<PAGE> 1
As filed with the Securities and Exchange Commission on August 16, 1999.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1999.
[ ] 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: 333-54003-06 Commission File Number: 000-25206
LIN HOLDINGS CORP. LIN TELEVISION CORPORATION
---------------------------- ----------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE DELAWARE
------------------------------- -------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
75-2733097 13-3581627
------------------------------------ ------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1 RICHMOND SQUARE, SUITE 230E, PROVIDENCE, RHODE ISLAND 02906
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(401) 454-2880
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrants were
required to file such reports), and (2) have been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
NOTE:
- ----
10-Q currently presents results for two companies rather than just the parent
company on a fully consolidated basis.
<PAGE> 2
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1. Financial Statements
LIN HOLDINGS CORP.
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
LIN TELEVISION CORPORATION
Condensed Consolidated Balance Sheets 12
Condensed Consolidated Statements of Operations 13
Condensed Consolidated Statements of Cash Flows 14
Notes to Condensed Consolidated Financial Statements 15
Item 2. Management's Discussion and Analysis of Results of Operations
And Financial Condition 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
Part II. Other Information
Item 1. Legal Proceedings 29
Item 6. Exhibits and Reports on Form 8-K 29
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
LIN HOLDINGS CORP.
Condensed Consolidated Balance Sheets
(In thousands, except number of shares)
June 30, 1999
(unaudited) December 31, 1998
----------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 13,067 $ 41,349
Accounts receivable, less allowance for
doubtful accounts (1999 - $1,671;
1998 - $1,880) 44,346 40,917
Program rights 4,930 9,671
Other current assets 496 916
---------- ----------
Total current assets 62,839 92,853
Property and equipment, net 130,788 131,758
Deferred financing costs 44,187 46,821
Investment in joint venture 68,707 70,692
Investment in Southwest Sports Group, at cost 48,500 --
Intangible assets, net 1,500,756 1,444,600
Program rights 2,914 4,636
Other noncurrent assets 2,736 9,530
---------- ----------
Total assets $1,861,427 $1,800,890
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,554 $ 8,917
Program obligations 5,438 9,990
Accrued income taxes 10,039 3,735
Current portion of long-term debt 11,963 15,063
KXTX Management fee payable -- 4,175
Accrued interest expense 8,960 9,154
Other accruals 20,801 18,548
---------- ----------
Total current liabilities 64,755 69,582
Long-term debt, excluding current portion 760,334 668,517
Deferred income taxes 516,727 519,207
Program obligations 2,757 4,640
Other noncurrent liabilities 6,584 6,535
---------- ----------
Total liabilities 1,351,157 1,268,481
---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value: Authorized
shares - (1999- none, 1998- none) -- --
Common stock, $0.01 par value: Authorized
shares - (1999 - 1,000, 1998 - 1,000) -- --
Additional paid-in capital 559,498 559,668
Accumulated deficit (49,228) (27,259)
---------- ----------
Total stockholders' equity 510,270 532,409
---------- ----------
Total liabilities and stockholders' equity $1,861,427 $1,800,890
========== ==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
NOTE - The December 31, 1998 information is derived from the audited financial
statements at that date
1
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LIN HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Period from Predecessor
Ended Ended Ended March 3 - Period from
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 January 1 -
(Unaudited) (Unaudited) (Unaudited) (Unaudited) March 2, 1998
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues .......................................... $56,629 $61,777 $101,239 $77,988 $43,804
Operating costs and expenses:
Direct operating .................................... 14,535 17,000 26,639 20,730 11,117
Selling, general and administrative ................. 11,684 14,068 24,150 18,364 11,701
Corporate ........................................... 1,965 2,296 3,913 2,754 1,170
KXTX Management Fee ................................. (365) -- 1,178 -- --
Amortization of program rights ...................... 3,285 3,041 6,630 4,056 2,743
Depreciation and amortization of intangible assets .. 13,787 13,631 28,002 18,105 4,581
------- ------- -------- ------- -------
Total operating costs and expenses .................... 44,891 50,036 90,512 64,009 31,312
------- ------- -------- ------- -------
Operating income ...................................... 11,738 11,741 10,727 13,979 12,492
Other (income) expense:
Interest expense .................................... 16,222 16,421 32,131 21,691 2,764
Investment income ................................... (710) (237) (1,299) (287) (98)
Loss on investment in joint venture ................. 297 1,700 2,118 2,162 244
Loss on disposition of KXTX-TV ...................... 2,212 -- 2,212 -- --
Merger expenses ..................................... -- -- -- -- 8,616
Other, net .......................................... (294) -- (294) -- --
------- ------- -------- ------- -------
Total other expense ................................... 17,727 17,884 34,868 23,566 11,526
------- ------- -------- ------- -------
Income (loss) before provision for (benefit from)
Income taxes .......................................... (5,989) (6,143) (24,141) (9,587) 966
Provision for (benefit from) income taxes ............. 808 (407) (2,172) (622) 3,710
------- ------- -------- ------- -------
Net loss .............................................. $(6,797) $(5,736) $(21,969) $(8,965) $(2,744)
======= ======= ======== ======= =======
</TABLE>
The Accompanying notes are an integral part of the condensed consolidated
financial statements
Note - The January 1 - March 2, 1998 information is derived from the audited
financial statements for that period.
2
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LIN HOLDINGS CORP.
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended Period from March 3 - Predecessor
June 30, 1999 June 30, 1998 Period From January 1 -
(unaudited) (unaudited) March 2, 1998
-------- ---------- -------
<S> <C> <C> <C>
Net cash provided by operating activities $ 10,618 $ 24,036 $ 8,416
-------- ---------- -------
Investing activities:
Capital expenditures (10,217) (2,702) (1,221)
Proceeds from asset disposals 6,560 41 3
Liquidating dividend on investment in SSDB 5,066 -- --
Investment in joint venture -- (250) (250)
Acquisition of WOOD-TV and WOTV-TV, net of cash acquired (118,100) -- --
Acquisition of LIN Television Corporation, net of cash acquired -- (1,723,656) --
-------- ---------- -------
Net cash used in investing activities (116,691) (1,726,567) (1,468)
-------- ---------- -------
Financing activities:
Proceeds from exercises of stock options, stock units and sale of
Employee Stock Purchase Plan shares (171) (75) 1,071
Principal payments on long-term debt (15,038) (260,000) --
Proceeds from long-term debt 93,000 668,929 --
Loan fees incurred on long-term debt -- (51,211) --
Proceeds from GECC note -- 815,500 --
Proceeds from sale of common stock -- 558,123 --
Proceeds from capital contribution -- 1,000 --
-------- ---------- -------
Net cash provided by financing activities 77,791 1,732,266 1,071
-------- ---------- -------
Net increase (decrease) in cash and cash equivalents (28,282) 29,735 8,019
Cash and cash equivalents at the beginning of the period 41,349 -- 8,046
-------- ---------- -------
Cash and cash equivalents at the end of the period $ 13,067 $ 29,735 $16,065
======== ========== =======
Schedule of Noncash Investing Activities
Value of Preferred Units received on disposal of KXTX-TV $ 47,000 $ -- $ --
======== ========== =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
NOTE - The January 1 - March 2, 1998 information is derived from the audited
financial statements for that period
3
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION:
LIN Holdings Corp. ("LIN Holdings"), together with its subsidiaries,
including LIN Television Corporation ("LIN Television"), the predecessor
business prior to the acquisition (see Note 2), (together, except with respect
to the notes to the condensed consolidated financial statements for LIN
Television, the "Company"), is a television station group operator in the United
States that owns and operates eight network-affiliated television stations.
Additionally, the Company has local marketing agreements ("LMAs") under which it
programs four other stations in the markets in which it operates.
All of the Company's direct and indirect consolidated subsidiaries
fully and unconditionally guarantee the Company's Senior Subordinated Notes (see
Note 5) on a joint and several basis.
These condensed consolidated financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 31,1998.
In the opinion of management, the accompanying unaudited interim
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary to summarize fairly the financial position, results of
operations and cash flows of LIN Holdings and its subsidiaries for the periods
presented. The interim results of operations are not necessarily indicative of
the results to be expected for the full year.
NOTE 2 - BUSINESS COMBINATIONS:
LIN Holdings and LIN Acquisition Company, both affiliates of Hicks,
Muse, Tate & Furst Incorporated ("Hicks Muse"), entered into an Agreement and
Plan of Merger with LIN Television on August 12, 1997 (as amended, the "Merger
Agreement"). Pursuant to, and upon the terms and conditions of, the Merger
Agreement, LIN Holdings acquired LIN Television (the "Acquisition") on March 3,
1998 by merging LIN Acquisition Company, its wholly-owned subsidiary, with and
into LIN Television (the "Merger"), with LIN Television surviving the merger and
becoming a direct, wholly-owned subsidiary of LIN Holdings. The total purchase
price for the common equity of LIN Television was approximately $1.7 billion. In
addition, the Company refinanced $260.2 million of LIN Television's indebtedness
and incurred acquisition costs of approximately $32.2 million.
The Acquisition was funded by:
(i) $6.9 million of excess cash on the LIN Television balance sheet;
(ii) $50.0 million aggregate principal amount of senior secured Tranche A
term loans ("Tranche A Term Loans");
(iii) $120.0 million aggregate principal of senior secured Tranche B term
loans ("Tranche B Term Loans");
(iv) $299.3 million of gross proceeds from the issuance of $300.0 million
aggregate principal amount of 8 3/8% senior subordinated notes due 2008
("Senior Subordinated Notes");
(v) $199.6 million of gross proceeds from the issuance by LIN Holdings of
$325.0 million aggregate principal amount at maturity of 10% senior
discount notes due 2008 ("Senior Discount Notes"), which proceeds were
contributed by LIN Holdings to the common equity of LIN Television;
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(vi) $815.5 million of proceeds from the GECC Note (see below); and
(vii) $558.1 million of common equity provided by affiliates of Hicks Muse,
management and other co-investors to the equity of the corporate
parents of LIN Holdings, which in turn, through LIN Holdings,
contributed such amount to the common equity of LIN Television.
The Senior Subordinated Notes and the Senior Discount Notes were
subsequently registered with the Securities and Exchange Commission (the "SEC").
JOINT VENTURE WITH NBC. In connection with the Acquisition, LIN
Television and NBC formed a television station joint venture (the "Joint
Venture"). The Joint Venture consists of KXAS-TV, formerly LIN Television's
Dallas-Fort Worth NBC affiliate, and KNSD-TV, formerly NBC's San Diego station.
A wholly owned subsidiary of NBC is the general partner of the Joint Venture
(the "NBC General Partner") and NBC operates the stations owned by the Joint
Venture. The NBC General Partner holds an approximate 80% equity interest and
the Company holds an approximate 20% equity interest in the Joint Venture (see
Note 6). General Electric Capital Corporation ("GECC") provided debt financing
for the Joint Venture in the form of an $815.5 million 25-year non-amortizing
senior secured note bearing an initial interest rate of 8.0% per annum (the
"GECC Note"). The Company expects that the interest payments on the GECC Note
will be serviced solely by the cash flows of the Joint Venture.
The GECC Note was issued by LIN Television of Texas, L.P., the
Company's indirect wholly-owned partnership ("LIN Texas"), which distributed the
proceeds to the Company to finance a portion of the cost of the Acquisition. The
obligations to GECC under the GECC Note were assumed by the Joint Venture and
LIN Texas was simultaneously released from all obligations under the GECC Note.
The GECC Note is not an obligation of the Company or any of its subsidiaries,
and has recourse only to the Joint Venture, the Company's equity interest
therein and to one of LIN Holdings' two corporate parents pursuant to a
guarantee.
NOTE 3 - RECENT DEVELOPMENTS:
LIN MERGER TERMINATION. On July 7, 1998, AMFM Inc. ("AMFM"), formerly
Chancellor Media Corporation, entered into a merger agreement (the "AMFM Merger
Agreement") with Ranger Equity Holdings Corporation ("Ranger"), a parent
company, to acquire Ranger in a stock for stock transaction (the "AMFM Merger").
Ranger indirectly owns 100% of the equity of LIN Holdings. On March 14, 1999,
the Boards of Directors of AMFM and Ranger agreed to terminate the AMFM Merger
Agreement. Additionally, AMFM's Board of Directors approved the assignment of
the agreements to acquire Petry Media Corporation, a leading television
representation firm, and Pegasus Broadcasting of San Juan, L.L.C., a television
broadcasting company that owns a television station in Puerto Rico, to the
Company. Subsequently, the AMFM agreement with Petry has expired. The assignment
of the agreement relating to the purchase of Pegasus Broadcasting by the Company
is subject to negotiation, third-party approval and various other conditions
including governmental approvals, and, accordingly, there can be no assurance
that the Company will complete such a transaction.
KXTX-TV. On June 3, 1999, LIN Texas transferred all of the assets of
KXTX-TV to Southwest Sports Group Holdings LLC, Inc. ("SSG Holdings" or "SSG"),
a Texas limited liability company and an entity in which a partner of Hicks Muse
has a substantial economic interest. In exchange, LIN Texas received 500,000
units of SSG's Series A Preferred Units, par value $100.00 per unit ("SSG
Preferred Units"). The Company has assigned a value of $47.0 million to the SSG
Preferred Units. The SSG Preferred Units are entitled to receive non-liquidating
distributions prior to any junior ranked units of SSG Holdings in an amount
equal to $100 per Preferred Unit, minus the amount of previously made
distributions, plus an amount of
5
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
interest thereon at a rate of 6% per annum compounded annually beginning January
1, 1999. As of June 30, 1999, the total interest owed to the Company was $1.5
million.
LIN Texas has the right, upon the earlier of (i) the third anniversary
of the issuance of the SSG Preferred Units and (ii) an initial public offering
of SSG Common Units, to convert its shares of SSG Preferred Units into shares of
SSG Common Units at a conversion rate equal to the par value per share of the
SSG Preferred Units (plus accrued and unpaid interest thereon) divided by the
fair market value per share of the SSG Common Units. SSG has the right, at its
sole option, to redeem the SSG Preferred Units at par value (plus accrued and
unpaid interest thereon) at any time.
WOOD AND WOTV. On June 30, 1999, the Company acquired from AT&T
Corporation ("AT&T") the assets of WOOD-TV and the LMA rights related to WOTV-TV
(collectively, the "Grand Rapids Stations"), both of which stations are located
in the Grand Rapids-Kalamazoo-Battle Creek market (the "Grand Rapids
Acquisition"). The Company had provided management services to the Grand Rapids
Stations pursuant to a consulting agreement with AT&T. The total purchase price
for the Grand Rapids Acquisition was approximately $142.4 million, including
direct costs of the acquisition. The Grand Rapids Acquisition was funded by the
combination of operating funds and $93.0 million of additional Tranche A Term
Loans (see Note 5).
