on it by the FCC Consent, except that no party
shall be required to comply with a condition if (1) the condition was imposed on
it as the result of a circumstance the existence of which does not constitute a
breach by the party of any of its representations, warranties, or covenants
under this Agreement, and (2) compliance with the condition would have a
material adverse effect upon it. Buyer and Sellers shall oppose any requests for
reconsideration or judicial review of the FCC Consent. If the Closing shall not
have occurred for any reason within the original effective period of the FCC
Consent, and neither party shall have terminated this Agreement under Section 9,
the parties shall jointly request an extension of the effective period of the
FCC Consent. No extension of the FCC Consent shall limit the exercise by either
party of its rights under Section 9.
6.2 CONTROL OF THE STATION. Prior to Closing, Buyer shall not, directly
or indirectly, control, supervise, direct, or attempt to control, supervise, or
direct, the operations of the Station; such operations, including complete
control and supervision of all Station programs, employees, and policies, shall
be the sole responsibility of Sellers until the Closing.
6.3 RISK OF LOSS.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets from any cause whatsoever shall be borne by
Sellers at all times prior to the Closing.
(b) If any damage or destruction of the Assets or any other
event occurs which (i) causes the Station to cease broadcasting operations for a
period of seven or more days or (ii) prevents in any material respect signal
transmission by the Station in the normal
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and usual manner and Sellers fail to restore or replace the Assets so that the
Station's normal and usual transmission is resumed in all material respects
within twenty-one days of the damage, destruction or other event, Buyer, in its
sole discretion, may (x) terminate this Agreement forthwith without any further
obligations hereunder upon written notice to Sellers, or (y) proceed to
consummate the transaction contemplated by this Agreement and complete the
restoration and replacement of the Assets after the Closing Date, in which event
Sellers shall deliver to Buyer all insurance proceeds received in connection
with such damage, destruction or other event. In the event Buyer fails to notify
Sellers of its election to terminate this Agreement pursuant to this Section
6.3(b) and Section 9.2(d) within 10 days following the end of the periods
specified in clause (i) or clause (ii) of this Section 6.3(b), as the case may
be, Buyer shall be deemed to have elected to consummate the transaction
contemplated by this Agreement in accordance with clause (y) of this Section
6.3(b).
6.4 CONFIDENTIALITY. Except as necessary for the consummation of the
transaction contemplated by this Agreement, including Buyer's obtaining of
financing related hereto, and except as and to the extent required by law,
including, without limitation, disclosure requirements of federal or state
securities laws and the rules and regulations of securities markets, each party
will keep confidential any information obtained from the other party in
connection with the transactions contemplated by this Agreement. If this
Agreement is terminated, each party will return to the other party all
information obtained by such party from the other party in connection with the
transactions contemplated by this Agreement.
6.5 ENVIRONMENTAL AUDIT. Buyer may, at its option and expense, retain
an environmental consultant to be selected by Buyer to perform a Phase I
environmental survey of the properties of the Station, and such survey shall be
completed within 45 days from the date hereof. If the survey discloses any
material environmental hazard or material possibility of future liability for
environmental damages or clean-up costs, Buyer shall so notify Sellers no later
than 55 days from the date hereof.
6.6 ENGINEERING STUDY. Buyer may, at its option and expense, retain an
engineering firm to conduct a proof of performance study of the Station and to
prepare a report on the Station's compliance with customary engineering
practices and all applicable FCC rules, regulations, prescribed practices, and
technical standards, and such study and report shall be completed within 45 days
from the date hereof. If the survey discloses any material deficiencies in the
operations or equipment of the Station, Buyer shall so notify Sellers no later
than 55 days from the date hereof.
6.7 COOPERATION. Buyer and Sellers shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Buyer and Sellers shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use their best efforts to consummate the
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transaction contemplated hereby and to fulfill their obligations under this
Agreement. Notwithstanding the foregoing, Buyer shall have no obligation (i) to
expend funds to obtain any of the Consents or (ii) to agree to any adverse
change in any License or Assumed Contract to obtain a Consent required with
respect thereto.
6.8 BULK SALES LAW. If applicable, the Bulk Sales law of the State of
Oregon shall be complied with by Sellers. Any loss, liability, obligation, or
cost suffered by Sellers or Buyer as the result of the failure of Sellers or
Buyer to comply with the provisions of any bulk sales law applicable to the
transfer of the Assets as contemplated by this Agreement shall be borne by
Sellers.
6.9 SALES TAX FILINGS. Sellers shall continue to file Oregon sales tax
returns with respect to the Station in accordance with Sellers' past practices
and shall concurrently deliver copies of all such returns to Buyer.
6.10 ACCESS TO BOOKS AND RECORDS. Sellers shall provide Buyer access
and the right to copy for a period of three years from the Closing Date any
books and records relating to the Assets that are not included in the Assets.
Buyer shall provide Sellers access and the right to copy for a period of three
years from the Closing Date any books and records relating to the Assets.
6.11 APPRAISAL. Buyer and Sellers agree to allocate the Purchase Price
for tax and recording purposes in accordance with an appraisal (the "Appraisal")
to be conducted by an appraisal firm selected and paid for by Buyer with
experience in the valuation and appraisal of television station assets. Buyer
shall deliver a copy of the Appraisal to Sellers on or before the date that is
90 days following the Closing Date.
6.12 HSR ACT FILING. Sellers and Buyer agree to (a) file, or cause to
be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, which are required in connection with
the transactions contemplated hereby under the HSR Act within ten (10) business
days of the date of this Agreement; (b) submit to the other party, prior to
filing, their respective HSR Act filings to be made hereunder, and to discuss
with the other any comments the reviewing party may have; (c) cooperate with
each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents in such party's
possession that may be reasonably required in connection with such filings; (d)
promptly file, after any request by the FTC or DOJ and appropriate negotiation
with the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (e) furnish each other with any correspondence
from or to, and notify each other of any other communications with, the FTC or
DOJ which relates to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
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SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS
AT CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. All obligations of Buyer at the
Closing are subject at Buyer's option to the fulfillment prior to or at the
Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Sellers contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) COVENANTS AND CONDITIONS. Sellers shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by them prior to or
on the Closing Date.
(c) CONSENTS. All Consents designated on Schedule 3.3 as
"Material Consents" shall have been obtained and delivered to Buyer without any
adverse change in the terms or conditions of any agreement or any governmental
license, permit, or other authorization.
(d) FCC CONSENT. The FCC Consent shall have been granted
without the imposition on Buyer of any conditions that need not be complied with
by Buyer under Section 6.1 hereof, Sellers shall have complied with any
conditions imposed on them by the FCC Consent, and the FCC Consent shall have
become a Final Order.
(e) GOVERNMENTAL AUTHORIZATIONS. Sellers shall be the holder
of all Licenses and, other than as a result of any decision or order issued in
connection with the FCC rulemaking identified as IN THE MATTER OF ADVANCED
TELEVISION SYSTEMS, MM Docket No. 87-268, and any subsequent FCC or court
proceeding relating to such rulemaking (the "ATV RULEMAKING"), there shall not
have been any modification of any License that could have a material adverse
effect on the Station or the conduct of their business and operations. Other
than the proceedings involved in the ATV RULEMAKING, no proceeding shall be
pending or threatened the effect of which could be to revoke, cancel, fail to
renew, suspend, or modify in any materially adverse respect any FCC License.
(f) DELIVERIES. Sellers shall have made or stand willing to
make all the deliveries to Buyer set forth in Section 8.2.
(g) ADVERSE CHANGE. Between the date of this Agreement and the
Closing Date, there shall have been no material adverse change in the Tangible
Personal Property, including any materially adverse damage, destruction, or loss
affecting the Tangible Personal Property.
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(h) HSR ACT. The waiting period under the HSR Act shall have
expired without unresolved action by the DOJ or the FTC to prevent the Closing.
(i) SKTV CONSENT. SKTV, Inc. shall have (x) granted its
consent to the transactions contemplated by this Agreement and (y) irrevocably
waived any right or interest it has or may have in or with respect to the Assets
or the business or operations of the Station, and the Affiliation Agreement
between Sellers and Home Shopping Club, Inc. shall have been terminated, in each
case pursuant to an agreement or agreements in form and substance reasonably
acceptable to Buyer (the "SKTV Consent").
(j) WNGM CLOSING. The transactions contemplated by the Asset
Purchase Agreement dated as of March 19, 1998, among Paxson Communications of
Atlanta-14, Inc., SKMD Broadcasting Partnership, and Silver King Broadcasting of
Maryland, Inc., shall have been consummated in accordance with terms set forth
therein.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. All obligations of Sellers at
the Closing are subject at Sellers' option to the fulfillment prior to or at the
Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though made at and as of
that time.
(b) COVENANTS AND CONDITIONS. Buyer shall have performed and
complied in all material respects with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date.
(c) DELIVERIES. Buyer shall have made or stand willing to make
all the deliveries set forth in Section 8.3.
(d) FCC CONSENT. The FCC Consent shall have been granted
without the imposition on Sellers of any conditions that need not be complied
with by Sellers under Section 6.1 hereof, and Buyer shall have complied with any
conditions imposed on it by the FCC Consent.
(e) HSR ACT. The waiting period under the HSR Act shall have
expired without unresolved action by the DOJ or the FTC to prevent the Closing.
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SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 CLOSING.
(a) CLOSING DATE. The Closing shall take place at 10:00 a.m.
on a date, to be set by Buyer on at least five days' written notice to Sellers,
that is (1) not earlier than the first business day after the FCC Consent is
granted, and (2) not later than ten business days following the date upon which
the FCC Consent has become a Final Order, subject to satisfaction or waiver of
all other conditions precedent to the holding of the Closing. If Buyer fails to
specify the date for Closing prior to the fifth business day after the date upon
which the FCC Consent becomes a Final Order, the Closing shall take place on the
tenth business day after the date upon which the FCC Consent becomes a Final
Order.
(b) CLOSING PLACE. The Closing shall be held at the offices of
Dow, Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington,
D.C. 20036, or any other place that is agreed upon by Buyer and Sellers.
8.2 DELIVERIES BY SELLERS. Prior to or on the Closing Date, Sellers
shall deliver to Buyer the following, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) TRANSFER DOCUMENTS. Duly executed motor vehicle titles,
assignments, and other transfer documents which shall be sufficient to vest good
and marketable title to the Assets in the name of Buyer, free and clear of all
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges or encumbrances, except for liens for current taxes not yet due and
payable;
(b) ESTOPPEL CERTIFICATES. Estoppel certificates of the
lessors of all leasehold interests included in the Real Property if and to the
extent Sellers obtain such estoppel certificates in accordance with Section
5.12;
(c) CONSENTS. A manually executed copy of any instrument
evidencing receipt of any Consent obtained by Sellers pursuant to Section 5.12;
(d) OFFICER'S CERTIFICATE. A certificate, dated as of the
Closing Date, executed on behalf of Sellers by an officer of Sellers, certifying
(1) that the representations and warranties of Sellers contained in this
Agreement are true and complete in all material respects as of the Closing Date
as though made on and as of that date; and (2) that Sellers have in all material
respects performed and complied with all of their obligations, covenants, and
agreements set forth in this Agreement to be performed and complied with on or
prior to the Closing Date;
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(e) LICENSES, CONTRACTS, BUSINESS RECORDS, ETC. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings, plans,
projections, engineering records, and all files and records used by Sellers in
connection with their operations;
(f) OPINION OF COUNSEL. An Opinion of Sellers' counsel dated
as of the Closing Date, substantially in the form of Schedule 8.2(f) hereto;
(g) LENDERS CERTIFICATES. Such certificates and confirmations
to Buyer's senior lenders executed by Sellers as Buyer may reasonably request in
connection with obtaining financing for the performance of its payment
obligations hereunder.
8.3 DELIVERIES BY BUYER. Prior to or on the Closing Date, Buyer shall
deliver to Sellers the following, in form and substance reasonably satisfactory
to Sellers and their counsel:
(a) PURCHASE PRICE. The Purchase Price as provided in Section
2.3;
(b) ASSUMPTION AGREEMENTS. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform Sellers'
obligations under the Licenses and Assumed Contracts insofar as they relate to
the time on and after the Closing Date and arise out of events related to
Buyer's ownership of the Assets or its operation of the Station on or after the
Closing Date;
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the
Closing Date, executed on behalf of Buyer by an officer of Buyer, certifying (1)
that the representations and warranties of Buyer contained in this Agreement are
true and complete in all material respects as of the Closing Date as though made
on and as of that date, and (2) that Buyer has in all material respects
performed and complied with all of its obligations, covenants, and agreements
set forth in this Agreement to be performed and complied with on or prior to the
Closing Date;
(d) OPINION OF COUNSEL. An opinion of Buyer's counsel dated as
of the Closing Date, substantially in the form of Schedule 8.3(d) hereto.
SECTION 9. TERMINATION
9.1 TERMINATION BY SELLERS. This Agreement may be terminated by Sellers
and the purchase and sale of the Station abandoned, if Sellers are not then in
material default, upon written notice to Buyer, upon the occurrence of any of
the following:
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(a) CONDITIONS. If on the date that would otherwise be the
Closing Date any of the conditions precedent to the obligations of Sellers set
forth in this Agreement have not been satisfied or waived in writing by Sellers.
(b) JUDGMENTS. If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree, or order that would
prevent or make unlawful the Closing, and any such judgment, decree or order is
not the result of any action or omission by Sellers.
(c) UPSET DATE. If the Closing shall not have occurred by
March 19, 1999.
(d) BREACH. Without limiting Sellers' rights under the other
provisions of this Section 9.1, if Buyer has failed to cure any material breach
of any of its representations, warranties or covenants under this Agreement
within thirty days after Buyer received written notice of such breach from
Sellers.
9.2 TERMINATION BY BUYER. This Agreement may be terminated by Buyer and
the purchase and sale of the Station abandoned, if Buyer is not then in material
default, upon written notice to Sellers, upon the occurrence of any of the
following:
(a) CONDITIONS. If on the date that would otherwise be the
Closing Date any of the conditions precedent to the obligations of Buyer set
forth in this Agreement have not been satisfied or waived in writing by Buyer.
(b) JUDGMENTS. If there shall be in effect on the date that
would otherwise be the Closing Date any judgment, decree, or order that would
prevent or make unlawful the Closing, and any such judgment, decree or order is
not the result of any action or omission by Buyer.
(c) UPSET DATE. If the Closing shall not have occurred by
March 19, 1999.
(d) INTERRUPTION OF SERVICE. If any damage or destruction of
the Assets or any other event occurs that causes the Station to cease
broadcasting operations or prevents signal transmission by the Station in the
normal and usual manner, in each case for the periods specified in Section
6.3(b).
(e) ENVIRONMENTAL HAZARDS. Buyer shall have notified Sellers
of material environmental hazards or the material possibility of environmental
damages or clean-up costs, as indicated in the environmental study described in
Section 6.5, within the period specified in Section 6.5, and the cause thereof
shall not have been remedied within 30 days from the date such notice is
received by Sellers.
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(f) TECHNICAL DEFICIENCIES. Buyer shall have notified Sellers
of material deficiencies in the operations or equipment of the Station, as
indicated in the engineering study described in Section 6.6, within the period
specified in Section 6.6, and the cause thereof shall not have been remedied
within 30 days from the date such notice is received by Sellers.
(g) BREACH. Without limiting Buyer's rights under the other
provisions of this Section 9.2, if Sellers have failed to cure any material
breach of any of their representations, warranties or covenants under this
Agreement within thirty days after Sellers received written notice of such
breach from Buyer.
9.3 RIGHTS ON TERMINATION. If this Agreement is terminated pursuant to
Section 9.1 or Section 9.2 and neither party is in material breach of this
Agreement, the parties hereto shall not have any further liability to each other
with respect to the purchase and sale of the Assets. If this Agreement is
terminated by Sellers due to Buyer's material breach of this Agreement, then
Sellers shall have all rights or remedies available at law or equity. If this
Agreement is terminated by Buyer due to Sellers' material breach of this
Agreement, Buyer shall have all rights and remedies available at law or equity.
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES
10.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties
contained in this Agreement shall be deemed continuing representations and
warranties and shall survive the Closing for a period of nine months. Any
investigations by or on behalf of any party hereto shall not constitute a waiver
as to enforcement of any representation, warranty, or covenant contained in this
Agreement. No notice or information delivered by Sellers shall affect Buyer's
right to rely on any representation or warranty made by Sellers or relieve
Sellers of any obligations under this Agreement as the result of a breach of any
of their representations and warranties.
10.2 INDEMNIFICATION BY SELLERS. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of Buyer or any
information Buyer may have, Sellers hereby agrees to indemnify and hold Buyer
harmless against and with respect to, and shall reimburse Buyer for:
(a) Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of any covenant
by Sellers contained in this Agreement or in any certificate, document, or
instrument delivered to Buyer under this Agreement.
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(b) Any and all obligations of Sellers not assumed by Buyer
pursuant to this Agreement, including any liabilities arising at any time under
any Contract not included in the Assumed Contracts.
(c) Any loss, liability, obligation, or cost resulting from
the failure of the parties to comply with the provisions of any bulk sales law
applicable to the transfer of the Assets.
(d) Any and all losses, liabilities, or damages resulting from
the operation or ownership of the Station prior to the Closing, including any
liabilities arising under the Licenses or the Assumed Contracts which relate to
events occurring prior the Closing Date.
(e) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.3 INDEMNIFICATION BY BUYER. Notwithstanding the Closing, and
regardless of any investigation made at any time by or on behalf of Sellers or
any information Sellers may have, Buyer hereby agrees to indemnify and hold
Sellers harmless against and with respect to, and shall reimburse Sellers for:
(a) Any and all losses, liabilities, or damages resulting from
any untrue representation, breach of warranty, or nonfulfillment of any covenant
by Buyer contained in this Agreement or in any certificate, document, or
instrument delivered to Sellers under this Agreement.
(b) Any and all obligations of Sellers assumed by Buyer
pursuant to this Agreement.
(c) Any and all losses, liabilities, or damages resulting from
the operation or ownership of the Station on and after the Closing.
(d) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
10.4 PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification
shall be as follows:
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(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim. If
the claim relates to an action, suit, or proceeding filed by a third party
against Claimant, such notice shall be given by Claimant within five days after
written notice of such action, suit, or proceeding was received by Claimant.
(b) With respect to claims solely between the parties,
following receipt of notice from the Claimant of a claim, the Indemnifying Party
shall have thirty days to make 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
and/or its authorized representatives the information relied upon by the
Claimant to substantiate the claim. If the Claimant and the Indemnifying Party
agree at or prior to the expiration of the thirty-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such claim, the
Indemnifying Party shall immediately pay to the Claimant the full amount of the
claim. If the Claimant and the Indemnifying Party do not agree within the
thirty-day period (or any mutually agreed upon extension thereof), the Claimant
may seek appropriate remedy at law or equity or under the arbitration provisions
of this Agreement, as applicable.
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the Indemnifying
Party. If the Indemnifying Party elects to assume control of the defense of any
third-party claim, the Claimant shall have the right to participate in the
defense of such claim at its own expense. If the Indemnifying Party does not
elect to assume control or otherwise participate in the defense of any third
party claim, it shall be bound by the results obtained by the Claimant with
respect to such claim.
(d) If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) The indemnifications rights provided in Sections 10.2 and
10.3 shall extend to the shareholders, directors, officers, employees, and
representatives of any Claimant although for the purpose of the procedures set
forth in this Section 10.4, any indemnification claims by such parties shall be
made by and through the Claimant.
10.5 LIMITATIONS ON INDEMNIFICATION. Sellers' and Buyer's obligations
to indemnify the other pursuant to this Section 10 shall be subject to the
following limitations:
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(a) No indemnification shall be required to be made under
Section 10.2 or Section 10.3 (i) until the aggregate amount of losses,
liabilities, damages or expenses incurred by Buyer or Sellers, as the case may
be, exceeds $25,000, and then the indemnification shall be made by the
Indemnifying Party only to the extent of such excess over $25,000 and (ii) in an
amount in excess of $500,000; and
(b) No indemnification shall be required to be made under
Section 10.2 (a) or Section 10.3(a) if the written notice of any claim for
indemnification is received by the Indemnifying Party following the expiration
of the period specified in Section 10.1; provided, however, that the expiration
of the period specified in Section 10.1 shall not affect the validity of any
claim made prior to such expiration.
10.6 SPECIFIC PERFORMANCE. The parties recognize that if Sellers breach
this Agreement and refuse to perform under the provisions of this Agreement,
monetary damages alone would not be adequate to compensate Buyer for its injury.
Buyer shall therefore be entitled, in addition to any other remedies that may be
available, including money damages, to obtain specific performance of the terms
of this Agreement. If any action is brought by Buyer to enforce this Agreement,
Sellers shall waive the defense that there is an adequate remedy at law.
10.7 ATTORNEYS' FEES. In the event of a default by either party which
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses.
SECTION 11. MISCELLANEOUS
11.1 FEES AND EXPENSES. Any federal, state, or local sales or transfer
tax arising in connection with the conveyance of the Assets by Sellers to Buyer
pursuant to this Agreement shall be paid by Sellers. Buyer and Sellers shall
each pay one-half of all filing fees required by the FTC under the HSR Act, and
all filing fees required by the FCC in connection with the FCC Consent. Except
as otherwise provided in this Agreement, each party shall pay its own expenses
incurred in connection with the authorization, preparation, execution, and
performance of this Agreement, including all fees and expenses of counsel,
accountants, agents, and representatives. Each party shall be responsible for
all fees or commissions payable to any finder, broker, advisor, or similar
person retained by or on behalf of such party.
11.2 ARBITRATION. Except as otherwise provided to the contrary below,
any dispute arising out of or related to this Agreement that Sellers and Buyer
are unable to resolve by themselves shall be settled by arbitration by a panel
of three (3) neutral arbitrators who shall be selected in accordance with the
procedures set forth in the commercial arbitration rules of
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the American Arbitration Association. The persons selected as arbitrators shall
have prior experience in the broadcasting industry but need not be professional
arbitrators, and persons such as lawyers, accountants, brokers and bankers shall
be acceptable. Before undertaking to resolve the dispute, each arbitrator shall
be duly sworn faithfully and fairly to hear and examine the matters in
controversy and to make a just award according to the best of his or her
understanding. The arbitration hearing shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in
Washington, D.C. The written decision of a majority of the arbitrators shall be
final and binding on Sellers and Buyer. The costs and expenses of the
arbitration proceeding shall be assessed between Sellers and Buyer in a manner
to be decided by a majority of the arbitrators, and the assessment shall be set
forth in the decision and award of the arbitrators. Judgment on the award, if it
is not paid within thirty days, may be entered in any court having jurisdiction
over the matter. No action at law or suit in equity based upon any claim arising
out of or related to this Agreement shall be instituted in any court by Sellers
or Buyer against the other except (i) an action to compel arbitration pursuant
to this Section, (ii) an action to enforce the award of the arbitration panel
rendered in accordance with this Section, or (iii) a suit for specific
performance pursuant to Section 10.5.
11.3 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 by personal delivery, or sent by commercial delivery service or
registered or certified mail, return receipt requested, (c) deemed to have been
given on the date of personal delivery or the date set forth in the records of
the delivery service or on the return receipt, and (d) addressed as follows:
If to Sellers: Blackstar Communications of Oregon, Inc.
Blackstar of Salem, Inc.
1211 Connecticut Avenue, N.W., Suite 509
Washington, D.C. 20036
Attention: Mr. John E. Oxendine
Telephone: (202) 496-9280
With a copy to: Alan C. Campbell, Esquire
Irwin, Campbell & Tannenwald, P.C.
1730 Rhode Island Avenue, N.W., Suite 200
Washington, D.C. 20036
Telephone: (202) 728-0400
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If to Buyer: Paxson Communications of Portland-22, Inc.
601 Clearwater Park Road
West Palm Beach, FL 33401
Attention: Mr. Lowell W. Paxson
Telephone: (561) 659-4122
With a copy to: John R. Feore, Jr., Esquire
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W., Suite 800
Washington, D.C. 20036
Telephone: (202) 776-2786
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.3.
11.4 BENEFIT AND BINDING EFFECT. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto; provided,
however, that Buyer may assign its rights and obligations under this Agreement,
in whole or in part, to one or more subsidiaries or commonly controlled
affiliates of Buyer without seeking or obtaining Sellers' prior approval in
which event Buyer shall have no further obligation hereunder and Buyer may
collaterally assign its rights and interests hereunder to its senior lenders
without seeking or obtaining Sellers' prior approval. Upon any permitted
assignment by Buyer or Sellers in accordance with this Section 11.4, all
references to "Buyer" herein shall be deemed to be references to Buyer's
assignee and all references to "Sellers" herein shall be deemed to be references
to Sellers' assignee, as the case may be. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.5 FURTHER ASSURANCES. The parties shall take any actions and execute
any other documents that may be necessary or desirable to the implementation and
consummation of this Agreement, including, in the case of Sellers, any
additional bills of sale, deeds, or other transfer documents that, in the
reasonable opinion of Buyer, may be necessary to ensure, complete, and evidence
the full and effective transfer of the Assets to Buyer pursuant to this
Agreement.
11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO
THE CHOICE OF LAW PROVISIONS THEREOF).
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11.7 HEADINGS. The headings in this Agreement are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement.
11.8 GENDER AND NUMBER. Words used in this Agreement, regardless of the
gender and number specifically used, shall be deemed and construed to include
any other gender, masculine, feminine, or neuter, and any other number, singular
or plural, as the context requires.