The acquisition is accounted for as a purchase and accordingly, the
purchase price, including direct costs of the acquisition, is allocated to the
assets acquired and liabilities assumed based on their fair values at the date
of the acquisition. These fair values are subject to adjustment when additional
information concerning asset and liability valuations is finalized. The excess
of the purchase price over the fair value of the net tangible assets acquired
has been allocated to intangible assets, primarily FCC licenses and network
affiliations. The results of operations associated with the acquired business
will be included in the consolidated results of the Company from the acquisition
date. The Grand Rapids Acquisition is summarized as follows (in thousands):
Assets acquired and liabilities assumed
Working capital, including cash of $22,400 ........................... $ 15,442
Property and equipment ............................................... 18,422
Other noncurrent assets .............................................. 1,033
Intangible assets .................................................... 108,096
Other noncurrent liabilities ......................................... (609)
--------
Total acquisition .................................................... 142,384
Cash from Wood-TV and WOTV-TV ........................................ (22,400)
Additional Liabilities Assumed ....................................... (1,884)
--------
Cash Paid For Acquisition ............................................ $118,100
--------
The following summarizes unaudited pro forma consolidated results of operations
as if the Grand Rapids Acquisition had taken place as of the beginning of the
periods presented (in thousands):
6
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Six months Six months
ended ended
June 30, 1999 June 30, 1998
------------- -------------
Net Revenues ............................... $117,146 $124,074
Operating Income ........................... 16,251 19,205
Net Loss ................................... (16,091) (17,234)
The pro forma data give effect to actual operating results prior to the
acquisition and adjustments to interest expense, amortization and income taxes.
No effect has been given to cost reductions or operating synergies in this
presentation. The pro forma results do not necessarily represent results that
would have occurred if the acquisition had taken place as of the beginning of
the periods presented, nor are they necessarily indicative of the results of
future operations.
NETWORK AFFILIATION COMPENSATION. On July 15, 1999, the Company entered
into an amendment to its existing network agreement with American Broadcasting
Company ("ABC"). This amendment calls for the Company to make payments to ABC
for the rights to broadcast National Football League ("NFL") games. In exchange,
the Company will receive eight additional prime time program spots per week. The
Company has three stations affiliated with ABC - WAND in Decatur, Illinois, WTNH
in New Haven, Connecticut, and WOTV, an LMA station in Battle Creek, Michigan.
On April 6, 1999, Fox Broadcasting Company ("Fox") informed the Company
of the network's plan to reduce the inventory of the commercial time in Fox
prime time programming allocated to its affiliates by approximately 22% or to
allow the affiliates to buy-back that inventory plus additional network
inventory. The Company has only one station affiliated with Fox -- WVBT, an LMA
station in Norfolk, Virginia. WVBT-TV has elected to buy the commercial time
from Fox.
NOTE 4 - RELATED PARTY TRANSACTIONS:
ACQUISITION OF LIN TELEVISION. In connection with the Acquisition (see
Note 2), LIN Holdings and LIN Television (collectively, the "Clients") entered
into a ten-year agreement (the "Monitoring and Oversight Agreement") with Hicks,
Muse & Co. Partners, L.P., ("Hicks Muse Partners"), an affiliate of Hicks Muse,
pursuant to which the Clients agreed to pay Hicks Muse Partners an annual fee
(payable quarterly) for oversight and monitoring services to the Clients. The
aggregate annual fee is adjustable on January 1 of each calendar year to an
amount equal to 1.0% of the budgeted consolidated annual earnings before
interest, tax, depreciation and amortization ("EBITDA") of LIN Holdings and its
subsidiaries for the then current fiscal year. Upon the acquisition by LIN
Holdings and its subsidiaries of another entity or business, the fee shall be
adjusted prospectively in the same manner using the pro forma consolidated
annual EBITDA of LIN Holdings and it subsidiaries. In no event shall the annual
fee be less than $1,000,000. Hicks Muse Partners is also entitled to
reimbursement for any expenses incurred by it in connection with rendering
services allocable to LIN Holdings or LIN Television. The fee for the three and
six months ended June 30, 1999 was $250,000 and $500,000, respectively.
In connection with the Acquisition, the Clients also entered into a
ten-year agreement (the "Financial Advisory Agreement") with Hicks Muse
Partners, pursuant to which Hicks Muse Partners received a financial advisory
fee at the closing of the Acquisition as compensation for its services as
financial advisor to the Clients in connection with the Acquisition. Hicks Muse
Partners also is entitled to receive a fee equal to 1.5% of the "transaction
value" (as defined below) for each "subsequent transaction" (as defined below)
in which either LIN Holdings or LIN Television is
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
involved. The term "transaction value" means the total value of the subsequent
transaction including without limitation, the aggregate amount of the funds
required to complete the subsequent transaction (excluding any fees payable
pursuant to the Financial Advisory Agreement), including the amount of any
indebtedness, preferred stock or similar obligations assumed (or remaining
outstanding). The term "subsequent transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving LIN Holdings or
any of its subsidiaries, and any other person or entity. The fee for the six
months ended June 30, 1999 was approximately $1.9 million, related to the
WOOD-TV and WOTV-TV acquisition.
Prior to June 1999, the Company leased an aircraft to AMFM pursuant to
an existing lease agreement. In June 1999, the Company sold the aircraft to AMFM
for approximately $6.6 million and terminated the lease agreement. The
transaction with AMFM reimbursed the Company for all costs associated with the
plane, including the original purchase price.
INVESTMENT IN SPECIAL SERVICES DELAWARE B, INC. In October 1998, the
Company invested $7.1 million for 25% of the capital stock of Special Services
Delaware B, Inc. ("SSDB"), a company that owned and leased an aircraft to AMFM.
Ranger Equity Holdings A Corp., a subsidiary of Ranger, invested $21.4 million
for the remaining 75% capital stock of SSDB. The Company accounts for its
interest in SSDB using the equity method, as the Company does not have a
controlling interest. The results of SSDB were immaterial for all periods
presented. In June 1999, SSDB sold the aircraft to a third party and terminated
the lease agreement with AMFM. The sales proceeds from the aircraft were
distributed to the shareholders as a liquidating dividend in proportion to their
equity interests. The Company's portion of the liquidating dividend was $5.1
million. In addition, the Company received $2.0 million from AMFM as
reimbursement for costs associated with the plane. As SSDB had no assets as of
June 30, 1999, the company recorded a charge of $7.1 million for the write-off
of its investment.
JOINT VENTURE WITH 21ST CENTURY GROUP LLC. In August 1999, the Company
and 21st Century Group LLC ("21st Century"), an entity in which Hicks Muse has a
substantial economic interest, announced the formation of a television station
joint venture, Banks Broadcasting, LLC. The Company and 21st Century also
announced the first transaction of the joint venture, the entry into a local
marketing agreement to build and develop a new WB affiliate serving the Midwest.
NOTE 5 - LONG-TERM DEBT:
Long-term debt consisted of the following at (in thousands):
June 30, December 31,
1999 1998
-------- --------
Senior Credit Facilities ............................ $245,639 $167,678
$300,000 8 3/8% Senior Subordinated Notes
due 2008 (net of a discount of $639) ............... 299,361 299,337
$325,000 10% Senior Discount Notes
due 2008 (net of a discount of $97,703) ............ 227,297 216,565
-------- --------
Total debt .......................................... 772,297 683,580
Less current portion ................................ (11,963) (15,063)
-------- --------
Total long-term debt ................................ $760,334 $668,517
-------- --------
SENIOR CREDIT FACILITIES. On March 3, 1998, the Company entered into a
credit agreement (the "Credit Agreement") with the Chase Manhattan Bank, as
administrative agent (the "Agent"), and the lenders named therein. Under the
Credit Agreement, the Company established a $295
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LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
million term loan facility, a $50 million revolving facility, and a $225 million
incremental term loan facility (collectively, the "Senior Credit Facilities").
Borrowings under the Senior Credit Facilities and part of the proceeds from the
8 3/8% Senior Subordinated Notes were used to repay LIN Television's existing
debt.
Borrowings under the Senior Credit Facilities bear interest at a rate
based, at the option of the Company, on an adjusted London interbank offered
rate ("Adjusted LIBOR"), or the highest of the Agent's prime rates, certificate
of deposits rate plus 1.00%, or the Federal Funds effective rate plus 1/2 of
1.00% (the "Alternate Base Rate"), plus an incremental rate based on the
Company's financial performance. As of June 30, 1999, the interest rates on the
$50 million Tranche A term loan and the $120 million Tranche B term ranged
between 6.13% to 7.04%, based on the Adjusted LIBOR. In addition, the interest
rate on the $93 million Delayed Tranche A Term Loan used to finance the Grand
Rapids Acquisition was 6.47%. The Company is required to pay quarterly
commitment fees ranging from 0.25% to 0.50%, based upon the Company's leverage
ratio for that particular quarter on the unused portion of the loan commitment,
in addition to annual agency and other administration fees.
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed, jointly and severally, by LIN
Holdings and by each existing and subsequently acquired or organized subsidiary
of the Company. In addition, substantially all of the assets of the Company and
its subsidiaries are pledged as collateral against the performance of these
obligations. Quarterly required principal repayments of amounts outstanding
under the Senior Credit Facilities commenced on December 31, 1998. The Company's
ability to make additional borrowings under the Senior Credit Facilities is
subject to compliance with certain financial covenants and other conditions set
forth in the Credit Agreement.
SENIOR SUBORDINATED NOTES. On March 3, 1998, LIN Television issued $300
million aggregate principal amount of 8 3/8% Senior Subordinated Notes due 2008
in a private placement for net proceeds of $290.3 million. Such Senior
Subordinated Notes were subsequently registered with the SEC pursuant to a
Registration Statement filed on August 12, 1998. The Senior Subordinated Notes
are obligations of LIN Television without collateral rights, subordinated in
right of payment to all existing and any future senior indebtedness of LIN
Television. The Senior Subordinated Notes are fully and unconditionally
guaranteed, on a joint and several basis, by all wholly owned subsidiaries of
LIN Television. Interest on the Senior Subordinated Notes accrues at a rate of 8
3/8% per annum and is payable in cash, semi-annually in arrears, which commenced
on September 1, 1998. The effective interest rate of the Senior Subordinated
Notes is 8.9% on an annual basis.
SENIOR DISCOUNT NOTES. In connection with the Merger on March 3, 1998,
LIN Holdings issued $325 million aggregate principal amount at maturity of 10%
Senior Discount Notes due 2008 in a private placement. Such Senior Discount
Notes were subsequently registered with the SEC pursuant to a Registration
Statement filed on August 12, 1998. The Senior Discount Notes were issued at a
discount and generated net proceeds of $192.6 million to LIN Holdings. The
Senior Discount Notes are unsecured senior obligations of LIN Holdings, and are
not guaranteed. Cash interest will not accrue or be payable on the Senior
Discount Notes prior to March 1, 2003. Thereafter, cash interest will accrue at
a rate of 10% per annum and will be payable semi-annually in arrears commencing
on September 1, 2003. The effective interest rate of the Senior Discount Notes
is 11.0% on an annual basis.
9
<PAGE> 12
LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 6 - INVESTMENTS:
JOINT VENTURE WITH NBC. The Company owns a 20% interest in a Joint
Venture with NBC (see Note 2) and accounts for its interest using the equity
method, as the Company does not have a controlling interest. The following
presents the summarized financial information of the Joint Venture (in
thousands):
Six months ended
June 30, 1999
-------------
Net revenues .................................. $68,458
Operating income .............................. 21,431
Net loss ...................................... (10,366)
As of As of
June 30, 1999 December 31, 1998
------------- -----------------
Current Assets .............................. $ 20,471 $ 2,507
Non-current assets .......................... 247,039 249,441
Current liabilities ......................... 16,310 550
Non-current liabilities ..................... 815,500 815,500
NOTE 7 - INCOME TAXES:
The provision for (benefit from) income taxes differs from the amount
computed by applying the federal statutory income tax rate of 35% to income
(loss) before income taxes due to the effects of state income taxes and certain
expenses not deductible for tax purposes, primarily the amortization of
goodwill. The current and deferred income taxes of the Company are calculated by
applying Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" to the Company as if it were a separate taxpayer.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
CHANGES IN FCC OWNERSHIP RULES. On August 5, 1999, the Federal
Communications Commission ("FCC") adopted changes in its broadcast ownership
rules. The FCC relaxed its so-called television "duopoly" rule, which barred any
entity from owning more than one television station in a local market. Under the
new rules, one entity may own two stations in the same market provided 1) one of
the two stations is not among the top four in audience share and 2) that
post-merger there will be at least eight independently owned and operated
commercial and noncommercial stations in that market. The FCC will also permit
combinations where one of the stations has failed, is failing or unbuilt or
where extraordinary public interest factors are present.
The FCC also declared that LMAs such as those that LIN has entered into
will now be attributable ownership interests for purposes of the duopoly rule.
However, the FCC grandfathered all LMAs entered into prior to November 1996,
which includes all of LIN's LMAs, for a minimum of five years, at which time the
FCC will determine whether and how long to permit these combinations to
continue. And, in the interim, the FCC will permit LMA parties to apply for
common ownership under the standards outlined above.
The FCC also provided television licensees greater latitude to acquire
stations in adjacent markets by dispensing with its prohibition on
adjacent-market station combinations where the stations had overlapping signal
contours and substituting the requirement that the stations be in different
Nielsen viewing markets.
The FCC relaxed its so-called "one-to-a-market" rule, which restricts
the cross-ownership of television and radio stations in the same market. One
entity may now own up to two television
10
<PAGE> 13
LIN HOLDINGS CORP.
Notes to Condensed Consolidated Financial Statements
(unaudited)
stations (if permitted under the duopoly rule) and six radio stations in the
same market provided that after the combination there remain 20 independent
media voices (which also includes newspapers and cable systems) in that market.
The number of radio stations cannot exceed four in markets where there are fewer
than 20 but more than 9 independent voices.
Finally, the FCC made various changes in its rules governing the
circumstances under which ownership of a broadcast property is attributed to an
individual or entity, relaxing them in some respects and stiffening them in
others.
The Company is in the process of analyzing the impact of these changes
on its operations.
LITIGATION. On September 4, 1997, the Company announced that it had
learned of four lawsuits regarding the then proposed acquisition of LIN
Television. The Company and all of its then present directors are defendants in
all of the lawsuits. AT&T is a defendant in three of the lawsuits, and an AT&T
affiliate and Hicks Muse are defendants in one of the lawsuits. Each of the
lawsuits was filed by a purported shareholder of the Company seeking to
represent a putative class of all the Company's public stockholders. Three of
the four lawsuits were filed in the Delaware Court of Chancery, while the fourth
lawsuit was filed in the New York Supreme Court.
While the allegations of the complaints are not identical, all of the
lawsuits basically assert that the terms of the original merger agreement were
not in the best interests of the Company's public Stockholders. All of the
complaints allege breach of fiduciary duty in approving the merger agreement.