11.9 ENTIRE AGREEMENT. This Agreement, the schedules, hereto, and all
documents, certificates, and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
between Buyer and Sellers with respect to the subject matter hereof. This
Agreement supersedes the letter of intent dated February 3, 1998, between Paxson
Communications Corporation and Blackstar Communications, Inc. and all prior
negotiations between the parties and cannot be amended, supplemented, or changed
except by an agreement in writing that makes specific reference to this
Agreement and which is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought.
11.10 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement, or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.10.
11.11 PRESS RELEASE. Neither party shall publish any press release,
make any other public announcement or otherwise communicate with any news media
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party; provided, however, that nothing
contained herein shall prevent either party from promptly making all filings
with governmental authorities as may, in its judgement be required or advisable
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
11.12 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
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11.13 GUARANTY OF PCC.
(a) In consideration of the execution and delivery of this
Agreement by Sellers, PCC agrees as follows:
(1) PCC hereby guarantees the complete and timely
performance in all material respects of each and every obligation of Buyer under
this Agreement. If any default shall be made by Buyer in such performance, then
PCC will itself perform or cause to be performed such obligation upon receipt of
notice from Sellers specifying in summary form the default.
(2) PCC waives presentment, protest, demand, or
action or delinquency in respect of any of the obligations of Buyer under this
Agreement. PCC waives all notices of nonperformance, notices of protest, notices
of dishonor, and notices of acceptance of this guaranty.
(3) This guaranty shall be deemed a continuing
guaranty, and the above consents and waivers of PCC shall remain in full force
and effect until the satisfaction in full of all obligations of Buyer under this
Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
PAXSON COMMUNICATIONS
CORPORATION HEREBY JOINS IN THE
EXECUTION OF THE FOREGOING ASSET
PURCHASE AGREEMENT TO AGREE TO
THE PROVISIONS OF SECTION 11.13.
PAXSON COMMUNICATIONS OF PAXSON COMMUNICATIONS
OF PORTLAND-22, INC. CORPORATION
By: /s/ LOWELL W. PAXSON By: /s/ LOWELL W. PAXSON
----------------------- --------------------------
Lowell W. Paxson Lowell W. Paxson
Chairman Chairman
BLACKSTAR COMMUNICATIONS OF BLACKSTAR OF SALEM, INC.
OREGON, INC.
By: /s/ JOHN E. OXENDINE By: /s/ JOHN E. OXENDINE
----------------------------- ------------------------
John E. Oxendine John E. Oxendine
Chairman Chairman
<PAGE> 1
EXHIBIT 10.196
MEMBERSHIP PURCHASE AGREEMENT
THIS MEMBERSHIP PURCHASE AGREEMENT (the "Agreement") is dated as of the
14th day of January, 1998, by and among DR. JOSEPH A. ZAVALETTA ("Seller");
SOUTH TEXAS VISION, L.L.C., a Texas limited liability company (the "Company");
PAXSON COMMUNICATIONS OF SAN ANTONIO-26, INC., a Florida corporation ("Buyer");
and PAXSON COMMUNICATIONS CORPORATION, a Delaware corporation ("PCC").
W I T N E S S E T H
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WHEREAS, Company has filed an application for a construction permit,
File No. BPCT-941221KH, as amended by the Company on December 31, 1997
("Construction Permit"), to be issued by the Federal Communications Commission
("FCC") for a new television station on Channel 26, Uvalde, Texas (the
"Station");
WHEREAS, Buyer, Seller and Company are entering into a Loan Agreement,
Construction Agreement, Lease Agreement and Time Brokerage Agreement relating to
the Station;
WHEREAS, Buyer desires to purchase from Seller, following the grant of
the Construction Permit to the Company, forty-nine percent (49%) of the
membership interests of the Company, subject to the terms and conditions set
forth herein;
WHEREAS, Buyer desires to grant to Seller an option to require Buyer to
purchase the remaining fifty-one percent (51%) of the outstanding membership
interests of the Company, and Seller desires to grant to Buyer an option to
purchase such interests, subject to the terms and conditions set forth herein;
and
WHEREAS, in connection with the foregoing transactions, Buyer, Seller
and the Company desire to enter into an agreement setting forth, among other
things, certain restrictions relating to the issuance and sale of the ownership
interests of the Company.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants, conditions and promises contained herein, and for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
<PAGE> 2
ARTICLE 1. CERTAIN DEFINITIONS
Section 1.1 TERMS DEFINED IN THIS SECTION. The following terms, as used
in this Agreement, have the meanings set forth in this Section:
"Amended Regulations" means the Amended and Restated Regulations of
South Texas Vision, L.L.C., to be entered into upon the Initial Closing among
Buyer, Seller and the Company, substantially in the form of Exhibit A.
"Closings" means the collective reference to the Initial Closing and
the Second Closing.
"Communications Act" means the Communications Act of 1934, as amended,
the Telecommunications Act of 1996 and the rules and regulations promulgated
thereunder.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Construction
Permit to the Company and to transfer the Initial Interests or the Option
Interests to Buyer or otherwise to consummate the transactions contemplated by
this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses, and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) to which the Company is a party or that are binding upon the Company,
and (a) that are in effect on the date of this Agreement or (b) that are entered
into by the Company between the date of this Agreement and the Second Closing
Date.
"FCC Consent" means action by the FCC granting its consent to the
transfer of the Option Interests to Buyer as contemplated by this Agreement.
"FCC Licenses" means those licenses, permits, and authorizations issued
by the FCC in connection with the business and operations of the Station.
"Final Order" means an action by the FCC that has not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no requests are pending for administrative or judicial review, reconsideration,
appeal, or stay, and the time for filing any such requests and the time for the
FCC to set aside the action on its own motion have expired.
"Initial Closing" means the consummation of the purchase and sale of
the Initial Interests pursuant to this Agreement in accordance with the
provisions of Article 2.
"Initial Closing Date" means the date on which the Initial Closing
occurs, as determined pursuant to Section 2.1.
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"Initial Interests" means 490,000 units of membership interests in the
Company representing 49% of the issued and outstanding membership interests of
the Company.
"Initial Interests Purchase Price" has the meaning set forth in Section
2.3.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, patents, permits, jingles, proprietary
information, technical information and data, machinery and equipment warranties,
and other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by the
Company or under which the Company is licensed or franchised and that are used
or useful in the business and operations of the Station, together with any
additions thereto between the date of this Agreement and the Second Closing
Date.
"Interests" means the Initial Interests and the Option Interests,
collectively.
"Licenses" means all licenses, permits, construction permits, and other
authorizations issued as of the date hereof by the FCC, the Federal Aviation
Administration, or any other federal, state, or local governmental authorities
for the construction or operation of the Station, together with any additions
thereto between the date of this Agreement and the Second Closing Date.
"Option Interests" means 510,000 units of membership interests of the
Company representing 51% of the issued and outstanding membership interests of
the Company.
"Option Price" shall have the meaning set forth in Section 9.4.
"Organizational Documents" means the regulations, certificate of
organization, articles of organization and all other documents relating to the
organization or governance of the Company as amended, modified or restated.
"PRO FORMA FCC Consent" means the action by the FCC granting its
consent to the PRO FORMA transfer of the Company permitting Buyer's acquisition
of the Initial Interests.
"Real Property" means all interests in real property, including fee
estates, leaseholds and subleaseholds, purchase options, easements, licenses,
rights to access, and rights of way, and all buildings and other improvements
thereon, owned or held by the Company that are used or useful in the business or
operations of the Station, together with any additions thereto between the date
of this Agreement and the Second Closing Date.
"Second Closing" means the consummation of the purchase and sale of the
Option Interests pursuant to this Agreement in accordance with the provision of
Article 9.
"Second Closing Date" means the date on which the Second Closing
occurs, as determined pursuant to Section 9.2.
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"Settlement Agreement" means the Amended and Restated Settlement
Agreement dated December 23, 1997, between Seller and T.L. Gilchrist.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, and other tangible personal property owned or held by the Company
that is used or useful in the conduct of the business or operations of the
Station, together with any additions thereto between the date of this Agreement
and the Second Closing Date.
"Taxes" (and, with correlative meaning, "Taxes" and "Taxable") means
all federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
capital, transfer, employment, withholding and other taxes and assessments,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties, and "Tax" means any one of
such Taxes.
"Tax Returns" means all federal, state, local and foreign income,
franchise, sales, use, occupation, property, excise, alternative or add-on
minimum, social security, employees' withholding, unemployment, disability,
transfer, capital stock and other tax returns and tax reports, and "Tax Return"
means any one of such Tax Returns.
"Transaction Documents" means the Loan Agreement, Note, Pledge
Agreement, Time Brokerage Agreement, Construction Agreement, and Lease Agreement
among Buyer, Seller and the Company.
Section 1.2 CLARIFICATIONS. Words used herein, regardless of the gender
and number specifically used, shall be deemed and construed to include any other
gender and any other number as the context requires. Use of the word "including"
herein shall be deemed and construed to mean "including but not limited to."
Except as specifically otherwise provided in this Agreement in a particular
instance, a reference to a Section, Exhibit or Schedule is a reference to a
Section of this Agreement or a Schedule or an Exhibit hereto, and the terms
"hereof," "herein" and other like terms refer to this Agreement as a whole,
including the Schedules and Exhibits hereto, and not solely to any particular
part hereof.
ARTICLE 2. THE INITIAL CLOSING
Section 2.1 THE INITIAL CLOSING. The Initial Closing shall take place
at 10:00 a.m., Washington, D.C. time, on a date to be set by Buyer on no less
than five (5) days' written notice to Seller, which date shall not be sooner
than the first business day after the date on which the PRO FORMA FCC Consent
has been granted by the FCC and shall not be later than the tenth business day
after the date on which the PRO FORMA FCC Consent has become a Final Order,
subject to the satisfaction of all other conditions precedent to the holding of
the Initial Closing. The Initial Closing shall take place at the offices of Dow,
Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C.
20036, or
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<PAGE> 5
such other place as the parties shall mutually agree. If Buyer fails to specify
the date for Initial Closing prior to the fifth business day after the date upon
which the PRO FORMA FCC Consent has become a Final Order, the Initial Closing
shall take place on the tenth business day after the date upon which the PRO
FORMA FCC Consent has become a Final Order.
Section 2.2 SALE OF INITIAL INTERESTS. Subject to the terms and
conditions set forth in this Agreement, Seller hereby agrees to sell, transfer
and deliver to Buyer on the Initial Closing Date, and Buyer agrees to purchase,
the Initial Interests, free and clear of any claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges or encumbrances of any
nature whatsoever.
Section 2.3 PURCHASE PRICE. The purchase price for the Initial
Interests (the "Initial Interests Purchase Price") shall be Five Million Dollars
($5,000,000). The Initial Interests Purchase Price shall be paid at the Initial
Closing by Buyer to Seller and the creditors listed on Schedule 6.8, in
accordance with written instructions provided by Seller to Buyer no less than
two (2) business days prior to the Initial Closing Date, by wire transfer of
immediately available federal funds or by Buyer's check or checks. Seller shall
use the Initial Interests Purchase Price to repay on the Initial Closing Date
all of the indebtedness listed on Schedule 6.8. Seller agrees that,
notwithstanding Seller's repayment of such indebtedness on behalf of the
Company, such repayment shall not be deemed a capital contribution by Seller to
the Company and shall not increase Seller's ownership interest in the Company.
ARTICLE 3. ACTIONS TO BE TAKEN PRIOR TO THE INITIAL CLOSING
Section 3.1 THE COMPANY. Seller and Company shall take all steps
necessary to obtain FCC approval of the Settlement Agreement and grant of the
Construction Permit to the Company.
Section 3.2 TOWER SITE. Prior to the Initial Closing, Seller shall
prepare and file with the FCC and any other federal, state or local government
authorities such applications, notices or other documents as may be necessary or
advisable to permit the construction and operation of the Station's transmission
facilities at the tower site (the "Tower Site") specified in the Lease attached
hereto as Schedule 3.2 (the "Tower Site Lease").
Section 3.3 PRO FORMA FCC CONSENT. Buyer, the Company and Seller shall
prepare and, within five (5) business days after the later of (a) the date the
FCC's approval of the Settlement Agreement shall have become a Final Order and
(b) the date the FCC's grant of the Construction Permit shall have become a
Final Order, file with the FCC an appropriate application for the PRO FORMA FCC
Consent. Seller, the Company and Buyer shall thereafter prosecute the
application for the PRO FORMA FCC Consent with all diligence and otherwise use
their best efforts to obtain a grant of the application for the PRO FORMA FCC
Consent as expeditiously as possible.
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Section 3.4 CONDUCT PENDING THE INITIAL CLOSING. Between the date
hereof and the Initial Closing Date, unless Buyer shall otherwise consent in
writing, Seller and the Company covenant and agree:
(a) to perform all acts necessary to carry out the
transactions contemplated by this Agreement and not to: (i) sell, transfer or
encumber the ownership of the Company or the Construction Permit other than as
contemplated herein; (ii) perform or suffer any acts within their control that
are inconsistent with their representations, warranties, covenants and
agreements set forth herein, (iii) amend or terminate the Organizational
Documents, Tower Site Lease or Settlement Agreement, and (iv) amend the pending
application for the Construction Permit; and
(b) to notify Buyer promptly of (i) any adverse development
with respect to the Settlement Agreement, Construction Permit or the PRO FORMA
FCC Consent or (ii) the commencement or threat of any claim; suit; action;
arbitration; legal, administrative or other proceeding; governmental
investigation; or tax audit against Seller or the Company or affecting the
Station; and
(c) to cooperate fully with Buyer in taking any and all
actions necessary or desirable for the consummation of the transactions
contemplated by this Agreement;
(d) that the Company shall not create, incur, assume or
guarantee any indebtedness, obligation or liability in excess of $50,000;
provided, however, that in no event shall any such permitted indebtedness,
obligation or liability be secured by any lien, pledge, security interest or
other encumbrance on any assets of the Company or any of the Interests; and
(e) to perform their obligations under the Settlement
Agreement and use their best efforts to consummate the transactions contemplated
thereby as soon as practicable following the date hereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER REGARDING
THE INITIAL CLOSING
As an inducement to Seller and the Company to enter into this Agreement
and consummate the transactions contemplated to occur upon the Initial Closing,
Buyer represents and warrants to Seller and the Company as follows:
Section 4.1 ORGANIZATION AND STANDING. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida and shall be, on or before the Initial Closing Date, duly qualified
to conduct business as a foreign corporation in the State of Texas.
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Section 4.2 POWER AND AUTHORITY. Buyer has full corporate power and
authority to enter into this Agreement and the other documents contemplated
hereby, and to perform and comply with the terms, covenants and conditions to be
performed or complied with by Buyer hereunder and thereunder. This Agreement
constitutes, and any other instrument contemplated hereby when executed and
delivered by Buyer at the Initial Closing, will constitute, the legal, valid and
binding obligations of Buyer, enforceable in accordance with their terms, except
as such enforceability may be affected by bankruptcy, insolvency or similar laws
and by court-applied equitable principles.
Section 4.3 CONFLICTS. The execution and delivery of this Agreement and
the instruments or documents to be delivered by Buyer pursuant to this Agreement
at the Initial Closing, the consummation of the transactions contemplated by
this Agreement at the Initial Closing, and compliance with the terms, conditions
and provisions of this Agreement at the Initial Closing by Buyer, with or
without the giving of notice or the passage of time, or both, do not and will
not: (i) contravene any provision of Buyer's Articles of Incorporation or
Bylaws; (ii) conflict with or result in a breach of or constitute a default
under any of the terms, conditions or provisions of any indenture, mortgage,
loan or credit agreement or any other agreement or instrument to which Buyer is
a party or by which it or its assets may be bound or affected, or any decree,
judgment or order of any court or governmental department, commission, board,
agency or instrumentality, domestic or foreign, or any applicable law,
ordinance, rule or regulation, including but not limited to the Communications
Act; or (iii) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of Buyer's assets or give to
others any interests or rights therein.
Section 4.4 INVESTMENT. Buyer will acquire the Initial Interests for
its own account for investment and not with a present view to distribute or
resell the same.
Section 4.5 DISCLOSURE. No representation or warranty by Buyer in this
Agreement, and no schedule, document, statement, certificate furnished or to be
furnished by Buyer to Seller or the Company pursuant hereto, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
REGARDING THE INITIAL CLOSING
As an inducement to Buyer to enter into this Agreement and consummate
the transactions contemplated to occur upon the Initial Closing, Seller and the
Company jointly and severally represent and warrant to Buyer as follows:
Section 5.1 ORGANIZATION AND STANDING. The Company is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Texas. Seller has delivered to Buyer true and complete
copies of the Organizational Documents of the Company.
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<PAGE> 8
Section 5.2 POWER AND AUTHORITY. Each of Seller and the Company has
full power and authority to enter into this Agreement and the other documents
contemplated hereby, and to perform and comply with the terms, covenants and
conditions to be performed or complied with by Seller or the Company hereunder
or thereunder. This Agreement constitutes, and any other instrument contemplated
hereby, when executed and delivered by Seller or the Company at the Initial
Closing, will constitute, the legal, valid and binding obligations of Seller and
the Company, enforceable in accordance with their terms, except as such
enforceability may be affected by bankruptcy, insolvency or similar laws and by
court-applied equitable principles.
Section 5.3 CONFLICTS. The execution and delivery of this Agreement and
the instruments or documents to be delivered by Seller or the Company pursuant
to this Agreement at the Initial Closing, the consummation of the transactions
contemplated by this Agreement at the Initial Closing, and compliance with the
terms, conditions and provisions of this Agreement at the Initial Closing by
Seller and the Company, with or without the giving of notice or the passage of
time, or both, do not and will not: (i) contravene any provision of the
Organizational Documents of the Company, (ii) conflict with or result in a
breach of or constitute a default under any of the terms, conditions or
provisions of any indenture, mortgage, loan or credit agreement or any other
agreement or instrument to which Seller or the Company is a party or by which
Seller or the Company or any of their respective assets may be bound or
affected, or any decree, judgment or order of any court or governmental
department, commission, board, agency or instrumentality, domestic or foreign,
or any applicable law, ordinance, rule or regulation, including but not limited
to the Communications Act; or (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the assets of
Seller or the Company or the Interests or give to others any interests or rights
therein.
Section 5.4 EXCHANGE ACT; INVESTMENT COMPANY ACT. No interests or other
securities of the Company are required to be registered under Section 12 of the
Securities and Exchange Act of 1934, as amended. Neither Seller nor the Company
is an "investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
Section 5.5 CAPITALIZATION. The Company's ownership consists solely of
1,000,000 units of duly authorized membership interests, all of which units are
issued and outstanding on the date hereof and are legally and beneficially owned
by Seller (the "Units"). The Units are, and as of the Initial Closing, will be,
validly issued and outstanding, fully paid and nonassessable. The Units
constitute on the date hereof all of the issued and outstanding ownership
interests of the Company, and on the Initial Closing Date, the Units will
constitute all of the issued and outstanding ownership interests of the Company.
There are no outstanding securities convertible into or exchangeable for, and no
outstanding options, warrants or other rights to purchase or to subscribe for,
any ownership interests or other securities of the Company, other than as set
forth herein. There are no outstanding agreements, arrangements, commitments or
understandings of any kind affecting or relating
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<PAGE> 9
to the voting, issuance, purchase, redemption, repurchase or transfer of any of
the ownership interests of the Company, other than as set forth herein or in the
Amended Regulations. Except as provided herein, there are no options, warrants,
rights or any other agreement or instrument giving any person any right under
any circumstances to acquire any ownership interests of the Company. Seller has
good and valid marketable title to the Units and the sole right to vote, sell,
transfer and deliver the Units and on the Initial Closing Date, Seller will have
good and marketable title to the Units and the sole right to vote, sell,
transfer and deliver the Units. Except as contemplated by this Agreement and the
Amended Regulations, neither the Company nor Seller has agreed with any person
to sell, transfer or deliver the Units or other ownership interests of the
Company. Upon the sale of the Initial Interests to Buyer hereunder, Buyer shall
have good and valid marketable title thereto, free and clear of all liens,
encumbrances, security interests and restrictions of any kind and such Initial
Interests shall represent 49% of the issued and outstanding ownership interests
of the Company.
Section 5.6 ASSETS AND LIABILITIES OF THE COMPANY. As of the Initial
Closing Date, the Company shall own and have good and marketable title to the
assets and properties listed on Schedule 5.6, including, without limitation, the
Construction Permit, and shall have no debts, obligations or liabilities of any
kind whatsoever, whether accrued, contingent or otherwise, except as specified
on Schedule 6.8 or permitted pursuant to Section 3.4(d) and those arising under
this Agreement, the Transaction Documents, Loan Documents referenced in the Loan
Agreement between Company and Buyer dated as of the date hereof, the Tower Site
Lease and the Communications Act. Except as listed on Schedule 6.8, the Company
has no debts, obligations or liabilities of any kind whatsoever, whether
accrued, contingent or otherwise, except for those arising under this Agreement,
the Transaction Documents, the Loan Documents referred to in the Loan Agreement
and the Communications Act. No portion of the indebtedness listed on Schedule
6.8 is secured by any lien, pledge, security interest or other encumbrance on
any assets of the Company or any of the Interests.
Section 5.7 BROKER. Except as Seller has previously advised Buyer,
neither Seller, the Company nor any person acting on their behalf has incurred
any liability for any finder's or broker's fees or commissions in connection
with the transactions contemplated by this Agreement.
Section 5.8 CONSTRUCTION PERMIT. On the Initial Closing Date, the
Company will be the authorized legal holder of the Construction Permit. Seller
and the Company are in compliance in all material respects with all laws,
regulations, and rules, including the Communications Act. Each of Seller and the
Company have filed all returns, reports and statements required to be filed in
connection with the Construction Permit.
Section 5.9 CONSENTS. Except for the PRO FORMA FCC Consent, the
approval by the FCC of the Settlement Agreement and the grant of the
Construction Permit, no consent, approval, permit or authorization of, or filing
with, any governmental authority or other
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<PAGE> 10
party is required to consummate the transactions contemplated by this Agreement
at or before the Initial Closing.
Section 5.10 CLAIMS AND LEGAL ACTIONS. There is no claim, legal action,
suit, arbitration, counterclaim, governmental investigation or other proceeding,
nor any order, decree or judgment, in progress or pending, or to the knowledge
of Seller, threatened against Seller or the Company.
Section 5.11 DISCLOSURE. No representation or warranty by Seller or the
Company in this Agreement, and no schedule, document, statement, certificate
furnished or to be furnished by Seller or the Company to Buyer pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading.
ARTICLE 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AT
THE INITIAL CLOSING
The obligations of Buyer at the Initial Closing are subject to the
fulfillment prior to or at the Initial Closing of the following conditions (any
one or more of which may be waived in whole or in part by Buyer at Buyer's
option):
Section 6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and the Company contained in this Agreement relating to the
Initial Closing shall be true and correct in all material respects on and as of
the Initial Closing Date, with the same force and effect as though made on and
as of such date.
Section 6.2 COVENANTS AND CONDITIONS. Seller and the Company shall have
performed in all material respects all of their respective obligations and
agreements and complied with all of their respective covenants and conditions
contained in this Agreement to be performed or complied with by Seller and the
Company on or before the Initial Closing Date.
Section 6.3 APPROVALS FOR TOWER SITE. Seller and the Company shall have
obtained all necessary governmental consents or approvals required for the
construction and operation of the Station at the Tower Site, and any such
construction shall have been conducted in accordance with the terms of such
consents or approvals and with any applicable laws, rules and regulations of any
governmental authority, including, without limitation, the FCC, any municipality
or the Federal Aviation Administration.
Section 6.4 FCC CONSENT. The PRO FORMA FCC Consent shall have been
granted and shall have become a Final Order.
Section 6.5 TOWER SITE LEASE. The Tower Site Lease shall be valid,
binding and enforceable in accordance with its terms.
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<PAGE> 11
Section 6.6 DELIVERIES. Seller and the Company shall have delivered to
Buyer the following, in form and substance reasonably satisfactory to Buyer and
Buyer's Counsel:
(a) INITIAL INTERESTS. Upon the request of Buyer, certificates
representing the Initial Interests, which shall be either duly endorsed or
accompanied by powers duly executed in favor of Buyer.
(b) ORGANIZATIONAL DOCUMENTS. A copy of the certificate of
organization and other Organizational Documents of the Company, certified as of
a date not earlier than ten (10) days prior to the Initial Closing Date by the
Secretary of State of Texas and an appropriate officer or member of the Company.
(c) RESOLUTIONS. Copies of resolutions adopted by the Company,
authorizing and approving the execution and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, certified by an appropriate officer or member of the Company
as being true and complete on the Initial Closing Date.
(d) CERTIFICATES. Certificates, dated as of the Initial
Closing Date, executed on behalf of Seller and the Company by Seller and an
appropriate officer or member of the Company, respectively, each certifying: (1)
that the representations and warranties of Seller and the Company contained in
this Agreement are true and complete in all material respects as of the Initial
Closing Date as though made on and as of that date; and (2) that Seller and the
Company have performed in all material respects all of their respective
obligations and agreements under this Agreement to be performed and complied
with by Seller and the Company on or before the Initial Closing Date.
(e) OPINIONS OF COUNSEL. Opinions of the Company's counsel and
communications counsel dated as of the Initial Closing Date, substantially in
the form of Schedule 6.6(e) hereto.
(f) CONSENTS. A manually executed copy of any instrument
evidencing receipt of any Consent.