Two of the complaints also allege breach of fiduciary duty in connection with
the sale of the television station WOOD-TV by AT&T to LIN Television and the
amendment to a Private Market Value Guarantee Agreement that was entered into
simultaneously with the first merger agreement. The complaints seek the
preliminary and permanent enjoinment of the merger or alternatively seek damages
in an unspecified amount. The complaints have not been amended to reflect the
terms of the merger itself.
The plaintiffs in each of the actions have agreed to an indefinite
extension of time for each of the defendants served to respond to the respective
complaints. No discovery has taken place.
In addition, the Company currently and from time to time is involved in
litigation incidental to the conduct of its business. In the opinion of the
Company's management, none of such litigation as of June 30, 1999, is likely to
have a material adverse effect on the Company's financial position, results of
operations or cash flows.
11
<PAGE> 14
LIN TELEVISION CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except number of shares)
<TABLE>
<CAPTION>
June 30, 1999
(unaudited) December 31, 1998
----------- -----------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 13,067 $ 41,349
Accounts receivable, less allowance for doubtful accounts (1999 - $1,671; 1998 - $1,880) 44,346 40,917
Program rights 4,930 9,671
Other current assets 496 916
---------- ----------
Total current assets 62,839 92,853
Property and equipment, net 130,788 131,758
Deferred financing costs 33,114 35,109
Investment in joint venture 68,707 70,692
Investment in Southwest Sports Group, at cost 48,500 --
Intangible assets, net 1,500,756 1,444,600
Program rights 2,914 4,636
Program rights and other noncurrent assets 2,736 9,530
---------- ----------
Total assets $1,850,354 $1,789,178
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,554 $ 8,917
Program obligations 5,438 9,990
Accrued income taxes 18,139 10,035
Current portion of long-term debt 11,963 15,063
KXTX Management fee payable -- 4,175
Accrued interest expense 8,960 9,154
Other accruals 20,801 18,548
---------- ----------
Total current liabilities 72,855 75,882
Long-term debt, excluding current portion 533,038 451,952
Deferred income taxes 520,127 519,207
Program obligations 2,757 4,640
Other noncurrent liabilities 6,584 6,535
---------- ----------
Total liabilities 1,135,361 1,058,216
---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value: Authorized shares - (1999- none, 1998- none)
Common stock, $0.01 par value: Authorized shares - (1999 - 1,000, 1998 - 1,000) -- --
Additional paid-in capital 746,351 746,522
Accumulated Earnings (Deficit) (31,358) (15,560)
---------- ----------
Total stockholders' equity 714,993 730,962
---------- ----------
Total liabilities and stockholders' equity $1,850,354 $1,789,178
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
NOTE - The December 31, 1998 information is derived from the audited financial
statements at that date.
12
<PAGE> 15
LIN TELEVISION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Period from Predecessor
Ended Ended Ended March 3 - Period from
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 January 1 -
(Unaudited) (Unaudited) (Unaudited) (Unaudited) March 2, 1998
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenue $56,629 $61,777 $101,239 $77,988 $43,804
Operating costs and expenses:
Direct operating 14,535 17,000 26,639 20,730 11,117
Selling, general and administrative 11,684 14,068 24,150 18,364 11,701
Corporate 1,965 2,296 3,913 2,754 1,170
KXTX Management Fee (365) -- 1,178 -- --
Amortization of program rights 3,285 3,041 6,630 4,056 2,743
Depreciation and amortization of intangible assets 13,787 13,631 28,002 18,105 4,581
------- ------- -------- ------- -------
Total operating costs and expenses 44,891 50,036 90,512 64,009 31,312
------- ------- -------- ------- -------
Operating income 11,738 11,741 10,727 13,979 12,492
Other (income) expense:
Interest expense 10,408 10,895 20,760 14,430 2,764
Investment income (710) (237) (1,299) (287) (98)
Loss on investment in joint venture 297 1,700 2,118 2,162 244
Loss on disposition of KXTX-TV 2,212 -- 2,212 -- --
Merger expenses -- -- -- -- 8,616
Other, net (294) -- (294) -- --
------- ------- -------- ------- -------
Total other expense 11,913 12,358 23,497 16,305 11,526
------- ------- -------- ------- -------
Income (loss) before provision for
Income taxes (175) (617) (12,770) (2,326) 966
Provision for income taxes 775 747 3,028 2,766 3,710
------- ------- -------- ------- -------
Net loss $ (950) $(1,364) $(15,798) $(5,092) $(2,744)
======= ======= ======== ======= =======
</TABLE>
The Accompanying notes are an integral part of the condensed consolidated
financial statements.
Note - The January 1 - March 2, 1998 information is derived from the audited
financial statements for that period.
13
<PAGE> 16
LIN TELEVISION CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended Period from March 3 - Predecessor
June 30, 1999 June 30, 1998 Period From January 1 -
(unaudited) (unaudited) March 2, 1998
----------- ----------- -------------
<S> <C> <C> <C>
Net cash provided by operating activities $ 10,618 $ 24,036 $ 8,416
-------- ---------- -------
Investing activities:
Capital expenditures (10,217) (2,702) (1,221)
Proceeds from asset disposals 6,560 41 3
Liquidating dividend on investment in SSDB 5,066 -- --
Investment in joint venture -- (250) (250)
Acquisition of WOOD-TV and WOTV-TV, net of cash acquired (118,100) -- --
Acquisition of LIN Television Corporation, net of cash acquired -- (1,723,656) --
-------- ---------- -------
Net cash used in investing activities (116,691) (1,726,567) (1,468)
-------- ---------- -------
Financing activities:
Proceeds from exercises of stock options, stock units and sale
of Employee Stock Purchase Plan shares (171) (75) 1,071
Principal payments on long-term debt (15,038) (260,000) --
Proceeds from long-term debt 93,000 469,298 --
Loan fees incurred on long-term debt -- (38,434) --
Proceeds from GECC note -- 815,500 --
Proceeds from sale of common stock -- 744,977 --
Proceeds from capital contribution -- 1,000 --
-------- ---------- -------
Net cash provided by financing activities 77,791 1,732,266 1,071
-------- ---------- -------
Net increase (decrease) in cash and cash equivalents (28,282) 29,735 8,019
Cash and cash equivalents at the beginning of the period 41,349 -- 8,046
-------- ---------- -------
Cash and cash equivalents at the end of the period $ 13,067 $ 29,735 $16,065
======== ========== =======
Schedule of Noncash Investing Activities
Value of Preferred Units received on disposal of KXTX-TV $ 47,000 $ -- $ --
======== ========== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE - The January 1 - March 2, 1998 information is derived from the audited
financial statements for that period.
14
<PAGE> 17
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION:
LIN Television Corporation, together with its subsidiaries (together,
solely with respect to these notes to the condensed consolidated financial
statements, the "Company" or "LIN Television"), is a television station group
operator in the United States that owns and operates eight network-affiliated
television stations. Additionally, the Company has local marketing agreements
("LMAs") under which it programs four other stations in the markets in which it
operates.
All of the Company's direct and indirect consolidated subsidiaries
fully and unconditionally guarantee the Company's Senior Subordinated Notes (see
Note 5) on a joint and several basis.
These condensed consolidated financial statements have been prepared
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 31,1998.
In the opinion of management, the accompanying unaudited interim
financial statements contain all adjustments (consisting of normal recurring
adjustments) necessary to summarize fairly the financial position, results of
operations and cash flows of the Company and its subsidiaries for the periods
presented. The interim results of operations are not necessarily indicative of
the results to be expected for the full year.
NOTE 2 - BUSINESS COMBINATIONS:
LIN Holdings Corp. ("LIN Holdings") and LIN Acquisition Company, both
affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") entered into
an Agreement and Plan of Merger with LIN Television on August 12, 1997 (as
amended, the "Merger Agreement"). Pursuant to, and upon the terms and conditions
of, the Merger Agreement, LIN Holdings acquired LIN Television (the
"Acquisition") on March 3, 1998 by merging LIN Acquisition Company, its
wholly-owned subsidiary, with and into LIN Television (the "Merger"), with LIN
Television surviving the merger and becoming a direct, wholly-owned subsidiary
of LIN Holdings. The total purchase price for the common equity of LIN
Television was approximately $1.7 billion. In addition, the Company refinanced
$260.2 million of the Predecessor's indebtedness and incurred acquisition costs
of approximately $32.2 million.
The Acquisition was funded by:
(i) $6.9 million of excess cash on the Predecessor balance sheet;
(ii) $50.0 million aggregate principal amount of senior secured Tranche A
term loans ("Tranche A Term Loans");
(iii) $120.0 million aggregate principal of senior secured Tranche B term
loans ("Tranche B Term Loans");
(iv) $299.3 million of gross proceeds from the issuance of $300.0 million
aggregate principal amount of 8 3/8% senior subordinated notes due 2008
("Senior Subordinated Notes");
(v) $199.6 million of gross proceeds from the issuance by LIN Holdings of
$325.0 million aggregate principal amount at maturity of 10% senior
discount notes due 2008 ("Senior Discount Notes"), which proceeds were
contributed by LIN Holdings to the common equity of the Company;
15
<PAGE> 18
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(vi) $815.5 million of proceeds from the GECC (see below); and
(vii) $558.1 million of common equity provided by affiliates of Hicks Muse,
management and other co-investors to the equity of the corporate
parents of LIN Holdings, which in turn, through LIN Holdings,
contributed such amount to the common equity of the Company.
The Senior Subordinated Notes and the Senior Discount Notes were
subsequently registered with the Securities and Exchange Commission (the "SEC").
JOINT VENTURE WITH NBC. In connection with the Acquisition, LIN
Television and NBC formed a television station joint venture. The Joint Venture
consists of KXAS-TV, formerly LIN Television's Dallas-Fort Worth NBC affiliate,
and KNSD-TV, formerly NBC's San Diego station. A wholly-owned subsidiary of NBC
is the general partner of the Joint Venture (the "NBC General Partner") and NBC
operates the stations owned by the Joint Venture. The NBC General Partner holds
an approximate 80% equity interest and the Company holds an approximate 20%
equity interest in the Joint Venture (see Note 6). General Electric Capital
Corporation ("GECC") provided debt financing for the Joint Venture in the form
of an $815.5 million 25-year non-amortizing senior secured note bearing an
initial interest rate of 8.0% per annum (the "GECC Note"). The Company expects
that the interest payments on the GECC Note will be serviced solely by the cash
flows of the Joint Venture.
The GECC Note was issued by LIN Television of Texas, L.P., the
Company's indirect wholly owned partnership ("LIN Texas"), which distributed the
proceeds to the Company to finance a portion of the cost of the Acquisition. The
obligations to GECC under the GECC Note were assumed by the Joint Venture and
LIN Texas was simultaneously released from all obligations under the GECC Note.
The GECC Note is not an obligation of the Company or any of its subsidiaries,
and has recourse only to the Joint Venture, the Company's equity interest
therein and to one of LIN Holdings' two corporate parents pursuant to a
guarantee.
NOTE 3 - RECENT DEVELOPMENTS:
LIN MERGER TERMINATION. On July 7, 1998, AMFM Inc. ("AMFM"), formerly
Chancellor Media Corporation, entered into a merger agreement (the "AMFM Merger
Agreement") with Ranger Equity Holdings Corporation ("Ranger"), a parent
company, to acquire Ranger in a stock for stock transaction (the "AMFM Merger").
Ranger indirectly owns 100% of the equity of LIN Holdings. On March 14, 1999,
the Boards of Directors of AMFM and Ranger agreed to terminate the AMFM Merger
Agreement. Additionally, AMFM's Board of Directors approved the assignment of
the agreements to acquire Petry Media Corporation, a leading television
representation firm, and Pegasus Broadcasting of San Juan, L.L.C., a television
broadcasting company that owns a television station in Puerto Rico, to the
Company. Subsequently, the AMFM agreement with Petry has expired. The assignment
of the agreement relating to the purchase of Pegasus Broadcasting by the Company
is subject to negotiation, third-party approval and various other conditions
including governmental approvals, and, accordingly, there can be no assurance
that the company will complete such a transaction.
KXTX-TV. On June 3, 1999, LIN Texas transferred all of the assets of
KXTX-TV to Southwest Sports Group Holdings LLC, Inc. ("SSG Holdings" or "SSG"),
a Texas limited liability company and an entity in which a partner of Hicks Muse
has a substantial economic interest. In exchange, LIN Texas received 500,000
units of SSG's Series A Preferred Units, par value $100.00 per unit ("SSG
Preferred Units"). The Company has assigned a value of $47.0 million to the SSG
Preferred Units. The SSG Preferred Units are entitled to receive non-liquidating
distributions prior to any junior ranked units of SSG Holdings in an amount
equal to $100 per Preferred Unit, minus the amount of previously made
distributions, plus an amount of
16
<PAGE> 19
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
interest thereon at a rate of 6% per annum compounded annually beginning January
1, 1999. As of June 30, 1999, the total interest owed to the Company was $1.5
million.
LIN Texas has the right, upon the earlier of (i) the third anniversary
of the issuance of the SSG Preferred Units and (ii) an initial public offering
of SSG Common Units, to convert its shares of SSG Preferred Units into shares of
SSG Common Units at a conversion rate equal to the par value per share of the
SSG Preferred Units (plus accrued and unpaid interest thereon) divided by the
fair market value per share of the SSG Common Units. SSG has the right, at its
sole option, to redeem the SSG Preferred Units at par value (plus accrued and
unpaid interest thereon) at any time.
WOOD AND WOTV. On June 30, 1999, the Company acquired from AT&T
Corporation ("AT&T") the assets of WOOD-TV and the LMA rights related to WOTV-TV
(collectively, the "Grand Rapids Stations"), both of which stations are located
in the Grand Rapids-Kalamazoo-Battle Creek market (the "Grand Rapids
Acquisition"). The Company had provided management services to the Grand Rapids
Stations pursuant to a consulting agreement with AT&T. The total purchase price
for the Grand Rapids Acquisition was approximately $142.4 million, including
direct costs of the acquisition. The Grand Rapids Acquisition was funded by the
combination of operating funds and $93.0 million of additional Tranche A Term
Loans (see Note 5).