(g) PAY-OFF LETTERS. A pay-off letter, in form and substance
reasonably acceptable to Buyer, from each creditor identified on Schedule 6.8
with respect to the indebtedness to be repaid at the Initial Closing pursuant to
Section 2.3.
(h) REGULATIONS. The Amended Regulations, duly executed by
Seller.
(i) ADDITIONAL INSTRUMENTS. Such additional instruments and
documents as may be required to consummate the transactions contemplated hereby.
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<PAGE> 12
Section 6.7 CONSTRUCTION PERMIT; ADVERSE PROCEEDINGS. The FCC approval
of the Settlement Agreement shall have become a Final Order and the transactions
contemplated by the Settlement Agreement shall have been consummated in
accordance with the terms thereof. The Company shall be the legal and valid
holder of the Construction Permit, the Construction Permit shall be in full
force and effect and shall authorize the construction of the Station at the
transmitter site, and in accordance with the other parameters, set forth in the
amendment to the application for the Construction Permit filed by the Company on
December 31, 1997. Except for proceedings relating to the television broadcast
industry generally, there shall not be any order, decree or judgment in effect
or any lawsuit, claim, legal action, proceeding or investigation pending or
threatened before any court, administrative agency or arbitrator which is
reasonably likely to adversely affect the construction, business, property,
assets or condition (financial or otherwise) of the Station or the Company or
which seeks to enjoin or prohibit, or otherwise questions the validity of, any
action taken or to be taken pursuant to or in connection with this Agreement.
Section 6.8 NO LIABILITIES Except as set forth on Schedule 6.8 or
permitted pursuant to Section 3.4(d), the Company shall have no debts,
obligations or liabilities of any kind whatsoever, whether accrued, contingent
or otherwise except for those arising under this Agreement, the Transaction
Documents, the Loan Documents referred in the Loan Agreement and the
Communications Act.
ARTICLE 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
AND THE COMPANY AT THE INITIAL CLOSING
The obligations of Seller and the Company at the Initial Closing are
subject to the fulfillment prior to or at the Initial Closing of the following
conditions (any one or more of which may be waived in whole or in part by Seller
and the Company at their option):
Section 7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement relating to the Initial Closing
shall be true and correct in all material respects on and as of the Initial
Closing Date, with the same force and effect as though made on and as of such
date.
Section 7.2 COVENANTS AND CONDITIONS. Buyer shall have performed in all
material respects all of its obligations and agreements and complied with all of
its covenants and conditions contained in this Agreement to be performed or
complied with by Buyer on or before the Initial Closing Date.
Section 7.3 DELIVERIES. Buyer shall have delivered to Seller and the
Company the following in form and substance reasonably satisfactory to Seller,
the Company and their Counsel:
(a) PURCHASE PRICE. Payment of the Initial Interests Purchase
Price described in Section 2.3.
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<PAGE> 13
(b) RESOLUTIONS. Copies of resolutions adopted by the Board of
Directors of Buyer, authorizing and approving the execution of this Agreement
and the consummation of the transactions contemplated hereby, certified by its
Secretary as being true and correct on the Initial Closing Date.
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the
Initial Closing Date, executed on behalf of Buyer by an officer of Buyer,
certifying (1) that the representations and warranties of Buyer contained in
this Agreement are true and complete in all material respects as of the Initial
Closing Date as though made on and as of that date, and (2) that Buyer has
performed in all material respects all of its obligations and agreements under
this Agreement to be performed and complied with by Buyer on or before the
Initial Closing Date.
(d) OPINION OF COUNSEL. An opinion of Buyer's counsel dated as
of the Initial Closing Date, substantially in the form of Schedule 7.3(d)
hereto.
(e) REGULATIONS. The Amended Regulations, duly executed by
Buyer.
(f) ADDITIONAL INSTRUMENTS. Such additional instruments and
documents as may be required to consummate the transactions contemplated hereby.
Section 7.4 ADVERSE PROCEEDINGS. There shall not be any order, decree
or judgment in effect or any lawsuit, claim, legal action, proceeding or
investigation pending or threatened before any court, administrative agency or
arbitrator which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken pursuant to or in connection with
this Agreement.
Section 7.5 LOAN. Buyer shall have made the loan to Seller contemplated
by the Loan Agreement.
Section 7.6 FCC CONSENT. The PRO FORMA FCC Consent shall have been
granted.
ARTICLE 8. CONSTRUCTION AND OPERATION OF THE STATION
Section 8.1 GENERAL. Following the date hereof and prior to the Second
Closing Date without Buyer's prior written consent: (i) neither the Company nor
Seller shall enter into any contracts or agreements creating any security
interests, mortgages, liens or encumbrances on the assets of the Company or the
Station; (ii) Seller shall not enter into any contract or agreement creating any
liens or security interests in any ownership of the Company; (iii) the Company
shall be operated in a prudent and businesslike manner and in accordance with
the other covenants in this Article 8; (iv) the Company shall not amend its
Organizational Documents or the Tower Site Lease; and (v) neither Seller nor the
Company shall take or permit, or agree to take or permit, any action within
Seller's or the Company's
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<PAGE> 14
control that is inconsistent with the proper performance of their obligations
under this Agreement, including but not limited to, the issuance or sale of any
ownership interests in the Company or the granting to any person or entity,
other than Buyer, an option or similar right to purchase any of the Company's
membership interests.
Section 8.2 FCC CONSENT.
(a) The conveyance of the Option Interests by Seller to Buyer
as contemplated by this Agreement is subject to the prior consent and approval
of the FCC.
(b) Seller and Buyer shall prepare and, within five (5)
business days after Seller's receipt of the Option Notice (as defined below),
shall file with the FCC an appropriate application for the FCC Consent. Seller
and Buyer shall thereafter prosecute the application for the FCC Consent with
all diligence and otherwise use their respective best efforts to obtain a grant
of the application for the FCC Consent as expeditiously as possible. Each party
agrees to comply with any condition imposed on it by the FCC Consent, except
that no party shall be required to comply with a condition if (i) the condition
was imposed on it as the result of a circumstance the existence of which does
not constitute a breach by that party of any of its representations, warranties,
or covenants hereunder, and (ii) compliance with the condition would have a
material adverse effect upon it. Buyer and Seller shall oppose any petitions to
deny or other objections filed with respect to the application for the FCC
Consent and any requests for reconsideration or judicial review of the FCC
Consent.
(c) If the Second Closing shall not have occurred for any
reason within the original effective period of the FCC Consent and neither party
shall have terminated this Agreement under Article 18, the parties shall jointly
request one or more extensions of the effective period of the FCC Consent. No
extension of the effective period of the FCC Consent shall limit the exercise by
either party of its right to terminate the Agreement under Article 18.
Section 8.3 EMPLOYEE BENEFIT PLANS. Except as may be consented to in
writing by Buyer, the Company will not adopt any employee benefit plans or
arrangements applicable to the employees of the Company, including, without
limitation, pension or thrift plans, individual or supplemental pension or
accrued compensation arrangements, incentive plans, or bonus and termination
arrangements; provided, however, that nothing herein shall prevent the Company
from adopting reasonable policies on vacation and sick leave for its employees
or offering them participation in employer-paid group health plans or any other
benefits required by law.
Section 8.4 LABOR RELATIONS. Neither the Seller nor the Company (i)
will enter into any collective bargaining agreement with respect to the Station;
(ii) will enter into any written or oral contracts of employment; (iii) will
incur any fixed or contingent liabilities or obligations with respect to any
person employed at the Station; and (iv) will fail to comply in all material
respects with applicable laws, rules and regulations relating to the employment
of
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<PAGE> 15
labor including, without limitation, those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll related taxes.
Section 8.5 LICENSES. Neither the Seller nor the Company shall cause,
or fail to take any action necessary to prevent, (i) any License to expire, be
surrendered or modified; (ii) any governmental authority to institute
proceedings for the suspension, revocation, or adverse modification of any
License; and (iii) any governmental authority to dismiss or deny any pending
application concerning the construction or operation of the Station.
Section 8.6 COMPLIANCE WITH LAWS. The Seller and the Company shall
construct and operate the Station in all material respects in accordance with
all applicable laws, rules and regulations and the terms of all Licenses.
Section 8.7 NOTIFICATION. Seller and the Company shall give Buyer
prompt written notice of any material change in any of the information contained
in the representations and warranties of Seller and the Company set forth in
this Agreement or in the Schedules hereto.
Section 8.8 PRESERVATION OF BUSINESS. Seller and the Company shall
preserve the business and organization of the Station intact and use their best
efforts to keep available to the Station its employees and to preserve the
Station's relationships with suppliers, advertisers and others having business
relations with it, to the end that the business, operations, and prospects of
the Station shall be unimpaired at the Second Closing.
Section 8.9 PERFORMANCE OF AGREEMENTS. The Company and Seller shall
perform their respective obligations under this Agreement, Amended Regulations,
Time Brokerage Agreement, Construction Agreement, in each case in accordance
with the terms thereof.
Section 8.10 CABLE CARRIAGE. Consistent with the rules and regulations
of the FCC, the Company shall notify the cable operators within the San Antonio,
Texas Designated Market Area of the Station's election to be carried on a
"must-carry" basis on such cable operators' cable television systems. The
Company shall use its best efforts to provide such notices on the date that is
sixty (60) days prior to commencing operations pursuant to program test
authority as defined by FCC rules and regulations, but in no event shall such
notices be provided later than thirty (30) days after the commencement of such
operations.
Section 8.11 TOWER SITE LEASE. Upon the request of Buyer, the Company
shall assign to Buyer all of its rights and interests under the Tower Site
Lease, subject to, if required, the prior consent of the landlord thereunder,
and Buyer shall assume all of the Company's obligations under the Tower Site
Lease, pursuant to an assignment and assumption agreement in form and substance
reasonably acceptable to Buyer and Seller. If, following any such assignment of
the Tower Site Lease to Buyer, this Agreement is terminated in accordance with
its terms, Buyer shall, following such termination, re-assign the Tower Site
Lease to the Company, subject to, if required, the prior consent of the landlord
thereunder.
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<PAGE> 16
ARTICLE 9. THE OPTION AND THE SECOND CLOSING
Section 9.1 OPTION.
(a) In consideration of Buyer's undertakings herein, the
receipt and sufficiency of which are hereby acknowledged by Seller, Seller
hereby grants to Buyer an exclusive and irrevocable option to purchase from
Seller the Option Interests (the "Call Option"), free and clear of any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever; provided, however, that, subject to
Section 9.4(c), the Call Option shall not be exercisable by Buyer if the Fair
Market Value determined in accordance with Section 9.4 is less than $13,500,000.
In consideration of Seller's undertakings herein, the receipt and sufficiency of
which are hereby acknowledged by Buyer, Buyer hereby grants to Seller an
exclusive and irrevocable option to require Buyer to purchase from Seller the
Option Interests (the "Put Option"), free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges or
encumbrances of any nature whatsoever.
(b) Buyer may give written notice to Seller of Buyer's
intention to exercise the Call Option, and Seller may give written notice to
Buyer of Seller's intention to exercise the Put Option (in either case, the
"Option Notice") at any time during the ninety (90) day period beginning on the
date the Station commences operations pursuant to program test authority (the
"Option Period"). In the event that Buyer fails to give Seller its Option Notice
prior to the end of the Option Period, the Call Option shall expire, and in the
event that Seller fails to give Buyer its Option Notice prior to the end of the
Option Period, then the Put Option shall expire.
(c) Within five (5) business days of Buyer's or Seller's
receipt of an Option Notice, Seller and Buyer shall file with the FCC the
application for the FCC Consent and shall file such notices with, and obtain
such approvals of, any other governmental authorities that are required for the
acquisition by Buyer of the Option Interests and shall diligently and
expeditiously prosecute such filings.
Section 9.2 THE SECOND CLOSING. Subject to Section 9.4(c), the Second
Closing shall take place at 10:00 a.m., Washington, D.C. time, on a date to be
set by Buyer on no less than five (5) days' written notice to Seller, which date
shall not be sooner than the first business day after the date on which the FCC
Consent is granted and shall not be later than the tenth business day after the
date on which the FCC Consent has become a Final Order, subject to the
satisfaction of all other conditions precedent to the holding of the Second
Closing. The Second Closing shall take place at the offices of Dow, Lohnes &
Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036,
or such other place as the parties shall mutually agree. If Buyer fails to
specify the date for Second Closing prior to the fifth business day after the
date upon which the FCC Consent has become a Final Order, the Second Closing
shall take place on the tenth business day after the date upon which the FCC
Consent has become a Final Order.
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Section 9.3 SALE OF OPTION INTERESTS. Subject to the terms and
conditions set forth in this Agreement, Seller hereby agrees to sell, transfer
and deliver to Buyer on the Second Closing Date, and Buyer agrees to purchase,
the Option Interests, free and clear of any claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges or encumbrances of any
nature whatsoever.
Section 9.4 PURCHASE PRICE FOR OPTION INTERESTS.
(a) The purchase price for the Option Interests (the "Option
Price") shall be the lesser of (i) an amount equal to the Fair Market Value of
the Company, as determined utilizing the procedures set forth in subsection (b)
hereof less the sum of the Initial Interests Purchase Price and the outstanding
principal balance of the loan made by Buyer to Seller pursuant to the Loan
Agreement as of the Second Closing Date or (ii) $13,500,000 less the sum of the
Initial Interests Purchase Price and the outstanding principal balance of the
loan made by Buyer to Seller pursuant to the Loan Agreement as of the Second
Closing Date. The Option Price shall be paid at the Second Closing by Buyer or
Buyer's designee to Seller by wire transfer of immediately available federal
funds or other means mutually satisfactory to Buyer and Seller in accordance
with written instructions provided by Seller to Buyer no less than two (2)
business days prior to the Second Closing Date.
(b) Fair Market Value of the Company shall be determined by an
appraisal, in accordance with the following provisions:
(1) The Fair Market Value of the Company shall be
equal to the appraised value of the Station as of the date of the Option Notice
exclusive of any broker's fee, less the amount of any outstanding debt of the
Company.
(2) The appraisal will be conducted in conformity
with standard appraisal techniques in use at the time of the appraisal, applying
the market and economic factors then relevant.
(3) The appraisal will be conducted by Patrick
Communications Corporation or, if Patrick Communications Corporation is
unwilling or unable to provide the appraisal, by one of the following upon
written designation by Seller and Buyer: Bond & Pecaro, Media Venture Partners
or Cole Appraisal Services.
(4) The value of the Station arrived at by the
appraiser shall, absent manifest error, be conclusive and binding on the
relevant parties.
(c) If the Fair Market Value, as determined pursuant to
subsection (b) above, is less than $13,500,000, Buyer shall have the right to
obtain a second appraisal within sixty days of the date the initial appraisal is
delivered to Buyer and Seller, in which event the Option Period, the Second
Closing Date and the date set forth in Section 18.1(a)
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shall be extended for the same period. If the Fair Market Value, as determined
by the second appraisal pursuant to subsection (b) above, is less than
$13,500,000, Buyer shall have the right to obtain a third appraisal within sixty
days of the date the second appraisal is delivered to Buyer and Seller, in which
event the Option Period, the Second Closing Date and the date set forth in
Section 18.1(a) shall be extended for such further period. If the Fair Market
Value, as determined by the third appraisal pursuant to subsection (b) above, is
less than $13,500,000, this Agreement shall be subject to termination in
accordance with Section 18.1(a).
(d) Seller shall use such portion of the Option Price that is
equal to the entire indebtedness of the Company as of the Second Closing Date to
repay at the Second Closing Date the entire amount of such indebtedness. If the
Company has not repaid such indebtedness, Buyer shall be permitted to apply the
Option Price to pay on the Second Closing Date any outstanding indebtedness of
the Company as of the Second Closing Date.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES OF BUYER REGARDING
THE SECOND CLOSING
All of the representations and warranties of Buyer set forth in Article
4 hereof shall be true and correct in all material respects as of the Second
Closing Date, with the same force and effect as though made on and as of the
Second Closing Date, except as otherwise contemplated by the express terms of
this Agreement. For the purpose of this Article 10, each reference in Article 4
hereof to the "Initial Closing," "Initial Interests" and the "Initial Closing
Date" shall be deemed to be a reference to the Second Closing, Option Interests
and the Second Closing Date, respectively.
ARTICLE 11. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY AND SELLER REGARDING THE SECOND CLOSING
All of the representations and warranties of the Company and Seller set
forth in Article 5 hereof shall be true and correct in all material respects as
of the Second Closing Date, with the same force and effect as though made on and
as of the Second Closing Date, except as otherwise contemplated by the express
terms of this Agreement. For the purpose of this Article 11, each reference in
Article 5 hereof to the "Initial Closing" and the "Initial Closing Date" shall
be deemed to be a reference to the Second Closing and the Second Closing Date,
respectively, and each reference to the "Initial Interests" shall be deemed to
be a reference to the Option Interests. Each of Seller and the Company further
jointly and severally represent, warrant and covenant to Buyer as follows:
Section 11.1 CONTRACTS. Within ten (10) days after the Option Notice,
Seller shall deliver to Buyer a true and complete list and copies of the
Contracts. The Contracts shall be valid and binding agreements of the Company
enforceable in accordance with their terms. The Company shall have complied with
the Contracts in all material respects, and the Company shall not be in default
under any of the Contracts.
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Section 11.2 COPYRIGHTS, TRADEMARKS AND SIMILAR RIGHTS. Within ten (10)
days after the Option Notice, Seller shall deliver to Buyer a true and complete
list and copies of all Intangibles.
Section 11.3 GOVERNMENTAL AUTHORIZATIONS. Within ten (10) days after
the Option Notice, Seller shall deliver to Buyer a true and complete list and
copies of the Licenses. The Company shall be the authorized legal holder of the
Licenses. The Licenses shall comprise all of the licenses, permits and other
authorizations required from governmental and regulatory authorities for the
lawful conduct of the business and operations of the Station in the manner and
to the full extent they are conducted on the Second Closing Date and for the
lawful broadcasting by the Company from the Tower Site as contemplated by the
Construction Permit, and none of the Licenses shall be subject to any
restriction or condition which would limit the full operation of the Station.
The Licenses shall be in full force and effect, and the operation of the Station
shall be in accordance therewith. Seller has no knowledge of any events or
conditions relating to Seller or Seller's ownership and control of the Company
that could prevent the FCC from approving the transfer of control of the Company
to Buyer.
Section 11.4 TITLE TO AND CONDITION OF REAL PROPERTY. Within ten (10)
days after the Option Notice, Seller shall deliver to Buyer a true and complete
description of all the Real Property and the Company's interests therein. The
Real Property shall comprise all real property interests necessary to conduct
the business and operations of the Station as then conducted and for the lawful
broadcasting by the Company from the Tower Site as contemplated by the
Construction Permit. The Company shall have good and marketable fee simple
title, insurable at standard rates, to all fee estates (including the
improvements thereon) included in the Real Property, free and clear of all
liens, mortgages, pledges, covenants, easements, restrictions, encroachments,
leases, charges, and other claims and encumbrances of any nature whatsoever, and
without reservation or exclusion of any mineral, timber, or other rights or
interests, except for liens for real estate taxes not yet due and payable. All
Real Property (including the improvements thereon) (i) shall be in good
condition and repair consistent with its present use, (ii) shall be available
for immediate use in the conduct of the business and operations of the Station,
and (iii) shall comply with all applicable building or zoning codes and the
regulations of any governmental authority having jurisdiction.
Section 11.5 TITLE TO AND CONDITION OF TANGIBLE PERSONAL PROPERTY.
Within ten (10) days after the Option Notice, Seller shall deliver to Buyer a
true and complete list of all material items of Tangible Personal Property. The
Tangible Personal Property shall comprise all material items of tangible
personal property necessary to conduct the business and operations of the
Station as then conducted and for the lawful broadcasting by the Company from
the Tower Site as contemplated by the Construction Permit. The Company shall own
and have good title to each item of Tangible Personal Property, and none of the
Tangible Personal Property shall be subject to any security interest, mortgage,
pledge,
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conditional sales agreement, or other lien or encumbrance, except for liens for
current taxes not yet due and payable. All items of transmitting and studio
equipment included in the Tangible Personal Property (i) shall have been
maintained in a manner consistent with generally accepted standards of good
engineering practice, and (ii) shall permit the Station to operate in accordance
with the terms of the FCC Licenses and the rules and regulations of the FCC, and
with all other applicable federal, state, and local statutes, ordinances, rules,
and regulations.
Section 11.6 COMPLIANCE WITH LAWS. The Company shall be in compliance
in all material respects with all laws, regulations and governmental orders
applicable to the ownership or use of its assets and the conduct of the business
and operations of the Station.
Section 11.7 REPORTS. All returns, reports and statements which the
Station is required to file with the FCC or with any other governmental agency
shall have been filed and shall be complete and correct in all material
respects.
Section 11.8 PUBLIC INSPECTION FILE. The Station's public inspection
file shall be located at the Station's main studio and shall contain, in all
material respects, the original or copies of all applications, reports and other
documents and records relating to the operation of the Station that are required
to be in such file under the rules and regulations of the FCC.
Section 11.9 TAXES.
(a) The Company shall have filed all Tax Returns and shall
have paid all Taxes shown on such Tax Returns on any assessment received by the
Company, provided that the Company shall not be required to pay any Tax the
validity of which is being contested by the Company in good faith and pursuant
to appropriate proceedings;
(b) such reports and Tax Returns shall have been prepared in
accordance with applicable provisions of the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder and with applicable provisions
of state laws, rules and regulations concerning taxation; and
(c) the Company shall not have waived any statute of
limitations with respect to the payment of any taxes.
Section 11.10 DIVIDENDS AND REDEMPTIONS. The Company shall not have
made at any time any declaration, set aside or payment of any dividend or other
distribution in respect of any ownership of the Company, or any direct or
indirect redemption, purchase or other acquisition of such ownership.
Section 11.11 NOTICES; CONDEMNATION.
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(a) Neither the Company nor Seller shall have received any
written notice or order by any governmental or other public authority, any
insurance company that has issued a policy of insurance with respect to the
Station's assets or business, or any board of fire underwriters or other body
exercising similar functions that relates to material violations of building,
safety, fire or other ordinances or regulations by the Station or requests the
performance of any significant repairs, alterations or other work to the assets
of the Station; and
(b) there will not be any pending or threatened condemnation,
expropriation, eminent domain, zoning or similar proceeding materially affecting
all or any portion of the assets of the Station.
Section 11.12 LIABILITIES OF THE COMPANY. The Company shall have no
liabilities or obligations of any sort whatsoever, except those specified on
Schedule 6.8 or permitted pursuant to Section 3.4(d), those arising under the
Licenses, those arising under this Agreement, the Tower Site Lease, the
Transaction Documents and Loan Documents and those consented to in writing by
Buyer.
Section 11.13 DISCLOSURE. No representation or warranty by Seller or
the Company in this Agreement, and no schedule, document, statement, certificate
furnished or to be furnished to Buyer pursuant hereto, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading.
ARTICLE 12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER AT
THE SECOND CLOSING
The obligations of Buyer under this Agreement at the Second Closing are
subject to the fulfillment prior to or at the Second Closing of the following
conditions (any one or more of which may be waived in whole or in part by Buyer
at Buyer's option):
Section 12.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller and the Company contained in this Agreement relating to the
Second Closing shall be true and correct in all material respects on and as of
the Second Closing Date, with the same force and effect as though such
representations and warranties had been made on as of such date.
Section 12.2 COVENANTS AND CONDITIONS. Seller and the Company shall
have performed in all material respects all of their respective obligations and
agreements and complied with all of their respective covenants and conditions
contained in this Agreement and the Transaction Documents to be performed or
complied with by Seller and the Company on or before the Second Closing Date.
Section 12.3 FCC CONSENT. The FCC Consent shall have been granted and
shall have become a Final Order.
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Section 12.4 CONSENTS. All material consents and approvals of all other
governmental authorities, bodies or agencies necessary for the consummation of
the transactions contemplated by this Agreement to occur at the Second Closing,
shall have been obtained, all without any conditions which would be unduly
burdensome on, or have a material adverse effect upon Buyer or the Company.
Section 12.5 DELIVERIES. Seller and the Company shall have delivered to
Buyer the following, in form and substance reasonably satisfactory to Buyer and
Buyer's Counsel:
(a) OPTION INTERESTS. Upon Buyer's request, certificates
representing the Option Interests, which shall be either duly endorsed or
accompanied by powers duly
executed in favor of Buyer.
(b) ORGANIZATIONAL DOCUMENTS. A copy of the certificate of
organization and other Organizational Documents of the Company, certified as of
a date not earlier than ten (10) days prior to the Second Closing Date by the
Secretary of State of Texas and an appropriate officer or member of the Company.
(c) RESOLUTIONS. Copies of resolutions adopted by the Company,
authorizing and approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby, certified by
an appropriate officer or member of the Company as being true and complete on
the Second Closing Date.
(d) CONSENTS. A manually executed copy of any instrument
evidencing receipt of any Consent.
(e) ESTOPPEL CERTIFICATES. Estoppel Certificates of the
lessors of all leasehold and subleasehold interests included in the Real
Property.
(f) CERTIFICATES. Certificates, dated as of the Second Closing
Date, executed by Seller and an appropriate officer or member of the Company,
respectively, each certifying: (1) that the representations and warranties of
Seller and the Company contained in this Agreement are true and complete in all
material respects as of the Second Closing Date as though made on and as of that
date; and (2) that Seller and the Company have performed in all material
respects all of their respective obligations and agreements in this Agreement to
be performed and complied with by Seller and the Company on or before the Second
Closing Date.