The acquisition is accounted for as a purchase and accordingly, the purchase
price, including direct costs of the acquisition, has been allocated to the
assets acquired and liabilities assumed based on their fair values at the date
of the acquisition. These fair values are subject to adjustment when additional
information concerning asset and liability valuations is finalized. The excess
of the purchase price over the fair value of the net tangible assets acquired
has been allocated to intangible assets, primarily FCC licenses and network
affiliations. The results of operations associated with the acquired business
will be included in the consolidated results of the Company from the acquisition
date. The Grand Rapids Acquisition is summarized as follows (in thousands):
Assets acquired and liabilities assumed
Working capital, including cash of $22,400 ........................... $ 15,442
Property and equipment ............................................... 18,422
Other noncurrent assets .............................................. 1,033
Intangible assets .................................................... 108,096
Other noncurrent liabilities ......................................... (609)
--------
Total acquisition .................................................... 142,384
Cash from WOOD-TV and WOTV-TV ........................................ (22,400)
Additional Liabilities Assumed ....................................... (1,884)
--------
Cash Paid For Acquisition ............................................ $118,100
--------
The following summarizes unaudited pro forma consolidated results of operations
as if the Grand Rapids Acquisition had taken place as of the beginning of the
periods presented (in thousands):
17
<PAGE> 20
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Six months Six months
ended ended
June 30, 1999 June 30, 1998
------------- -------------
Net Revenues ........................... $117,146 $124,074
Operating Income ....................... 16,251 19,205
Net Loss ............................... (16,091) (17,234)
The pro forma data give effect to actual operating results prior to the
acquisition and adjustments to interest expense, amortization and income taxes.
No effect has been given to cost reductions or operating synergies in this
presentation. The pro forma results do not necessarily represent results that
would have occurred if the acquisition had taken place as of the beginning of
the periods presented, nor are they necessarily indicative of the results of
future operations.
NETWORK AFFILIATION COMPENSATION. On July 15, 1999, the Company entered
into an amendment to its existing network agreement with American Broadcasting
Company ("ABC"). This amendment calls for the Company to make payments to ABC
for the rights to broadcast National Football League ("NFL") games. In exchange,
the Company will receive eight additional prime time program spots per week. The
Company has three stations affiliated with ABC - WAND in Decatur, Illinois, WTNH
in New Haven, Connecticut, and WOTV, an LMA station in Battle Creek, Michigan.
On April 6, 1999, Fox Broadcasting Company ("Fox") informed the Company
of the network's plan to reduce the inventory of the commercial time in Fox
prime time programming allocated to its affiliates by approximately 22% or to
allow the affiliates to buy-back that inventory plus additional network
inventory. The Company has only one station affiliated with Fox -- WVBT, an LMA
station in Norfolk, Virginia. WVBT-TV has elected to buy additional commercial
time from Fox.
NOTE 4 - RELATED PARTY TRANSACTIONS:
ACQUISITION OF LIN TELEVISION. In connection with the Acquisition (see
Note 2), LIN Holdings and LIN Television (collectively, the "Clients") entered
into a ten-year agreement (the "Monitoring and Oversight Agreement") with Hicks,
Muse & Co. Partners, L.P., ("Hicks Muse Partners"), an affiliate of Hicks Muse,
pursuant to which the Clients agreed to pay Hicks Muse Partners an annual fee
(payable quarterly) for oversight and monitoring services to the Clients. The
aggregate annual fee is adjustable on January 1 of each calendar year to an
amount equal to 1.0% of the budgeted consolidated annual earnings before
interest, tax, depreciation and amortization ("EBITDA") of LIN Holdings and its
subsidiaries for the then current fiscal year. Upon the acquisition by LIN
Holdings and its subsidiaries of another entity or business, the fee shall be
adjusted prospectively in the same manner using the pro forma consolidated
annual EBITDA of LIN Holdings and it subsidiaries. In no event shall the annual
fee be less than $1,000,000. Hicks Muse Partners is also entitled to
reimbursement for any expenses incurred by it in connection with rendering
services allocable to LIN Holdings or LIN Television. The fee for the three and
six months ended June 30, 1999 was $250,000 and $500,000, respectively.
In connection with the Acquisition, the Clients also entered into a
ten-year agreement (the "Financial Advisory Agreement") with Hicks Muse
Partners, pursuant to which Hicks Muse Partners received a financial advisory
fee at the closing of the Acquisition as compensation for its services as
financial advisor to the Clients in connection with the Acquisition. Hicks Muse
Partners also is entitled to receive a fee equal to 1.5% of the "transaction
value" (as defined
18
<PAGE> 21
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
below) for each "subsequent transaction" (as defined below) in which either LIN
Holdings or LIN Television is involved. The term "transaction value" means the
total value of the subsequent transaction including without limitation, the
aggregate amount of the funds required to complete the subsequent transaction
(excluding any fees payable pursuant to the Financial Advisory Agreement),
including the amount of any indebtedness, preferred stock or similar obligations
assumed (or remaining outstanding). The term "subsequent transaction" means any
future proposal for a tender offer, acquisition, sale, merger, exchange offer,
recapitalization, restructuring or other similar transaction directly involving
LIN Holdings or any of its subsidiaries, and any other person or entity. The fee
for the six months ended June 30, 1999 was approximately $1.9 million, related
to the WOOD-TV and WOTV-TV acquisition.
Prior to June 1999, the Company leased an aircraft to AMFM pursuant to
an existing lease agreement. In June 1999, the Company sold the aircraft to AMFM
for approximately $6.6 million and terminated the lease agreement. The
transaction with AMFM reimbursed the company for all costs associated with the
plane, including the original purchase price.
INVESTMENT IN SPECIAL SERVICES DELAWARE B, INC. In October 1998, the
Company invested $7.1 million for 25% of the capital stock of Special Services
Delaware B, Inc.("SSDB"), a company that owned and leased an aircraft to AMFM.
Ranger Equity Holdings A Corp., a subsidiary of Ranger, invested $21.4 million
for the remaining 75% capital stock of SSDB. The Company accounts for its
interest in SSDB using the equity method, as the Company does not have a
controlling interest. The results of SSDB were immaterial for all periods
presented. In June 1999, SSDB sold the aircraft to a third party and terminated
the lease agreement with AMFM. The sales proceeds from the aircraft were
distributed to the shareholders as a liquidating dividend in proportion to their
equity interests. The Company's portion of the liquidating dividend was $5.1
million. In addition, the Company received $2.0 million from AMFM as
reimbursement for costs associated with the plane. As SSDB had no assets as of
June 30, 1999, the company recorded a charge of $7.1 million for the write-off
of its investment.
JOINT VENTURE WITH 21ST CENTURY GROUP LLC. In August 1999, the Company
and 21st Century Group LLC ("21st Century"), an entity in which Hicks Muse has a
substantial economic interest, announced the formation of a television station
joint venture, Banks Broadcasting, LLC. The Company and 21st Century also
announced the first transaction of the joint venture, the entry into a local
marketing agreement to build and develop a new WB affiliate serving the Midwest.
NOTE 5 - LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands):
June 30, December 31,
1999 1998
-------- --------
Senior Credit Facilities ............................ $245,640 $167,678
$300,000 8 3/8% Senior Subordinated Notes
due 2008 (net discount of $639) .................... 299,361 299,337
-------- --------
Total debt .......................................... 545,001 467,015
Less current portion ................................ (11,963) (15,063)
-------- --------
Total long-term debt ................................ $533,038 $451,952
-------- --------
SENIOR CREDIT FACILITIES. On March 3, 1998, LIN Holdings and the
Company entered into a credit agreement (the "Credit Agreement") with the Chase
Manhattan Bank, as administrative agent (the "Agent"), and the lenders named
therein. Under the Credit Agreement, the Company established a $295 million term
loan facility, a $50 million revolving facility, and a
19
<PAGE> 22
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
$225 million incremental term loan facility (collectively, the "Senior Credit
Facilities"). Borrowings under the Senior Credit Facilities and part of the
proceeds from the 8 3/8% Senior Subordinated Notes were used to repay LIN
Television's existing debt.
Borrowings under the Senior Credit Facilities bear interest at a rate
based, at the option of the Company, on an adjusted London interbank offered
rate ("Adjusted LIBOR"), or the highest of the Agent's prime rates, certificate
of deposits rate plus 1.00%, or the Federal Funds effective rate plus 1/2 of
1.00% (the "Alternate Base Rate"), plus an incremental rate based on the
Company's financial performance. As of June 30, 1999, the interest rates on the
$50 million Tranche A term loan and the $120 million Tranche B term loan ranged
between 6.13% and 7.04%, respectively, based on the Adjusted LIBOR. In addition,
the interest rate on the $93 million Delayed Tranche A Term Loan used to finance
the Grand Rapids Acquisition was 6.47%. The Company is required to pay quarterly
commitment fees ranging from 0.25% to 0.50%, based upon the Company's leverage
ratio for that particular quarter on the unused portion of the loan commitment,
in addition to annual agency and other administration fees.
The obligations of the Company under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed, jointly and severally, by LIN
Holdings and by each existing and subsequently acquired or organized subsidiary
of the Company. In addition, substantially all of the assets of the Company and
its subsidiaries are pledged as collateral against the performance of these
obligations. Quarterly required principal repayments of amounts outstanding
under the Senior Credit Facilities commenced on December 31, 1998. The Company's
ability to make additional borrowings under the Senior Credit Facilities is
subject to compliance with certain financial covenants and other conditions set
forth in the Credit Agreement.
SENIOR SUBORDINATED NOTES: On March 3, 1998, the Company issued $300
million aggregate principal amount of 8 3/8% Senior Subordinated Notes due 2008
in a private placement for net proceeds of $290.3 million. Such Senior
Subordinated Notes were subsequently registered with the SEC pursuant to a
Registration Statement filed on August 12, 1998. The Senior Subordinated Notes
are obligations of the Company, without collateral rights, subordinated in right
of payment to all existing and any future senior indebtedness of the Company.
The Senior Subordinated Notes are fully and unconditionally guaranteed, on a
joint and several basis, by all wholly-owned subsidiaries of the Company.
Interest on the Senior Subordinated Notes accrues at a rate of 8 3/8% per annum
and is payable in cash, semi-annually in arrears, which commenced on September
1, 1998. The effective interest rate of the Senior Subordinated Notes is 8.9% on
an annual basis.
NOTE 6 - INVESTMENTS:
JOINT VENTURE WITH NBC. The Company owns a 20% interest in a Joint
Venture with NBC (see Note 2) and accounts for its interest using the equity
method, as the Company does not have a controlling interest. The following
presents the summarized financial information of the Joint Venture (in
thousands):
20
<PAGE> 23
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Six months ended
June 30, 1999
-------------
Net revenues ................................... $68,458
Operating income ............................... 21,431
Net loss ....................................... (10,366)
As of As of
June 30, 1999 December 31, 1998
------------- -----------------
Current assets ........................... $ 20,471 $ 2,507
Non-current assets ....................... 247,039 249,441
Current liabilities ...................... 16,310 550
Non-current liabilities .................. 815,500 815,500
NOTE 7 - INCOME TAXES:
The provision for (benefit from) income taxes differs from the amount
computed by applying the federal statutory income tax rate of 35% to income
(loss) before income taxes due to the effects of state income taxes and certain
expenses not deductible for tax purposes, primarily the amortization of
goodwill. The current and deferred income taxes of the Company are calculated by
applying Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" to the Company as if it were a separate taxpayer.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
CHANGES IN FCC OWNERSHIP RULES. On August 5, 1999, the Federal
Communications Commission ("FCC") adopted changes in its broadcast ownership
rules. The FCC relaxed its so-called television "duopoly" rule, which barred any
entity from owning more than one television station in a local market. Under the
new rules, one entity may own two stations in the same market provided 1) one of
the two stations is not among the top four in audience share and 2) that
post-merger there will be at least eight independently owned and operated
commercial and noncommercial stations in that market. The FCC will also permit
combinations where one of the stations has failed, is failing or unbuilt or
where extraordinary public interest factors are present.
The FCC also declared that LMAs such as those that LIN has entered into
will now be attributable ownership interests for purposes of the duopoly rule.
However, the FCC grandfathered all LMAs entered into prior to November 1996,
which includes all of LIN's LMAs, for a minimum of five years, at which time the
FCC will determine whether and how long to permit these combinations to
continue. And, in the interim, the FCC will permit LMA parties to apply for
common ownership under the standards outlined above.
The FCC also provided television licensees greater latitude to acquire
stations in adjacent markets by dispensing with its prohibition on
adjacent-market station combinations where the stations had overlapping signal
contours and substituting the requirement that the stations be in different
Nielsen viewing markets.
The FCC relaxed its so-called "one-to-a-market" rule, which restricts
the cross-ownership of television and radio stations in the same market. One
entity may now own up to two television stations (if permitted under the duopoly
rule) and six radio stations in the same market provided that after the
combination there remain 20 independent media voices (which also includes
21
<PAGE> 24
LIN TELEVISION CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
newspapers and cable systems) in that market. The number of radio stations
cannot exceed four in markets where there are fewer than 20 but more than 9
independent voices.
Finally, the FCC made various changes in its rules governing the
circumstances under which ownership of a broadcast property is attributed to an
individual or entity, relaxing them in some respects and stiffening them in
others.
The Company is in the process of analyzing the impact of these changes
on its operations.
LITIGATION. On September 4, 1997, the Company announced that it had
learned of four lawsuits regarding the then proposed acquisition of LIN
Television. The Company and all of its then present directors are defendants in
all of the lawsuits. AT&T is a defendant in three of the lawsuits, and an AT&T
affiliate and Hicks Muse are defendants in one of the lawsuits. Each of the
lawsuits was filed by a purported shareholder of the Company seeking to
represent a putative class of all the Company's public stockholders. Three of
the four lawsuits were filed in the Delaware Court of Chancery, while the fourth
lawsuit was filed in the New York Supreme Court.
While the allegations of the complaints are not identical, all of the
lawsuits basically assert that the terms of the original merger agreement were
not in the best interests of the Company's public Stockholders. All of the
complaints allege breach of fiduciary duty in approving the merger agreement.
Two of the complaints also allege breach of fiduciary duty in connection with
the sale of the television station WOOD-TV by AT&T to LIN Television and the
amendment to a Private Market Value Guarantee Agreement that was entered into
simultaneously with the first merger agreement. The complaints seek the
preliminary and permanent enjoinment of the merger or alternatively seek damages
in an unspecified amount. The complaints have not been amended to reflect the
terms of the merger itself.
The plaintiffs in each of the actions have agreed to an indefinite
extension of time for each of the defendants served to respond to the respective
complaints. No discovery has taken place.
In addition, the Company currently and from time to time is involved in
litigation incidental to the conduct of its business. In the opinion of the
Company's management, none of such litigation as of June 30, 1999, is likely to
have a material adverse effect on the Company's financial position, results of
operations or cash flows.
22
<PAGE> 25
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Forward-Looking Statements
Certain statements in this Section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect the
future financial position and operating results of LIN Holdings Corp. ("LIN
Holdings") and its subsidiaries, including LIN Television Corporation ("LIN
Television"), together, the "Company". When used in this report, the words
"believes," "anticipated," "intends," and similar expressions are intended to
identify forward-looking statements. There are a number of risks, uncertainties
and factors that could cause the Company's actual results to differ materially
from those forecasted or projected in such forwarding-looking statements. These
factors include, without limitation changes in advertising, demand,
technological changes, regulatory changes, acquisitions and dispositions, as
well as other risks detailed in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date hereof. The Company
undertakes no obligation to update publicly forward-looking statements, whether
as a result of new information, future events or otherwise.
Business
The Company is a television station group operator in the United States
that owns and operates eight network-affiliated television stations.
Additionally, the Company has local marketing agreements ("LMAs") under which it
provides programming for four other stations in the markets in which it
operates.
Recent Developments
LIN MERGER TERMINATION. On July 7, 1998, AMFM Inc. ("AMFM"), formerly
Chancellor Media Corporation, entered into a merger agreement (the "AMFM Merger
Agreement") with Ranger Equity Holdings Corporation ("Ranger"), a parent
company, to acquire Ranger in a stock for stock transaction (the "AMFM Merger").
On March 14, 1999, the Boards of Directors of AMFM and Ranger agreed to
terminate the AMFM Merger Agreement. Additionally, AMFM's Board of Directors
approved the assignment of the agreements to acquire Petry Media Corporation, a
leading television representation firm, and Pegasus Broadcasting of San Juan,
L.L.C., a television broadcasting company that owns a television station in
Puerto Rico, to the Company. Subsequently, the AMFM agreement with Petry has
expired. The assignment of the agreement relating to the purchase of Pegasus
Broadcasting by the Company is subject to negotiation of definitive
documentation, third-party approval and various other conditions, including
governmental approvals, and, accordingly, there can be no assurance that the
Company will complete such a transaction.
KXTX-TV. On June 3, 1999, LIN Texas transferred all of the assets of
KXTX-TV to Southwest Sports Group Holdings LLC, Inc. ("SSG Holdings" or "SSG"),
a Texas limited liability company and an entity in which a partner of Hicks Muse
has a substantial economic interest. In exchange, LIN Texas received 500,000
units of SSG's Series A Preferred Units, par value $100.00 per unit ("SSG
Preferred Units"). The Company has assigned a value of $47.0 million to the SSG
Preferred Units. The SSG Preferred Units are entitled to receive non-liquidating
distributions prior to any junior ranked units of SSG Holdings in an amount
equal to $100 per Preferred Unit, minus the amount of previously made
distributions, plus an amount of interest thereon at a rate of 6% per annum
compounded annually beginning January 1, 1999. As of June 30, 1999, the total
interest owed to the Company was $1.5 million.
23
<PAGE> 26
LIN Texas has the right, upon the earlier of (i) the third anniversary
of the issuance of the SSG Preferred Units and (ii) an initial public offering
of SSG Common Units, to convert its shares of SSG Preferred Units into shares of
SSG Common Units at a conversion rate equal to the par value per share of the
SSG Preferred Units (plus accrued and unpaid interest thereon) divided by the
fair market value per share of the SSG Common Units. SSG has the right, at its
sole option, to redeem the SSG Preferred Units at par value (plus accrued and
unpaid interest thereon) at any time.
WOOD AND WOTV. On June 30, 1999, the Company acquired from AT&T
Corporation ("AT&T") the assets of WOOD-TV and the LMA rights related to WOTV-TV
(collectively, the "Grand Rapids Stations"), both of which stations are located
in the Grand Rapids-Kalamazoo-Battle Creek market (the "Grand Rapids
Acquisition"). The Company had provided management services to the Grand Rapids
Stations pursuant to a consulting agreement with AT&T. The total purchase price
for the Grand Rapids Acquisition was approximately $142.4 million, including
direct costs of the acquisition. The Grand Rapids Acquisition was funded by the
combination of operating funds and $93.0 million of additional Tranche A Term
Loans.
The acquisition was accounted for as a purchase and accordingly, the purchase
price, including direct costs of the acquisition, has been allocated to the
assets acquired and liabilities assumed based on their fair values at the date
of the acquisition. These fair values are subject to adjustment when additional
information concerning asset and liability valuations is finalized. The excess
of the purchase price over the fair value of the net tangible assets acquired
has been allocated to intangible assets, primarily FCC licenses and network
affiliations. The results of operations associated with the acquired business
will be included in the consolidated results of the Company from the acquisition
date. The Grand Rapids Acquisition is summarized as follows (in thousands):
Assets acquired and liabilities assumed
Working capital, including cash of $22,400 ........................... $ 15,442
Property and equipment ............................................... 18,422
Other noncurrent assets .............................................. 1,033
Intangible assets .................................................... 108,096
Other noncurrent liabilities ......................................... (609)
--------
Total acquisition .................................................... 142,384
NETWORK AFFILIATION COMPENSATION. On July 15, 1999, the Company entered
into an amendment to its existing network agreement with American Broadcasting
Company ("ABC"). This amendment calls for the Company to make payments to ABC
for the rights to broadcast National Football League ("NFL") games. In exchange,
the Company will receive eight additional prime time program spots per week. The
Company has three stations affiliated with ABC - WAND in Decatur, Illinois, WTNH
in New Haven, Connecticut, and WOTV, an LMA station in Battle Creek, Michigan.
On April 6, 1999, Fox Broadcasting Company ("Fox") informed the Company
of the network's plan to reduce the inventory of the commercial time in Fox
prime time programming allocated to its affiliates by approximately 22% or to
allow the affiliates to buy-back that inventory plus additional network
inventory. The Company has only one station affiliated with Fox -- WVBT, an LMA
station in Norfolk, Virginia. WVBT-TV has elected to buy the commercial time
from Fox.
24
<PAGE> 27
Results of Operations
Set forth below are the significant factors that contributed to the
operating results of the Company for the three- and six-month periods ended June
30, 1999 and 1998. The Company's results from operations from period to period
are not directly comparable because of the impact of the acquisition of LIN
Television by Hicks Muse, and the associated contribution of KXAS-TV to a joint
venture with NBC. Unaudited Pro forma comparisons have been included where
appropriate.
The following table summarizes the impact of the pro forma adjustments
related to the acquisition of LIN Television. These adjustments include
additional depreciation and amortization of intangibles related to the purchase
price allocations, and the contribution of KXAS-TV to a joint venture with NBC,
excluding the stations operating results from January 1, 1998 through March 2,
1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED | SIX MONTHS ENDED
----------------------------- | ---------------------------------------------------------------
| Pro Forma Pro Forma
June 30, 1999 June 30, 1998 | June 30, 1999 June 30, 1998 Adjustments June 30, 1998
(unaudited) (unaudited) | (unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- | ------------ ----------- ----------- -----------
<S> <C> <C> | <C> <C> <C> <C>
Net Revenues $56,629 $61,777 | $101,239 $121,792 $(13,253) $108,539
|
Operating costs and expenses: |
Direct operating 14,535 17,000 | 26,639 31,847 (2,246) 29,601
Selling, general and administrative 11,684 14,068 | 24,150 30,065 (2,750) 27,315
Corporate 1,965 2,296 | 3,913 3,924 -- 3,924
KXTX Management Fee (365) -- | 1,178 -- -- --
Amortization of program rights 3,285 3,041 | 6,630 6,799 (345) 6,454
Depreciation and amortization 13,787 13,631 | 28,002 22,686 4,542 27,228
------- ------- | ------- -------- -------- --------
Total operating costs and expenses 44,891 50,036 | 90,512 95,321 (799) 94,522
------- ------- | ------- -------- -------- --------
Operating income (loss) $11,738 $11,741 | $10,727 $ 26,471 $(12,454) $ 14,017
------- ------- | ------- -------- -------- --------
</TABLE>
Net revenues consist primarily of national and local time sales, net of
sales adjustments and agency commissions, network compensation, barter revenues
and revenues from the production of local commercials and sports programming.
Total net revenues for the three- and six-month periods ended June 30, 1999
decreased approximately 8.3% to $56.6 million and 6.7% to $101.2 million,
respectively, compared to net revenue of $61.8 million and pro forma net revenue
of $108.6 million for the same periods last year. The decrease is primarily due
to the overall television industry slow-down in the second quarter of 1999,
driven in part by a reduction in political revenue. In addition, the six-month
period has been impacted by the first quarter loss of advertising revenue
associated with the Winter Olympics that aired on the Company's CBS stations in
1998 and the University of Connecticut men's basketball games that aired on the
Company's New Haven station in 1998.
Direct operating expenses, consisting primarily of news, engineering,
programming and music licensing costs, decreased 14.5% to $14.5 million and
10.0% to $26.6 million for the three- and six-month periods ending June 30,
1999. Operating expenses for the same periods last year were $17.0 million and
pro forma operating expenses of $29.6 million, respectively. The decrease is
primarily the result of the Company's consistent focus on cost control resulting
in lower news aviation costs and lower compensation costs resulting from hiring
delays in certain open full-time positions.
Selling, general and administrative expenses decreased approximately
16.9% to $11.7 million and 11.6% to $24.2 million for the three- and six-month
periods ended June 30, 1999, compared to selling, general and administrative
expenses of $14.1 million and pro forma
25
<PAGE> 28
expenses of $27.3 million for the same periods last year. The decrease primarily
resulted from lower sales commission costs associated with the advertising
revenue decrease, as well as selling expense savings associated with certain
renegotiated contracts. In addition, the Company has incurred lower property
taxes as a result of revised assessments in several states.
Corporate expenses, representing costs associated with the centralized
management of LIN Television's stations, decreased 14.4% to $2.0 million for the
three-month period ended June 30, 1999 compared to $2.3 million for the same
period last year, and remained flat at $3.9 million for the six-month period
ended June 30, 1999.
Amortization of program rights, representing costs associated with the
acquisition of syndicated programming, features and specials increased 8.0% to
$3.3 million and 2.7% to $6.6 million for the three- and six-month periods ended
June 30, 1999, compared to amortization of program rights of $3.0 million and
pro forma amortization of $6.5 million for the same periods last year.
Depreciation and amortization of intangible assets increased 1.1% to
$13.8 million and 2.8% to $28.0 million for the three- and six-month periods
ended June 30, 1999, compared to depreciation and amortization of intangible
assets of $13.6 million and pro forma depreciation and amortization of $27.2
million for the same period last year.
For the reasons discussed above, the Company's operating income
remained flat at $11.7 million for the three month period ended June 30, 1999
compared to the same period last year and decreased by $3.3 million to $10.7
million for the six month period ended June 30, 1999, compared to pro forma
operating income of $14.0 million for the same period last year.
Interest expense decreased $.2 million to $16.2 million and increased
$7.6 million to $32.1 million for the three- and six-month periods ended June
30, 1999, compared to expenses of $16.4 million and expenses of $24.5 million
for the same periods last year. The increase for the six-month period was the
result of the new borrowings under the Senior Credit Facilities and the issuance
of the Senior Subordinated Notes in connection with the Merger. During the first
half of 1998, LIN Television incurred financial and legal advisory fees and
regulatory filing fees in connection with the Merger. During the same period,
LIN Television expensed approximately $8.6 million that is reflected on the
Predecessor's Consolidated Statement of Operations as merger expense.
The Company's provision for income taxes increased $1.2 million to $.8
million and decreased $5.3 million to a benefit of $2.2 million for the three-
and six-month periods ended June 30, 1999 compared to the benefit of $.4 million
and provision of $3.1 million for the same periods last year. The decrease was
due to an increase in the Company's net loss offset by nondeductible
amortization expense.
Liquidity and Capital Resources
Net cash provided by operating activities for the six months ended June
30, 1999 totaled $10.6 million compared to net cash provided by operating
activities of $32.5 million for the same period last year. The decrease in cash
provided by operating activities of $21.4 million was primarily due to amounts
paid for interest and the contribution of KXAS-TV to a joint venture with NBC.
Net cash used in investing activities was $116.7 million for the six months
ended June 30, 1999, compared to $1,728.0 million for the same period last year.
The decrease in cash used is primarily due to the acquisition of LIN Television
in March 1998. Net cash provided by financing activities for the six months
ended June 30, 1999 was a $77.8 million compared to cash provided by financing
activities of $1,733.3 million for the same period last year. The decrease is
primarily due to the issuance of the Senior Subordinated Notes, the issuance of
the Senior Discount Notes, the issuance of the Credit Facility, the proceeds
from the GECC Note, and the
26
<PAGE> 29
equity contribution by Hicks Muse in connection with the Acquisition, partially
offset by the principal payment of $260.0 million to refinance LIN's existing
indebtedness.
Capital expenditures for the six months ended June 30, 1999 were $10.2
million compared to $3.9 million for the same period last year. Over the last
three years, the Company has invested approximately $18 million to prepare its
towers and transmitter buildings for the transition to digital television. The
Company expects to spend approximately $23.0 million annually on capital
expenditures in 1999 and in 2000. The Company anticipates that it will be able
to meet its capital expenditure requirements with internally generated funds and
borrowings under the Senior Credit Facilities.
Based on the current level of operations and anticipated future growth
(both internally generated as well as through acquisitions), the Company
believes that its cash flows from operations, together with borrowings under the
Senior Credit Facilities, will be sufficient to meet its anticipated
requirements for working capital, capital expenditures, interest payments and
scheduled principal payments.
Year 2000 Issue
Some of Company's older computer programs were written using two digits
rather than four digits to define the applicable year. As a result, those
computer programs have time-sensitive software that recognizes a date using "00"
as the year 1900 rather than the year 2000. This could cause system failures or
miscalculations in the next millennium, causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company recognizes the importance of the Year 2000 issue and has
taken a proactive approach intended to facilitate an appropriate transition into
the Year 2000. The Company has implemented a project team utilizing both
internal and external resources to implement its Year 2000 initiative, which has
involved upgrading affected computer systems, software and equipment with
embedded chips, and preparing contingency and disaster recovery plans.
A Company-wide assessment of systems and operations has identified
information technology and non-information technology systems (including
equipment with embedded chips) that do not properly recognize dates after
December 31, 1999. The project team has implemented a plan of remediation and
testing to, sufficiently in advance of the Year 2000, assure that the systems of
the Company that are critical to the Company's operations will properly
recognize dates after December 31, 1999. Areas of concern that are being
addressed include possible service interruptions in satellite feeds providing
news, weather and syndicated shows for broadcast; potential failure of equipment
with embedded chips including master clocks, studio equipment, master control
automation systems and transmission equipment, and telephone, security and
environmental control systems.
The Company has and will continue to incur capital expenditures and
internal staff costs related to this initiative. The Company estimates the total
potential remediation costs to be approximately $3.0 million, and that
approximately $2.8 million has been incurred to date.
The Company has developed, in the ordinary course of business, a
contingency plan to address system failures that are critical to conduct its
business. Such plans include the increase in personnel needed to operate the
systems that would ordinarily be operated by computer. The Company believes that
its contingency plans would adequately address any potential Year 2000 related
system failures. The Company estimates that if current planned software upgrades
with certain non-information technology systems are not implemented prior to
January 1, 2000, the cost to the Company would be as much as $500,000 per year.
27
<PAGE> 30
The Company has initiated a formal communication program with its
significant vendors to determine the extent to which the Company is vulnerable
to those third parties who fail to remediate their own Year 2000 non-compliance.