(g) OPINIONS OF COUNSEL. Opinions of the Company's counsel and
communications counsel dated as of the Second Closing Date, substantially in the
form of Schedule 12.5(g) hereto.
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(h) PAY-OFF LETTERS. A pay-off letter, in form and substance
reasonably acceptable to Buyer, from each creditor identified on Schedule 6.8
with respect to the indebtedness to be repaid at the Second Closing.
(i) ADDITIONAL INSTRUMENTS. Such additional instruments and
documents as may be required to consummate the transactions contemplated hereby.
Section 12.6 ADVERSE PROCEEDINGS. Except for proceedings relating to
the television broadcast industry generally, there shall not be any order,
decree or judgment in effect or any lawsuit, claim, legal action, proceeding or
investigation pending or threatened before any court, administrative agency or
arbitrator which is reasonably likely to adversely affect the construction,
business, property, assets or condition (financial or otherwise) of the Station
or which seeks to enjoin or prohibit, or otherwise questions the validity of,
any action taken or to be taken pursuant to or in connection with this
Agreement.
Section 12.7 TIME BROKERAGE AGREEMENT. The Time Brokerage Agreement
shall be in full force and effect, and the Company shall have complied in all
material respects with its obligations thereunder.
Section 12.8 ADVERSE CHANGE. Between the date of this Agreement and the
Second Closing Date, there shall have been no material adverse change in the
business, assets, properties, financial condition, or business prospects of the
Station, including any unrestored damage, destruction, or loss affecting any
assets that are material to the conduct of the business of the Station.
Section 12.9 INITIAL CLOSING. The Initial Closing shall have occurred.
ARTICLE 13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
AND THE COMPANY AT THE SECOND CLOSING
The obligations of Seller and the Company at the Second Closing under
this Agreement are subject to the fulfillment prior to or at the Second Closing
of the following conditions (any one or more of which may be waived in whole or
in part by Seller or the Company at their option):
Section 13.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement relating to the Second Closing
shall be true and correct in all material respects on and as of the Second
Closing Date, with the same force and effect as though such representations and
warranties had been made on and as of such date.
Section 13.2 COVENANTS AND CONDITIONS. Buyer shall have performed in
all material respects all of its obligations and agreements and complied with
all of its covenants and conditions contained in the Agreement and the
Transaction Documents to be performed or completed with or before the Second
Closing Date.
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Section 13.3 FCC CONSENT. The FCC shall have granted the FCC Consent.
Section 13.4 CONSENTS. All material consents and approvals of all other
governmental authorities, bodies or agencies necessary for the consummation of
the transactions contemplated by this Agreement to occur at the Second Closing,
shall have been obtained, all without any conditions which would be unduly
burdensome on, or have a material adverse effect upon Seller.
Section 13.5 DELIVERIES. Buyer shall have delivered the following, in
form and substance reasonably satisfactory to Seller, the Company and their
Counsel:
(a) OPTION PRICE. The Option Price described in Section 9.4;
and
(b) RESOLUTIONS. Copies of resolutions adopted by the Board of
Directors of Buyer, authorizing and approving the execution of this Agreement
and the consummation of the transactions contemplated hereby, certified by its
Secretary as being true and correct on the Second Closing Date.
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the
Second Closing Date, executed on behalf of Buyer by an officer of Buyer,
certifying (1) that the representations and warranties of Buyer contained in
this Agreement are true and complete in all material respects as of the Second
Closing Date as though made on and as of that date, and (2) that Buyer has
performed in all material respects all of its obligations and agreements in this
Agreement to be performed and complied with by Buyer on or prior to the Second
Closing Date.
(d) OPINION OF COUNSEL. An opinion of Buyer's counsel dated as
of the Second Closing Date, substantially in the form of Schedule 13.5(d)
hereto.
Section 13.6 TIME BROKERAGE AGREEMENT. The Time Brokerage Agreement
shall be in full force and effect, and Buyer shall have complied in all material
respects with its obligations thereunder.
Section 13.7 ADVERSE PROCEEDINGS. There shall not be any order, decree
or judgment in effect or any lawsuit, claim, legal action, proceeding or
investigation pending or threatened before any court, administrative agency or
arbitrator which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken pursuant to or in connection with
this Agreement.
Section 13.8 INITIAL CLOSING. The Initial Closing shall have occurred.
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ARTICLE 14. JOINT COVENANTS
Section 14.1 CONFIDENTIALITY. Buyer, on the one hand, and Seller and
the Company, on the other hand, shall each keep confidential all confidential
information obtained by it with respect to the other in connection with this
Agreement (except for such disclosure to attorneys, bankers, underwriters, and
investors, as may be appropriate in the furtherance of the transactions
contemplated by this Agreement or as may be required by law, including by the
securities laws or the rules and regulations of any security exchange), and if
the transactions contemplated hereby are not consummated for any reason, each
shall, to the extent reasonably possible, return to the other, without retaining
a copy thereof, any confidential schedules, documents or other written
information obtained from the other in connection with this Agreement and the
transactions contemplated hereby.
Section 14.2 COOPERATION. Buyer, Seller and the Company shall cooperate
fully with each other and their respective counsels and accountants in
connection with any actions required to be taken as part of their obligations
under this Agreement, and the parties will use their commercially reasonable
efforts to consummate the transactions contemplated hereby and to fulfill their
obligations hereunder. No party shall take any action that is inconsistent with
its obligations under this Agreement, that would render any of its
representations or warranties herein untrue or incomplete or that could hinder
or delay the consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing, and except as otherwise expressed in this
Agreement, Buyer shall have no obligation (a) to expend funds to obtain any of
the Consents or (b) to agree to any adverse change in any License or Contract in
order to obtain a Consent required with respect thereto.
Section 14.3 GOVERNMENTAL CONSENTS. If any governmental consent
required for the consummation of the transactions contemplated hereby or the
satisfaction of any condition contained herein includes any condition, the party
upon which such condition is imposed shall use its best efforts to comply
therewith before the respective Closing to which such consent relates; provided,
however, that no party hereto shall be required to comply with any condition
that would be unduly burdensome or would have a material adverse effect upon
such party.
Section 14.4 STATION OPERATION AND CONTRACTS. Buyer and Seller
specifically acknowledge that, as of the Initial Closing Date, the Station will
not have commenced broadcast operations. Seller and the Company shall cooperate
and use their respective best efforts to complete construction of the Station
and commence broadcast operations at the Station as expeditiously as possible.
Seller and the Company shall file such applications with the FCC and other
governmental authorities as are necessary to enable the Station to operate in
compliance with FCC and other applicable rules and regulations.
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ARTICLE 15. TRANSFER TAXES; FEES AND EXPENSES
Section 15.1 TRANSFER TAXES. Buyer and Seller shall each pay one-half
of all transfer and documentary taxes or fees incurred in connection with the
transfer of the Initial Interests and Option Interests; provided, however, that
Seller shall be responsible for the payment of any federal, state or local
income tax applicable to Seller or the Company in connection with the
transaction contemplated by this Agreement.
Section 15.2 FILING FEES. Buyer and Seller shall each pay one-half of
all FCC filing fees and any other filing fee imposed by any other governmental
authority in connection with the transactions contemplated hereby.
Section 15.3 EXPENSES. Buyer, on the one hand, and Seller and the
Company, on the other hand, shall be solely responsible for all costs and
expenses incurred by it or him in connection with the negotiation, preparation
and performance of and compliance with this Agreement. In connection with the
FCC application for the transfer of the Option Interests to Buyer at the Second
Closing, Seller shall be responsible for the payment of any costs or expenses
that are incurred as a result of the filing of an objection to such FCC
application based upon the qualifications of Seller or the Company, or the acts
or omissions of Seller or the Company with respect to the acquisition or
construction of the Station, and Buyer shall be responsible for the payment of
any costs or expenses that are incurred as a result of the filing of an
objection to such FCC application based upon the qualifications of Buyer or the
acts or omissions of Buyer with respect to the acquisition or construction of
the Station.
ARTICLE 16. REMEDIES
Section 16.1 If this Agreement is terminated by Seller due to Buyer's
material breach of its obligations hereunder, Seller shall be entitled to such
damages as may be available to Seller at law as a result of Buyer's material
breach and, if such termination occurs following the Initial Closing, Seller
shall have the right to (a) purchase from Buyer on the Repurchase Closing Date
(as defined below) the Initial Interests in exchange for the repayment to Buyer
of the entire Initial Interests Purchase Price on the Repurchase Closing Date
and (b) require Buyer to sell to the Company, on the Repurchase Closing Date,
the equipment leased by Buyer to the Company pursuant to the Lease Agreement
(the "Equipment") for a purchase price equal to the appraised fair market value
of the Equipment.
Section 16.2 If this Agreement is terminated by Buyer due to Seller's
or the Company's material breach of its obligations hereunder, in addition to
the remedy set forth in Article 19, Buyer shall be entitled to such damages as
may be available to Buyer at law as a result of such material breach, including,
without limitation, the repayment of the entire principal amount of the loan
made by Buyer to Seller pursuant to the Loan Agreement and, if such termination
occurs following the Initial Closing, the repayment on the Repurchase Closing
Date of the entire Initial Interests Purchase Price in exchange for the return
of the
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Initial Interests to Seller on the Repurchase Closing Date and, if such
termination occurs after the Initial Closing, Buyer may require the Company to
purchase from Buyer, on the Repurchase Closing Date, the Equipment for a
purchase price equal to the appraised fair market value of the Equipment.
Section 16.3 If this Agreement is terminated by Seller or Buyer and
neither Seller and the Company, on the one hand, nor Buyer, on the other hand,
is in material breach of their respective obligations hereunder, (i) Seller
shall repay to Buyer on the Repurchase Closing Date the entire principal amount
of the loan made by Buyer to Seller pursuant to the Loan Agreement, (ii) if such
termination occurs following the Initial Closing, Buyer shall sell, transfer and
deliver to Seller the Initial Interests, free and clear of any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever, on the tenth (10th) business day
following such termination (the "Repurchase Closing Date") for a purchase price
payable by Seller to Buyer on the Repurchase Closing Date equal to the amount of
the Initial Interests Purchase Price, and (iii) if such termination occurs
following the Initial Closing, Buyer may require Seller to purchase from Buyer,
or Seller may require Buyer to sell to the Company, on the Repurchase Closing
Date, the Equipment for a purchase price equal to the appraised fair market
value of the Equipment.
ARTICLE 17. RISK OF LOSS
Section 17.1 RISK OF LOSS. The risk of any loss, damage or impairment,
confiscation or condemnation of any of the assets of Seller or the Company from
any cause whatsoever shall be borne by Seller. In the event of any such loss,
damage or impairment, confiscation or condemnation, the proceeds of, or any
claim for any loss payable under, any insurance policy, judgment or award with
respect thereto shall be applied to repair, replace or restore such assets to
their prior condition as soon as possible after such loss, impairment,
condemnation or confiscation.
Section 17.2 POSTPONEMENT OF THE SECOND CLOSING DATE. If any damage or
destruction of the Company's assets occurs and such assets cannot be restored or
replaced on or before the Second Closing Date, the Second Closing Date shall be
postponed, the exact date and time of such postponed closing date to be such
date and time within the effective period of the FCC Consent as shall be as
agreed to by Seller, Buyer and the Company. If such assets cannot be restored or
replaced within the effective period of the FCC Consent, the parties shall join
in requesting an extension of the effective period of such consent for a period
not to exceed an additional one hundred eighty (180) days from the date of FCC
Consent.
Section 17.3 OPTION TO CLOSE. In the event of any damage or destruction
of the assets, if such assets have not been restored or replaced within the
effective period of the FCC Consent as extended, Buyer may, at its option,
proceed to close this Agreement and complete the restoration and replacement of
such damaged assets after the Second Closing
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Date, in which event Seller shall deliver to Buyer all insurance proceeds
payable to it or the Company and received in connection with such damage or
destruction of the assets without limitation as to the costs and expenses
arising in connection with such restoration and replacement.
ARTICLE 18. TERMINATION RIGHTS
Section 18.1 TERMINATION BY THE PARTIES. This Agreement may be
terminated by either Buyer, on the one hand, or Seller and the Company, on the
other hand, if not then in material default, upon written notice to the other
upon the occurrence of any of the following:
(a) Subject to Section 9.4(c), if the purchase of the Initial
Interests and Option Interests by Buyer pursuant to this Agreement shall not
have occurred on or prior to December 31, 1998;
(b) If the other party defaults in the observance or in the
due and timely performance of any of its material covenants or agreements
contained herein and such default has not been cured within fifteen (15) days
after notice by that party not in default;
(c) If on the date of either of the Closings, any of the
conditions precedent to the obligations of a party set forth in this Agreement
as to that Closing have not been satisfied or waived by the other party and such
condition shall remain unsatisfied ten (10) days after notice thereof by the
other party;
(d) If there shall be in effect on the date of either of the
Closings any final judgment, decree or order that would prevent or make unlawful
the actions to be taken at such Closing; or
(e) Following the expiration of the Option Period, if neither
Buyer nor Seller has delivered to the other an Option Notice.