Based on the information currently available, the Company is not aware of any
likely third party Year 2000 non-compliance by the Company or its vendors or
customers that will materially affect the Company's business operations.
However, the Company does not control the systems of other companies, and cannot
assure that such systems will be timely converted and, if not converted, would
not have an adverse effect on the Company's business operations. Furthermore, no
assurance can be given at this time that any or all of the Company's systems are
or will be Year 2000 compliant, or that the ultimate costs required to address
the Year 2000 issue or the impact of any failure to achieve substantial Year
2000 compliance by the Company, its vendors or customers will not have a
material adverse effect on the Company's financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
principally with respect to its credit facility, which is priced based on
certain interest rate alternatives. (See note 5 of the notes to the condensed
consolidated financial statements.) The company does not believe that its
interest rate risks are material to its operations.
28
<PAGE> 31
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, LIN Television Corporation ("LIN Television")
was named as a defendant in four lawsuits regarding the then proposed merger of
LIN Television with LIN Holdings Corp. The plaintiffs in each of these actions
have agreed to an indefinite extension of time for each of the defendants served
to respond to the respective complaints. No discovery has taken place.
In addition, LIN Television currently and from time to time is involved
in litigation incidental to the conduct of its business. In the opinion of LIN
Television's management, none of such litigation is likely to have a material
adverse effect on LIN Television's financial condition, results of operations or
cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
10.28 Amended and Restated Asset Contribution Agreement
dated as of June 2, 1999 by and among LIN Television
of Texas, L.P., Southwest Sports Group Holdings LLC,
and Southwest Sports Television, Inc.
27.1 Financial Data Schedule for LIN Holdings Corp. for
six months ending June 30, 1999
27.2 Financial Data Schedule for LIN Television
Corporation for six months ending June 30, 1999
REPORTS ON FORM 8-K:
None.
29
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrants have duly caused this report to be signed on each of their
respective behalf by the undersigned thereunto duly authorized.
LIN HOLDINGS CORP. LIN TELEVISION CORPORATION
(Registrant) (Registrant)
DATED: /s/ Peter E. Maloney
--------------------------
Peter E. Maloney
Vice President of Finance
30
<PAGE> 1
EXHIBIT 10.28
AMENDED AND RESTATED ASSET CONTRIBUTION AGREEMENT
BY AND AMONG
LIN TELEVISION OF TEXAS, L.P.,
SOUTHWEST SPORTS GROUP HOLDINGS LLC,
AND
SOUTHWEST SPORTS TELEVISION, INC.
<PAGE> 2
This Amended and Restated Asset Contribution Agreement (the
"Agreement"), made as of this 2nd day of June, 1999, is by and among LIN
Television of Texas, L.P., a Delaware limited partnership ("LIN-Texas"),
Southwest Sports Group Holdings LLC, a Texas limited liability company
("Holdings"), and Southwest Sports Television, Inc., a Delaware corporation
("SSTI").
R E C I T A L S:
A. LIN-Texas, Southwest Sports Group, Inc., a Delaware corporation
("SSG"), and SSTI, entered into an Asset Purchase Agreement on August 27, 1998,
and a First Amendment to Asset Purchase Agreement on March 31, 1999 (as amended,
the "Prior Agreement").
B. Effective as of the date hereof, SSG assigned its rights and
obligations under the Prior Agreement to Holdings, and Holdings assumed all of
the rights and obligations of SSG under the Prior Agreement.
C. LIN-Texas owns certain assets in Station KXTX of Texas, UHF Channel
39, Dallas, Texas (the "Station"), including shares of common stock in KXTX of
Texas, Inc., a Delaware corporation ("KXTX-Texas"), the current FCC licensee of
the Station, and performs certain business and operations with respect to the
Station.
D. Pursuant to the terms and subject to the conditions hereof,
LIN-Texas desires to contribute, assign, transfer and convey to Holdings all of
the assets of LIN-Texas with respect to the Station in exchange for its
membership interest in Holdings, and Holdings desires to receive, accept and
acquire from LIN-Texas all such assets in exchange for such membership interest.
E. Holdings contemplates that Holdings will combine, among other
things, the ownership of the Station with the Dallas Stars Hockey League
franchise and the Texas Rangers Major League Baseball franchise, as more fully
described in EXHIBIT F.
F. LIN-Texas, Holdings and SSTI desire to amend and restate the Prior
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, the parties to this Agreement, intending
to be bound legally, hereby agree as follows:
<PAGE> 3
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS DEFINED IN THIS SECTION. The terms set forth on
Attachment A hereto, as used in this Agreement, have the meanings set forth in
Attachment A.
1.2 RULES OF CONSTRUCTION. Whenever the context requires, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". All references to "party" and "parties" shall be
deemed references to parties to this Agreement unless the context shall
otherwise require. Except as specifically otherwise provided in this Agreement,
a reference to a Section, Schedule or Exhibit is a reference to a Section of
this Agreement or a Schedule or Exhibit hereto, and the terms "hereof,"
"herein," and other like terms refer to this Agreement as a whole, including the
Schedules and Exhibits to this Agreement. The terms "or" is used in its
inclusive sense ("and/or"). The descriptive headings in this Agreement are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 2. CONTRIBUTION OF ASSETS
2.1 CONTRIBUTION. Subject to the terms and conditions set forth in this
Agreement, LIN-Texas hereby agrees to transfer, convey, assign and deliver to
Holdings on the Closing Date, and Holdings agrees to acquire, all of LIN-Texas's
right, title and interest in the tangible and intangible assets used or useful
in connection with the Station's Business, together with any additions thereto
between the date of this Agreement and the Closing Date, but excluding the
Excluded Assets and any assets disposed of between the Agreement Date and the
Closing Date in accordance with the provisions of this Agreement (such assets
being conveyed being collectively referred to herein as the "Assets"), free and
clear of any Lien, except for Permitted Liens, including the following:
(a) the Tangible Personal Property;
(b) the Real Property;
(c) the Licenses;
(d) the Assumed Contracts;
(e) the Intangibles;
(f) all amounts payable to the Station, if any, from the United
States Copyright Office or such arbitral panels as may be appointed by the
United States Copyright Office that relate to the period prior to the Effective
Time and that have not been paid to LIN-Texas as of the Effective Time;
<PAGE> 4
(g) all of LIN-Texas's proprietary information, technical
information and data, maps, computer discs and tapes, plans, diagrams,
blueprints and schematics directly relating to the Station's Business;
(h) all books and records of LIN-Texas relating solely to the
business or operations of the Station, including executed copies of the Assumed
Contracts and account books of original entry;
(i) all deposits and prepaid expenses of LIN-Texas with respect to
items that are prorated in Section 2.5 below (except as such relate to excluded
assets);
(j) equipment warranties to the extent transferable by LIN-Texas;
(k) the KXTX Shares;
(l) Accounts Receivable; and
(m) any and all of LIN-Texas's right, title, and interest in and to
the assets of LIN-Texas used by LIN-Texas in connection with the development and
production of television programming.
2.2 EXCLUDED ASSETS. The Assets shall not include the following (the
"Excluded Assets"):
(a) cash, cash equivalents and cash items of any kind whatsoever,
certificates of deposit, money market instruments, bank balances, and rights in
and to bank accounts, Treasury bills and marketable securities and other
securities of LIN-Texas;
(b) contracts of insurance and insurance plans and the assets
thereof, promissory notes, amounts due from employees, bonds, letters of credit,
or other similar items, and any cash surrender value in regard thereto;
(c) tangible personal property disposed of or consumed in the
ordinary course of the business of LIN-Texas, and in compliance with this
Agreement, between the Agreement Date and the Closing Date;
(d) claims of LIN-Texas with respect to transactions and events
occurring prior to the Closing Date and all claims for refunds of monies paid to
any governmental agency and all claims for copyright royalties for broadcast
prior to the Closing Date;
(e) Contracts that are not Assumed Contracts, including those listed
on SCHEDULE 2.2(e) (the "Excluded Contracts");
(f) LIN-Texas's partnership records and other books and records that
pertain to internal partnership matters of LIN-Texas and LIN-Texas's account
books of original entry with respect to the Station and all original accounts,
checks, payment
<PAGE> 5
records, Tax records and other similar books, records and information of
LIN-Texas relating to LIN-Texas's operation of the Station's Business and any
other Assets prior to Closing;
(g) any of LIN-Texas's proprietary information, technical
information and data, maps, computer discs and tapes, relating generally to the
business and operation of television stations owned (other than the Station) or
operated by LIN-Texas or any Affiliate thereof; and
(h) any other assets of LIN-Texas not related to the conduct and
operation of the Station's Business, including LIN-Texas's membership interest
in Station Venture Holdings LLC or the assets used or useful in connection with
the operation of KXAN.
2.3 ESCROW AGREEMENT.
(a) Pursuant to the terms of the Escrow Agreement entered into
concurrently with the execution of the Prior Agreement, SSTI delivered the
Escrow Deposit to the Escrow Agent to be held by the Escrow Agent to secure
Holdings's timely performance and fulfillment of its obligations under this
Agreement.
(b) At the Closing, Holdings and LIN-Texas shall cause Escrow Agent
to pay the Escrow Amount over to SSTI
(c) In the event of a termination of this Agreement, the Escrow
Amount shall be paid in accordance with Section 9.2 hereof.
2.4 PURCHASE PRICE. In consideration for the contribution of the Assets
pursuant to the terms and subject to the conditions hereof, Holdings shall issue
and deliver to LIN-Texas the Membership Interests, free and clear of all Liens,
and shall pay to LIN-Texas, by wire transfer of immediately available funds an
amount equal to the total aggregate amount paid or payable by LIN-Texas under
the KXTX Option during the period commencing on the date hereof and ending on
the Closing Date.
2.5 PRORATIONS AND ADJUSTMENTS. (a) All revenues and all expenses
arising from LIN-Texas's Assets and operations with respect to the Station,
including tower rental, 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, including program license
payments, sales and service charges, Taxes (except for Taxes arising from the
transfer of the Assets under this Agreement), employee compensation, including
wages, salaries, commissions, music license fees and similar prepaid and
deferred items, shall be prorated between Holdings and LIN-Texas in accordance
with generally accepted accounting principles and to effect the principle that
LIN-Texas shall receive all revenues and shall be responsible for all expenses,
costs and liabilities allocable to LIN-Texas's operations with respect to the
Station for the period prior to the Effective Time,
<PAGE> 6
and Holdings shall receive all revenues and shall be responsible for all
expenses, costs and obligations allocable to such operations for the period
after the Effective Time.
(b) In the event LIN-Texas elects, in its sole discretion, to
terminate as of the Closing Date the employment of any Employees of LIN-Texas,
other than Transferred Employees, in connection with the transactions
contemplated under the Agreement, Holdings shall pay LIN-Texas, as part of the
Closing Adjustment, an amount equal to the total aggregate amount paid and
payable by LIN-Texas as severance or other termination payments (including
accrued and unpaid vacation pay) in accordance with LIN-Texas's existing company
policies on the date hereof to such Employees whose employment is so terminated.
(c) Notwithstanding anything else in this Section 2.5 to the
contrary, any prorations and adjustments pursuant to section 2.5(a) or (b) shall
be subject to the following:
(i) There shall be no adjustment for, and LIN-Texas shall remain
solely liable with respect to, any Excluded Contracts and any other obligation
or liability not being assumed by Holdings in accordance with Section 2.7.
(ii) No adjustment or proration between Holdings and LIN-Texas
shall be made in favor of LIN-Texas or Holdings for the amount, if any, by which
the value of the goods or services to be received by the LIN-Texas under its
trade or barter agreements as of the Closing Date exceeds, or is less than, the
value of any advertising time remaining to be run in connection with the
programming provided by LIN-Texas to the Station as of the Closing Date.
(iii) There shall be no adjustment or proration between Holdings
and LIN-Texas for program barter. There shall be no adjustment or proration
between Holdings and LIN-Texas for payments due under the film or programming
license agreements except as expressly specified in this Section 2.5(c)(iii).
Except as set forth herein for the month in which the Effective Time occurs,
LIN-Texas shall be responsible for filing and paying all film or programming
license fees due and payable as of the Effective Time, and Holdings shall be
responsible for filing and paying all such fees after the Effective Time;
provided that for the month in which the Effective Time occurs, such obligations
for such month shall be allocated on a pro-rata basis based on the day of the
month immediately prior to the Effective Time. Deposits for film and programming
agreements shall be fully credited to the LIN-Texas; provided, however, that on
the Closing Date, such credit will be reduced on a pro-rated basis based on the
length of the term that the film or program was available to be aired on the
Station prior to the Effective Time and the total length of the term that the
film or program is available to air on the Station.
(iv) There shall be no adjustment or proration for sick and
personal days, severance pay or earned vacation time accrued on or prior to the
Closing Date by any Transferred Employee, all of which shall be assumed by
Holdings.
<PAGE> 7
(v) Notwithstanding anything to the contrary contained in this
Section 2.5, there shall be no adjustment or proration as between LIN-Texas and
Holdings to the extent that any such revenues or expenses which have been, or
will be, otherwise accounted for at the Effective Time and reflected in the
Management Fee (as defined in the Sub-Programming Agreement) payable to SSTI
under the Sub-Programming Agreement.
2.6 ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing Date,
Holdings shall assume and undertake to pay, discharge and perform (a) any
obligation or liability of LIN-Texas under the Assumed Contracts to the extent
that the obligations and liabilities relate to the period after the Effective
Time; (b) any liability or obligation to any former employee of LIN-Texas who
has been hired by Holdings, attributable to any period of time on or after the
Closing Date; (c) any liability or obligation arising out of any litigation,
proceeding or claim by any person or entity relating to LIN-Texas's business or
operations with respect to the Station or any of the Assets in connection with
any events or circumstances that occur or arise on or after the Closing Date;
(d) any severance or other liability arising out of the termination of any
employee's employment with or by Holdings on or after the Closing Date; (e) any
duty, obligation or liability relating to any pension, 401(k) or other similar
plan, agreement or arrangement provided by Holdings to any employee or former
employee of LIN-Texas on or after the Closing Date; and (f) all state and local
sales or use Taxes (or their equivalent) and transfer taxes or recording fees
payable as a consequence of the sale of the Assets hereunder (all of the
foregoing, together with other liabilities or obligations expressly assumed by
Holdings hereunder, are referred to herein collectively as the "Assumed
Liabilities"). Holdings shall not be required to assume any of the following:
(A) any obligations or liabilities under any Excluded Contract, (B) any
liability or obligation arising out of any litigation, proceeding or claim by
any Person relating to LIN-Texas's business or operations with respect to the
Station or any of the Assets in connection with any events or circumstances that
occur or exist prior to the Closing Date, and (C) any credit agreements, note
purchase agreements, indentures, or other financing arrangements (other than any
Assumed Contracts) of LIN-Texas. Holdings shall perform all obligations arising
out of the Assets (including the Assumed Contracts and the Licenses) on or after
the Closing Date. LIN-Texas shall retain all liabilities of LIN-Texas not
assumed by Holdings (the "Retained Liabilities").
2.7 NONASSIGNABLE CONTRACTS.
(a) NONASSIGNABILITY. To the extent that any Assumed Contract to be
assigned pursuant hereto is not capable of being assigned without the consent,
approval or waiver of a third person or entity, nothing in this Agreement will
constitute an assignment or require the assignment thereof except to the extent
provided in this Section 2.7.
(b) LIN-TEXAS TO USE COMMERCIALLY REASONABLE EFFORTS.
Notwithstanding anything contained in this Agreement to the contrary, LIN-Texas
will not be obligated to assign to Holdings any of its rights and obligations in
and to any of the Assumed Contracts without first having obtained all consents,
approvals and waivers
<PAGE> 8
necessary for such assignment; provided, however, that LIN-Texas shall use
commercially reasonable efforts to obtain all such consents, approvals and
waivers prior to and, if the Closing occurs, after the Closing.
(c) IF WAIVERS OR CONSENTS CANNOT BE OBTAINED. To the extent that
the consents, approvals and waivers referred to above are not obtained by
LIN-Texas, LIN-Texas shall use commercially reasonable efforts to provide to
Holdings the financial and business benefits of any Assumed Contract and
enforce, at the request and expense of Holdings, for the account of Holdings,
any rights of LIN-Texas arising from any such Assumed Contract (including
without limitation the right to elect to terminate such Assumed Contract in
accordance with the terms thereof upon the advice of Holdings).
SECTION 3. REPRESENTATIONS AND WARRANTIES OF LIN-TEXAS
To induce Holdings to purchase the Assets from LIN-Texas, LIN-Texas
represents and warrants to Holdings as follows:
3.1 ORGANIZATION AND AUTHORITY OF LIN-TEXAS. LIN-Texas is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of Delaware and qualified to conduct business as a foreign limited
partnership in the State of Texas. LIN-Texas has the requisite partnership power
and authority to own and operate the Assets owned and operated by it, to carry
on the Station's Business as now being conducted by it, and to execute, deliver
and perform this Agreement and the documents contemplated hereby according to
their respective terms.
3.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and the documents contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, by LIN-Texas
have been duly and validly authorized by all necessary partnership action on the
part of LIN-Texas and all necessary corporate action by the corporate general
partner of LIN-Texas. This Agreement has been duly executed and delivered by
LIN-Texas and constitutes its legal, valid and binding obligation, 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; CONSENTS.
(a) The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by LIN-Texas, will not
require any consent, approval, authorization or other action by, or filing with
or notification to, any Person or Governmental Authority, except as follows: (i)
filings required under the HSR Act, (ii) filings with respect to real estate,
sales and other transfer Taxes, and (iii) certain of the Assumed Contracts may
be assigned only with the consent of third parties, as specified in SCHEDULE
3.3.
<PAGE> 9
(b) Subject to obtaining the Consents, the execution, delivery and
performance by LIN-Texas of this Agreement and the documents contemplated hereby
(with or without the giving of notice, the lapse of time, or both): (i) do not
require the consent of any third party; (ii) do not conflict with any provision
of the Certificate or Agreement of Limited Partnership of LIN-Texas; (iii) do
not conflict in any material respect with, result in a material breach of, or
constitute a material default under, any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any Governmental
Authority applicable to LIN-Texas or any material contract or agreement to which
LIN-Texas is a party or by which LIN-Texas may be bound; and (iv) other than
Permitted Liens, will not create any Lien upon any of the Assets.
3.4 GOVERNMENTAL LICENSES.
(a) SCHEDULE 3.4 identifies, as of the date of this Agreement, all
main station, translator, microwave, low power television and transmitting earth
station licenses (collectively, "Material Licenses") for which LIN-Texas is
licensee and the date on which each expires. Each Material License is in full
force and effect, and the LIN-Texas is the authorized legal holder thereof.
Except as set forth on SCHEDULE 3.4, the conduct of the Station's Business is in
accordance with the Material Licenses in all material respects.
(b) To LIN-Texas's knowledge, SCHEDULE 3.4 also sets forth a true
and complete list as of the date of this Agreement of certain FCC Licenses used
in the operation of the Station as to which KXTX-Texas is the authorized legal
holder thereof, and any material pending applications filed with the FCC by
KXTX-Texas relating to the Station. The FCC Licenses listed on SCHEDULE 3.4
constitute all of the licenses and authorizations required under the
Communications Act or the current rules, regulations, and policies of the FCC
for, and/or used in, the business and operation of the Station as currently
operated, except as noted on SCHEDULE 3.4. Except as set forth on SCHEDULE 3.14,
and except for investigations or other proceedings affecting the broadcasting
industry generally, as of the date of this Agreement, LIN-Texas has no knowledge
of any pending or threatened investigation by or before the FCC, or any order to
show cause, notice of violation, notice of apparent liability, notice of
forfeiture or complaint by, before or with the FCC with respect to the Station
that would be reasonably expected to (i) impair or hinder the ability of
LIN-Texas to perform its obligations under this Agreement or (ii) affect the
business or operations of the Station in any material adverse respect, nor does
LIN-Texas have knowledge that any of the foregoing is threatened.
3.5 REAL PROPERTY.
(a) SCHEDULE 3.5 contains an accurate description as of the date of
this Agreement of all Real Property. Except as described on SCHEDULE 3.5,
LIN-Texas has good and marketable fee simple title to all fee estates included
in the Real Property and good title to LIN-Texas's interests in all other Real
Property, in each case free and clear of all Liens, except for Permitted Liens.
LIN-Texas has a valid leasehold interest in all leasehold Real Property listed
as leased by LIN-Texas in SCHEDULE 3.5. SCHEDULE 3.5 lists all leases and
subleases pursuant to which any of the leasehold Real Property included in
<PAGE> 10
the Assets is leased by LIN-Texas. Subject to obtaining the Consents, such
leases are assignable to Holdings. LIN-Texas is in compliance in all material
respects with all of the material provisions of such leases and subleases and is
not in default thereunder in any material respect, and to the knowledge of
LIN-Texas, no other party to any such lease or sublease is in default thereunder
in any material respect. There are no existing options or contracts to sell or
assign any of the LIN-Texas's interest in the owned Real Property or LIN-Texas's
interest in the leased Real Property, and there are no rights of first refusal
outstanding with respect to the owned Real Property or LIN-Texas's interest in
the leased Real Property.
(b) As of the Agreement Date, to LIN-Texas's knowledge, there are
(i) no actual, pending or threatened impositions or assessments for public
improvements with respect to any owned Real Property or leased Real Property for
which LIN-Texas would be liable or which would be a Lien on the owned Real
Property or leased Real Property, other than Permitted Liens, (ii) no
improvements constructed or planned that would be paid for by means of public
assessments upon any owned Real Property or leased Real Property for which
LIN-Texas would be liable or which would be a Lien on the owned Real Property or
leased Real Property, and (iii) no completed, pending or, to LIN-Texas's
knowledge, threatened or contemplated condemnation proceeding affecting any
owned Real Property or leased Real Property or any part thereof or of any sale
or any disposition of any owned Real Property or any leased Real Property or any
portion thereof in lieu of condemnation.
(c) To LIN-Texas's knowledge, all buildings, towers and other
improvements owned by LIN-Texas included within the Assets are in working order
for the purposes for which they are currently used by LIN-Texas (ordinary wear
and tear excepted).
(d) Each owned Real Property and each leased Real Property is
accessible by a public right of way or is otherwise reasonably accessible for
purposes of conducting the use of such Real Property as presently conducted. The
current use by LIN-Texas of the owned Real Property is in compliance with
applicable zoning and land-use laws, including the applicable local
comprehensive plan, except for noncompliance that would not have a material
adverse effect on the Station's Business.
3.6 TANGIBLE PERSONAL PROPERTY. SCHEDULE 3.6 lists all material items
of Tangible Personal Property included in the Assets owned by LIN-Texas. Except
as described in SCHEDULE 3.6, LIN-Texas owns and has good title to the Tangible
Personal Property listed thereon and none of the Tangible Personal Property
included in the Assets is subject to any Liens, except for Permitted Liens. The
material tangible Assets owned by LIN-Texas necessary for the normal operations
of the Station as conducted at present are in good operating condition and
adequate repair (given the age of such property and the use to which such
property is put, and ordinary wear and tear excepted).
3.7 ASSUMED CONTRACTS. SCHEDULES 3.5, 3.7 and 3.13 include a complete
list of all Assumed Contracts except (a) contracts with advertisers for
production or the sale of advertising time on the Station for cash that may be
canceled by LIN-Texas on not
<PAGE> 11
more than ninety (90) days' notice, (b) oral employment contracts terminable at
will, (c) miscellaneous service contracts terminable on not more than thirty
(30) days' notice, and (d) other Contracts entered into in the ordinary course
of business, not involving liabilities exceeding $10,000 per contract. Except as
disclosed in SCHEDULE 3.7, LIN-Texas has delivered or made available to Holdings
true and complete copies of all written Assumed Contracts and accurate
descriptions of all oral Assumed Contracts listed on SCHEDULES 3.5, 3.7 and
3.13. LIN-Texas is not in default under any Assumed Contract or the KXTX Option
in any material respect and, to the knowledge of LIN-Texas, no other party to
any such Assumed Contract is in default thereunder in any material respect.
3.8 INTANGIBLE. SCHEDULE 3.8 is a complete list of all material
Intangibles (exclusive of Licenses listed in SCHEDULE 3.4). LIN-Texas has
provided or made available to Holdings copies of all documents establishing or
evidencing the Intangibles listed on SCHEDULE 3.8. Other than with respect to
matters generally affecting the television broadcasting industry and not
particular to LIN-Texas, and except as set forth on SCHEDULE 3.8, LIN-Texas has
not received any notice or demand alleging that LIN-Texas or KXTX-Texas is
infringing upon any trademarks, trade names, service marks, service names,
copyrights or similar intellectual property rights owned by any other Person.
3.9 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.9 are true and
complete copies of the unaudited financial statements of LIN-Texas with respect
to its operations at the Station as at May 31, 1998, and an unaudited balance
sheet and statement of income with respect to its operations at the Station as
at and for the twelve (12)-month period then ended (collectively, the "Financial
Statements"). Except as set forth on SCHEDULE 3.9, the Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied, and present fairly in all material respects the financial
condition of LIN-Texas with respect to the Station as at their respective dates
and the results of operations for the periods then ended.
3.10 TAXES AND TAX RETURnS. Except as set forth on SCHEDULE 3.10 and
except where the failure to file, pay or accrue any Taxes does not result in a
Lien on the Assets or in the imposition of transferee or other liability on
Holdings for the payment of Taxes, (a) all Tax Returns have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed and (b) all Taxes shown on such Tax Returns have been
properly accrued or paid to the extent such Taxes have become due. There are no
Liens on any of the Assets in connection with any failure (or alleged failure)
to pay any Tax related to the Station's Business.
3.11 INSURANCE. SCHEDULE 3.11 is a true and complete list of all
insurance policies of LIN-Texas with respect to the Station. All policies of
insurance listed in SCHEDULE 3.11 are in full force and effect as of the date of
this Agreement.
3.12 REPORTS. All material returns, reports and statements that the
LIN-Texas is currently required to file with any federal, state or local
government authorities have been filed.
<PAGE> 12
3.13 PERSONNEL. Except (a) for oral employment contracts terminable at
will or (b) those described in SCHEDULE 3.13 attached hereto, LIN-Texas has no
written or oral contract of employment with any employee of the LIN-Texas
employed in connection with the Station's Business (collectively, the
"Employees"). Except as disclosed on SCHEDULE 3.13, LIN-Texas is not a party to
or subject to any collective bargaining agreements with respect to the Station,
and no labor union or other collective bargaining unit represents or, to
LIN-Texas's knowledge, claims to represent any of the employees of the Station.
LIN-Texas has made available to Holdings copies of all employee handbooks and
employee rules and regulations, if any. Except as described on SCHEDULE 3.13,
LIN-Texas maintains no Employee Plans for the benefit of its Employees.
3.14 CLAIMS AND LEGAL ACTIONS. Except as disclosed on SCHEDULE 3.14 and
for any FCC rulemaking proceedings generally affecting the television
broadcasting industry and not particular to LIN-Texas, as of the date hereof,
there is no claim, legal action, counterclaim, suit, arbitration, or other
legal, administrative, or tax proceeding, nor any order, decree, or judgment, in
progress or pending, or to the knowledge of LIN-Texas threatened, against
LIN-Texas, the Assets, or the Station's Business which would be reasonably
expected, in any material, adverse respect, to (a) impair or hinder the ability
of LIN-Texas to perform its obligation under this Agreement or (b) affect the
Station's Business.
3.15 COMPLIANCE WITH LAWS. LIN-Texas is in compliance in all material
respects with the Licenses and all federal, state and local laws, rules,
regulations and ordinances applicable or relating to LIN-Texas's operations with
respect to the Station, except for any noncompliance by LIN-Texas that would not
have a material adverse effect on the Station's business.
3.16 CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as set forth on
SCHEDULE 3.16, from May 31, 1998, through the date of this Agreement,
LIN-Texas's operations with respect to the Station have been in the ordinary
course and LIN-Texas has not (a) made any material increase in compensation
payable or to become payable to any of the Employees of LIN-Texas other than in
the ordinary course of business or any material change in personnel policies,
insurance benefits or other compensation arrangements affecting the Employees of
LIN-Texas, (b) made any sale, assignment, lease or other transfer of any of
LIN-Texas's properties other than obsolete assets no longer usable in the
operation of the Station or other assets sold or disposed of in the normal
course of business with suitable replacements being obtained therefor, (c)
incurred material loss of, or material injury to, any of the Assets or waived
any rights of substantial value, (d) mortgaged, pledged or subjected to any Lien
any of its Assets, other than Permitted Liens, (e) made any material change in
any method of accounting or accounting practice, (f) incurred any liability
except in the ordinary course of business or as expressly permitted elsewhere in
this Agreement, (g) entered into any transaction other than in the ordinary
course of business, (h) conducted the business of the Station in any manner
inconsistent in any material respect with its past practices, (i) given any
promise, assurance or guaranty of the payment, discharge or fulfillment of any
obligation of any other Person, or (j) transferred to any Affiliate of LIN-Texas
any right, property or interest which is necessary or useful in the operation of
the Station's Business.
<PAGE> 13
3.17 ENVIRONMENTAL MATTER.
(a) LIN-Texas has supplied to Holdings a copy of the report for each
environmental inspection or audit, if any, that LIN-Texas has caused to be
conducted with respect to any of the Assets as listed on SCHEDULE 3.17.
(b) (i) Except as disclosed on SCHEDULE 3.17, to LIN-Texas's
knowledge, no Hazardous Substances are located on or under the Real Property
affecting any natural resources therein the remediation of which is required
under any Applicable Environmental Law.