Section 18.2 TERMINATION BY BUYER. This Agreement may be terminated by
Buyer, if not then in material default, upon written notice to Seller and the
Company, if the FCC denies the application for the Construction Permit or the
application for the PRO FORMA FCC Consent.
ARTICLE 19. SPECIFIC PERFORMANCE
Seller and the Company agree that the Initial Interests and the Option
Interests are unique and valuable properties such that Buyer shall be entitled
to sue for specific performance of the terms of this Agreement in the event of a
breach by Seller or the Company with respect to either the Initial Closing or
the Second Closing, in which case Seller and the Company shall waive the defense
that there is an adequate remedy at law.
- 28 -
<PAGE> 29
ARTICLE 20. INDEMNIFICATION
Section 20.1 SELLER'S AND THE COMPANY'S INDEMNIFICATION. Seller and the
Company shall jointly and severally indemnify, defend and hold Buyer harmless
from and against any and all loss, cost, liability, damage and expense
(including legal and other expenses incident thereto) of every kind, nature or
description, arising out of: (a) the breach of any representation or warranty of
Seller or the Company set forth in this Agreement or in any schedule or
certificate delivered to Buyer pursuant hereto; (b) the breach of any of their
covenants or other agreements contained in or arising out of this Agreement or
the transactions contemplated hereby; or (c) the ownership of the Initial
Interests prior to the Initial Closing, and the conduct of the business and
operations of the Station and the ownership of the Option Interests prior to the
Second Closing, including, but not limited to, any liability, judgment or
damages against the Company or Seller, their officers, directors, employees or
agents, as a result of litigation involving the Company, Seller or the operation
of the Station prior to each of the Closings; provided, however, that neither
Seller nor the Company shall have any obligation to indemnify Buyer for expenses
incurred by Buyer as a result of actions taken by Buyer. Buyer shall have the
right to enforce its indemnification rights hereunder against either Seller or
the Company at its option. Following the Initial Closing, Seller shall not have
any right of contribution against the Company for any indemnification payment
made by Seller hereunder and Seller hereby waives any such right that it may
have.
Section 20.2 BUYER'S INDEMNIFICATION. Buyer shall indemnify, defend and
hold Seller and the Company harmless from and against any and all loss, cost,
liability, damage and expense (including legal and other expenses incident
thereto) of every kind, nature or description, arising out of: (i) the breach of
any representation or warranty of Buyer set forth in this Agreement (including
the Schedules hereto); (ii) the ownership or operation of the Station after the
Second Closing, or (iii) the breach of any of its other agreements contained in
or arising out of this Agreement or the transactions contemplated hereby.
Section 20.3 NOTICE OF CLAIM. Buyer, on the one hand, and Seller and
the Company, on the other hand, upon discovery of the breach of any of the
representations, warranties and covenants of the other under this Agreement,
shall give to the other prompt written notice of the discovery of such breach.
If any action, suit or proceeding shall be commenced against, or any claim or
demand be asserted against Buyer, Seller or the Company, as the case may be, in
respect of which such party proposes to seek indemnification from the other
under this Article 20, then such party (hereinafter the "Claimant") shall notify
the party from whom indemnification is sought (hereinafter the "Indemnifying
Party") to that effect in writing with reasonable promptness and in any event,
if such claim arises out of a claim by a person or entity other than the
Claimant, then within fifteen (15) days after written notice of such claim was
given to the Claimant.
Section 20.4 ASSUMPTION AND DEFENSE OF THIRD-PARTY ACTION. If any claim
hereunder arises of out a claim against the Claimant by a third party, the
Indemnifying Party
- 29 -
<PAGE> 30
shall have the right, at its own expense, to participate in or assume control of
the defense of such claim, and the Claimant shall fully cooperate with the
Indemnifying Party subject to reimbursement for actual out-of-pocket expenses
incurred as the result of a request by the Indemnifying Party. If the
Indemnifying Party elects to assume control of the defense of any third-party
claim, the Claimant shall have the right to participate in the defense of such
claim at its own expense. If a claim requires immediate action, the parties will
make every effort to reach a decision with respect thereto as expeditiously as
possible. If the Indemnifying Party does not elect to assume control or
otherwise participate in the defense of any third-party claim, it shall be bound
by the results obtained by the Claimant with respect to such claim. In no event
shall the Indemnifying Party have the right to agree to a settlement which is
binding upon Claimant without Claimant's prior consent which shall not be
unreasonably withheld.
Section 20.5 LIMITATION PERIOD. No party shall be entitled to
indemnification hereunder with respect to the breach of any representation,
warranty or covenant contained herein unless such claim for indemnification is
asserted in writing to the party from whom indemnification is sought within six
(6) months after the Second Closing, except that any claim for indemnification
related to a claim by a third party, including claims by the Internal Revenue
Service against the Company or Seller, shall be made within the statute of
limitations period applicable to such third-party claim.
ARTICLE 21. OTHER PROVISIONS
Section 21.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties, covenants, indemnities and agreements contained
herein are and will be deemed and construed to be continuing representations,
warranties, covenants, indemnities and agreements and will survive the
respective Closings as to which breach or claim is asserted until the
termination of the limitation period set forth in Section 20.5 hereof. Any
investigations by or on behalf of any party hereto prior to or after the
Closings shall not constitute a waiver as to enforcement of any representation,
warranty, covenant or agreement contained herein.
Section 21.2 PRESS RELEASES. Buyer, Seller and the Company shall
jointly prepare, and determine the timing of, any press release or other
announcement relating to the transactions contemplated by the Agreement. No
party will issue any press release or make any other public announcement
relating to the transactions contemplated by the Agreement without the prior
consent of the other parties, except that any party may make any disclosure
required to be made by it under applicable law (including the federal securities
laws) or by this Agreement if it determines in good faith that it is appropriate
to do so and provided further that it gives prior notice of any such disclosure
to the other party hereto.
Section 21.3 FURTHER ASSURANCES. At and after each of the Closings,
Buyer, Seller and the Company will, without further consideration, execute and
deliver such further instruments and documents and do such other acts and things
as the other parties may
- 30 -
<PAGE> 31
reasonably request in order to effect or confirm the transactions contemplated
by this Agreement.
Section 21.4 BENEFIT AND ASSIGNMENT. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. No party hereto may assign, transfer, encumber or
otherwise convey its interest under this Agreement without the prior written
consent of the other parties hereto; provided, however, that Buyer may assign
its rights and interests under this Agreement to its lenders as collateral
security for Buyer's obligations to such lenders.
Section 21.5 ENTIRE AGREEMENT. This Agreement and the schedules
attached hereto embody the entire agreement and understanding of the parties and
supersedes any and all prior agreements, arrangements and understandings
relating to matters provided for herein. No amendment, waiver of compliance with
any provision or condition hereof, or consent pursuant to this Agreement will be
effective unless evidenced by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, extension or discharge is
sought.
Section 21.6 HEADINGS. The headings are for convenience only and will
not control or affect the meaning or construction of the provisions of this
Agreement.
Section 21.7 GOVERNING LAW. The construction and performance of this
Agreement will be governed by the laws of the State of New York (except for the
choice of law provisions thereof).
Section 21.8 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 by personal delivery, or sent by commercial delivery
service or registered or certified mail, return receipt requested, (c) deemed to
have been given on the date of personal delivery or the date set forth in the
records of the delivery service or on the return receipt, and (d) addressed as
follows:
To Buyer: Paxson Communications of San Antonio-26, Inc.
601 Clearwater Park Road
West Palm Beach, FL 33401
Attention: Lowell W. Paxson
With a copy (which shall
not constitute notice) to:
John R. Feore, Jr., Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
- 31 -
<PAGE> 32
To Company and Seller: South Texas Vision, L.L.C.
844 Central Boulevard
Brownsville, Texas 78520
Attention: Dr. Joseph A. Zavaletta
With a copy (which shall
not constitute notice) to: Michael R. Ezell, Esq.
Koppel, Ezell, Powers & Kimball, L.L.P.
312 East Van Buren Street
Harlingen, Texas 78551
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 21.8.
Section 21.9 COUNTERPARTS. This Agreement may be signed in counterparts
with the same effect as if the signature on each counterpart were upon the same
instrument.
Section 21.10 ARBITRATION. To the fullest extent not prohibited by law,
any controversy, claim or dispute arising out of or relating to this Agreement,
including the determination of the scope or applicability of this agreement to
arbitrate, shall be settled by final and binding arbitration in accordance with
the rules then in effect of the American Arbitration Association ("AAA"), as
modified or supplemented under this section, and subject to the Federal
Arbitration Act, 9 U.S.C. Sections 1-16. The decision of the arbitrators shall
be final and binding, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof; provided that the
arbitrators shall be bound by any provision herein that specifies a remedy for
breach or prescribes limitations on remedies.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section, any party thereto may commence arbitration
hereunder by delivering notice to the other party hereto. The arbitration panel
shall consist of three (3) arbitrators, appointed in accordance with the
procedures set forth in this paragraph. Within ten (10) business days of
delivery of the notice of commencement of arbitration referred to above, the
arbitrators shall be appointed by the AAA as provided under its rules; provided
that persons eligible to be selected as arbitrators shall be limited to
attorneys at law who (i) are on the AAA's Large, Complex Case Panel, (ii) have
practiced law for at least fifteen (15) years as an attorney specializing in
either general commercial litigation or general corporate and commercial
matters, and (iii) are experienced in matters involving the broadcasting
industry.
The arbitration hearing shall commence no later than thirty (30)
business days after the completion of the selection of the arbitrators.
Consistent with the intent of the parties hereto that the arbitration be
conducted as expeditiously as possible, the parties agree that (i) discovery
shall be limited to the production of such documents and the taking of such
depositions as the arbitrators determine are reasonably necessary to the
resolution of the controversy, claim or dispute and (ii) the arbitrators shall
limit the presentation of evidence
- 32 -
<PAGE> 33
by each side in such arbitration to not more than ten (10) full days' (or the
equivalent thereof) or such shorter period as the arbitrators shall determine to
be necessary in order to resolve the controversy, claim or dispute. The
arbitrators shall be instructed to render a decision within ten (10) business
days of the close of the arbitration hearing. If arbitration has not been
completed within ninety (90) days of the commencement of such arbitration,
either party to the arbitration may initiate litigation upon ten (10) days'
written notice to the other; PROVIDED, HOWEVER, that if one party has requested
the other to participate in an arbitration and the other has failed to
participate, the requesting party may initiate litigation before the expiration
of such ninety-day period; and provided further, that if either party to the
arbitration fails to meet any of the time limits set forth in this Section or
set by the arbitrators in the arbitration, the other party may provide ten (10)
days' written notice of its intent to institute litigation with respect to the
controversy, claim or dispute without the need to continue or complete the
arbitration and without awaiting the expiration of such ninety-day period. The
parties hereto further agree that if any of the rules of the AAA are contrary to
or conflict with any of the time periods provided for hereunder, or with any
other aspect of the matters set forth in this Section, that such rules shall be
modified in all respects necessary to accord with the provisions of this Section
(and the arbitrators shall be so instructed by the parties).
The arbitrators shall base their decision on the terms of this
Agreement and applicable law and judicial precedent which a United States
District Court sitting in the Southern District of New York would apply in the
event the dispute were litigated in such court, and shall render their decision
in writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrators shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Washington, D.C.
Section 21.11 GUARANTY. PCC hereby guarantees the complete and timely
performance of Buyer's obligations set forth in this Agreement. If any default
shall be made by Buyer in such performance, PCC will itself perform, or cause to
be performed, such obligation upon receipt of notice from Seller specifying in
summary form the default. PCC hereby waives presentment, protests, demand,
action or delinquency in respect of the obligations of Buyer under this
Agreement. PCC waives all notices of non-performance, notices of protest,
notices of dishonor and notices of acceptance of this guaranty. This guaranty
shall be deemed a continuing guaranty and the above consents and waivers of PCC
shall remain in full force and effect until the satisfaction in full of Buyer's
obligations under this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 33 -
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have duly executed this
Membership Purchase Agreement as of the date first above written.
SOUTH TEXAS VISION, L.L.C.
By:
------------------------------------
Name:
Title:
DR. JOSEPH A. ZAVALETTA
---------------------------------------
PAXSON COMMUNICATIONS OF SAN
ANTONIO-26, INC.
By:
------------------------------------
Name:
Title:
WITH REGARD TO SECTION 21.11 ONLY:
PAXSON COMMUNICATIONS CORPORATION
By:
------------------------------------
Name:
Title:
- 34 -
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<FISCAL-YEAR-END> DEC-31-1998
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218,068,972
0
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