(ii) Except as set forth in SCHEDULE 3.17, there are, to
LIN-Texas's knowledge, no underground storage tanks on the Real Property, and
any removal by LIN-Texas of any underground storage tanks which existed on the
Real Property was pursuant to and in compliance with the Applicable
Environmental Laws, except for any noncompliance that would not have a material
adverse effect on the Station's Business.
(iii) Except as set forth on SCHEDULE 3.17, to LIN-Texas's
knowledge the improvements owned or used by LIN-Texas on the Real Property do
not contain any asbestos that would constitute a violation of, or noncompliance
with, any Applicable Environmental Law except for any violation or noncompliance
that would not have a material adverse effect on the Station's Business. To
LIN-Texas's knowledge, the equipment owned or used by LIN-Texas on the Real
Property does not contain any polychlorinated biphenyls that would constitute a
violation of or noncompliance with any Applicable Environmental Law, except for
any violation or noncompliance that would not have a material adverse effect on
the Station's Business.
(iv) Except as set forth on SCHEDULE 3.17, there are no
agreements, consent orders, decrees, judgments, license or permit conditions, or
other directives of Governmental Authorities directed to LIN-Texas that are
based on or arise out of Applicable Environmental Laws and relate to the future
use of the Assets or the Station's Business or that require any material change
in the present condition of the Assets or the Station's Business.
(v) To LIN-Texas's knowledge, LIN-Texas has given to pertinent
Governmental Authorities all notices required pursuant to Applicable
Environmental Laws in connection with the Station's Business. Except as listed
on SCHEDULE 3.17, LIN-Texas has not prior to the date hereof received any order
or notice of violation or noncompliance from, or been the subject of any
regulatory audit or investigation (other than any periodic investigation or
inspection of a routine nature) by, any Governmental Authority in connection
with LIN-Texas's operations with respect to the Station.
(vi) To LIN-Texas's knowledge, no consent or approval is needed
from any Governmental Authority under any Applicable Environmental Laws for the
transfer of the Assets from LIN-Texas to Holdings. To LIN-Texas's knowledge,
<PAGE> 14
neither the execution of this Agreement nor the closing of the transactions
contemplated hereby will violate any Applicable Environmental Laws in any
material respect.
3.18 BROKERS. Except for the fees payable to MEDIA VENTURE PARTNERS,
which fees shall be paid by LIN-Texas, neither LIN-Texas nor any person or
entity acting on its behalf has incurred any liability for any finders' or
brokers' fees or commissions in connection with the transactions contemplated by
this Agreement.
3.19 TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE
3.19, LIN-Texas is not a party, directly or indirectly, to any contract, lease,
arrangement or transaction which is material to the Station's Business, whether
for the purchase, lease or sale of property, for the rendition of services or
otherwise, with any Affiliate of LIN-Texas, or any officer, director, employee,
proprietor, partner or shareholder of LIN-Texas and no such Person has any
interest in or right to any of the Assets.
3.20 ASSETS. Except for the Excluded Assets, the Assets include all of
the assets or property necessary for the lawful conduct of the Station's
Business as performed at present by the LIN-Texas.
3.21 OWNERSHIP OF ASSETS. As of the Closing Date, LIN-Texas will own or
lease all assets or their replacements used in or for the operation of the
Station in the manner operated by LIN-Texas on the date hereof.
3.22 FOREIGN PERSON. LIN-Texas is not a "foreign person" or a "foreign
corporation" as such terms are defined in Section 1445 of the Code.
3.23 SECURITIES LAW MATTERS. LIN-Texas is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act of 1933,
as amended (the "Securities Act"). LIN-Texas is acquiring the Membership
Interests for its own account for investment, and not with a view to any
distribution, resale, subdivision, or fractionalization thereof in violation of
the Securities Act or any other applicable securities law, and LIN-Texas does
not have any present plans to enter into any contract, undertaking, agreement,
or arrangement for any such distribution, resale, subdivision, of
fractionalization.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Prior to the Closing, Holdings, its subsidiaries, and certain of their
Affiliates intend (subject to the receipt of all requisite third party consents)
to effect the transactions and restructurings described on EXHIBIT F hereto (the
"Additional Transactions"). Except where expressly stated to be as of the date
hereof, the following representations and warranties shall apply to the
currently existing assets, rights, liabilities and other interests of Holdings
and its subsidiaries, as well as to the assets, rights, liabilities and other
interests to be obtained by Holdings and its subsidiaries pursuant to the
Additional Transactions. Without limiting the generality of the foregoing,
except where the context may otherwise require, for the purposes of this Section
4 the term "subsidiaries" shall
<PAGE> 15
include each corporation, partnership, joint venture or other entity which will
be a subsidiary of Holdings immediately after giving effect to the Additional
Transactions.
Subject to the foregoing, to induce LIN-Texas to sell the Assets to
Holdings, Holdings represents and warrants to LIN-Texas as follows:
4.1 ORGANIZATION, STANDING AND AUTHORITY. Holdings is a Texas limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Texas and, on the Closing Date, will be duly qualified
to conduct business in each jurisdiction in which such qualification is
necessary for Holdings to own the Assets and perform LIN-Texas's operations with
respect to the Station. Holdings has the requisite power and authority to (a)
execute, deliver and perform this Agreement and the documents contemplated
hereby according to their respective terms and (b) own the Assets.
4.2 COMPANY DOCUMENTS. The Articles of Organization and the Limited
Liability Company Regulations of Holdings as currently in effect are in the form
previously provided to LIN-Texas.
4.3 CAPITALIZATION.
(a) Upon consummation of the transactions contemplated by this
Agreement and the Additional Transactions, the authorized units of beneficial
interest of Holdings shall consist of 300,000,000 units designated Class A Units
("Class A Units"), of which 48,939,538 units will be issued and outstanding,
175,000,000 units designated Class B Units ("Class B Units"), of which
152,731,428 units will be issued and outstanding, and 10,000,000 Preferred Units
("Preferred Units"), of which 1,000,000 units will have been designated Series A
Preferred Units, none of which are issued and outstanding and 500,000 of which
have been reserved for issuance pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Units are as stated in the
LLC Regulations attached hereto as EXHIBIT D. Upon consummation of the
Additional Transactions, the Company will have issued and outstanding warrants
to purchase, in the aggregate, 2,149,639 Class A Units.
(b) Each unit of beneficial interest of Holdings outstanding on the
date hereof is, and each unit of beneficial interest of Holdings which will be
outstanding immediately following consummation of the transactions contemplated
by this Agreement and the Additional Transactions will be, duly authorized and
validly issued and free of any preemptive rights and, to Holdings's knowledge,
was not, and will not be, issued in violation of any federal or state securities
laws. Except as set forth on SCHEDULE 4.3 and except as set forth in paragraph
(a) above or as contemplated by this Agreement or the Additional Transactions as
of the date hereof there are no, and immediately following consummation of the
transactions contemplated by this Agreement and the Additional Transactions
there will be no, outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
obligating Holdings to issue any additional units of beneficial interest or any
other
<PAGE> 16
securities convertible into, exchangeable for or evidencing the right to
subscribe for any units of beneficial interest of Holdings.
(c) Except as provided in the LLC Regulations and the Members
Agreement there are no agreements among the members of Holdings with respect to
the voting or transfer of the units of beneficial interest of Holdings.
4.4 VALID ISSUANCE OF MEMBERSHIP INTERESTS.
(a) The Membership Interests, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, (i)
will be duly authorized and validly issued, (ii) except as set forth in the
Members Agreement, will be free from any Liens and (iii) will be issued (and
will have been offered) in compliance with all applicable federal and state
securities laws. The Class A Units have been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the LLC Regulations,
(i) will be duly authorized and validly issued, (ii) except as set forth in the
Members Agreement will be free of any Liens and (iii) will be issued in
compliance with all applicable federal and state securities laws as presently in
effect. Upon consummation of the transactions contemplated hereby, LIN-Texas
will be duly admitted as a member of Holdings and will have all of the rights as
a member under the Texas Limited Liability Company Act, as amended, and the LLC
Regulations.
(b) The outstanding Class A Units and Class B Units are all duly
authorized and validly issued, and were issued in compliance with all applicable
federal and state securities laws.
4.5 SUBSIDIARIES OF HOLDINGS FOLLOWING THE ADDITIONAL TRANSACTIONS.
SCHEDULE 4.5(a) sets forth on the date on which the Additional Transactions
shall have been consummated, (i) the name of each subsidiary of Holdings and
(ii) the capitalization of the foregoing and the percentage of equity or other
ownership interests therein to be held by Holdings or by any of its
subsidiaries.
4.6 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery and
performance of this Agreement and the documents contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, by Holdings
have been duly and validly authorized by all necessary action on the part of
Holdings. This Agreement has been duly executed and delivered by Holdings and
constitutes a legal, valid and binding obligation of Holdings, enforceable
against Holdings 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.
4.7 ABSENCE OF CONFLICTING AGREEMENTS AND REQUIRED CONSENTS. Except for
applicable requirements of the HSR Act and subject to the receipt of the MLB and
NHL Approvals (as defined in Section 6.6 hereof) the execution, delivery and
performance by Holdings of this Agreement and the documents contemplated hereby
(with or without the giving of notice, the lapse of time, or both): (a) do not
require the consent of any third
<PAGE> 17
party; (b) will not conflict with the Articles of Organization of Holdings or
the LLC Regulations, or other applicable organizational and governing documents
of Holdings or any subsidiary of Holdings; (c) will not conflict in any material
respect with, result in a material breach of, or constitute a material default
under, any applicable law, judgment, order, ordinance, injunction, decree, rule,
regulation, or ruling of any Governmental Authority applicable to Holdings or
any subsidiary of Holdings or any material contract or agreement to which
Holdings or any subsidiary of Holdings is a party or by which Holdings or any
subsidiary of Holdings may be bound.
4.8 HOLDINGS QUALIFICATIONS. Holdings is legally, financially and
otherwise qualified to acquire, own and operate LIN-Texas's Assets with respect
to the Station under all applicable federal, state, and local laws, rules and
regulations, including the Communications Act, and the rules, regulations and
policies of the FCC.
4.9 LITIGATION.
(a) Except as set forth in SCHEDULE 4.9, there is no action, suit or
proceeding or investigation pending, or, to Holdings's knowledge, threatened
against Holdings or any of its subsidiaries, at law or in equity, in any court
or before or by any Governmental Authority that could have a material adverse
effect on the business, assets or properties of Holdings and its subsidiaries
taken as a whole.
(b) Neither Holdings or any of its subsidiaries is subject to any
judgment, order or decree entered in any lawsuit or proceeding.
4.10 TITLE TO PROPERTIES. Holdings and each of its subsidiaries has
good and marketable title to all of its respective properties and assets owned
by it, free and clear of all Liens, except for Permitted Liens and Liens set
forth on SCHEDULE 4.10 hereto. Holdings and its subsidiaries enjoys peaceful and
undisturbed possession under all leases and subleases necessary in any material
respect for the operation of its respective properties and businesses.
4.11 INTELLECTUAL PROPERTY. All patents, trademarks, service marks,
trade names, licenses, franchises or other rights used by Holdings and each of
its subsidiaries in the conduct of their business and operations (the "Holdings
Intellectual Property") are either owned by Holdings or such subsidiary or
licensed by Holdings or such subsidiary from a third party pursuant to a valid
and enforceable written agreement, and such Holdings Intellectual Property is
free and clear of all Liens except Permitted Liens and Liens set forth on
SCHEDULE 4.11. There are no pending, or to the knowledge of Holdings, threatened
material actions affecting the Holdings Intellectual Property except as set
forth on SCHEDULE 4.9. Except as set forth on SCHEDULE 4.11, to the knowledge of
Holdings, there are no conflicts with or infringements of any Holdings
Intellectual Property by any third party and, to the knowledge of Holdings, none
of the Holdings Intellectual Property conflicts with or infringes upon any
proprietary right of any third party.
<PAGE> 18
4.12 MATERIAL AGREEMENTS.
(a) Except as described on SCHEDULE 4.12 (such items listed therein
referred to herein as "Holdings Contracts") and except for contracts which can
be cancelled on 90 days or less notice without penalty, neither Holdings nor any
of its subsidiaries is a party to any:
(i) contract for the future purchase or sale of, or payment for,
supplies or products, or for the performance of services involving in any one
case more than $125,000 in value;
(ii) contract under which Holdings or any of its subsidiaries is
either lessor or lessee of real property or contract under which Holdings or any
of its subsidiaries is either lessor or lessee of personal property providing
for annual payments of $125,000 or more;
(iii) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(iv) contract for any capital expenditure or leasehold
improvement involving more than $125,000 in value;
(v) contract limiting or restraining Holdings, any of its
subsidiaries or any successor thereto from engaging or competing in any manner
or in any business;
(vi) advertising, distribution, dealer, representative or sales
agency contract involving more than $125,000 in value;
(vii) any contract granting to any person a power of attorney
with respect to Holdings, its subsidiaries or their respective business;
(viii) excluding contracts with players, employment, consulting,
severance, or other similar contract with any present or former employee,
director, agent, consultant, or similar representative providing for annual
payments in excess of $100,000, excluding commissions;
(ix) contract relating to or involving the barter or exchange of
goods, services, equipment, or other assets involving more than $125,000 in
value;
(x) collective bargaining agreement with any labor union.
(xi) contract relating to cleanup, abatement or other
environmental actions;
<PAGE> 19
(xii) contract (other than employment and related contracts
required to be disclosed pursuant to clause (viii) above) with any officer or
director of Holdings or any of its subsidiaries, or contract with any Affiliate
of Holdings;
(xiii) contract which relates in whole or in part to any
Holdings Intellectual Property involving more than $125,000 in value;
(xiv) licensing, rights, sponsorship or other similar contract
involving more than $125,000 in value; or
(xv) material contract not made in the ordinary course of
business.
(b) No party to any Holdings Contract has given Holdings written
notice of or made a claim with respect to any breach or default under any such
Holdings Contract the consequences of which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or prospects of
Holdings and its subsidiaries taken as a whole. Each of the Holdings Contracts
is valid, binding and enforceable, to the best of Holdings's knowledge, against
the other parties thereto, in accordance with its terms, and is in full force
and effect. Holdings and its subsidiaries and, to the best of Holdings's
knowledge, each of the other parties thereto, has performed all material
obligations required to be performed by it to date under, and is not in default
in respect of, any of the Holdings Contracts and, to the best of Holdings's
knowledge, no event exists which, with notice or lapse of time, or both, would
constitute such a default, other than where failure to perform such obligations
or such default would not reasonably be expected to have a material adverse
effect on the business, condition (financial or other), assets, properties,
operations or prospects of Holdings and its subsidiaries taken as a whole.
4.13 COMPLIANCE WITH LAWS.
(a) Holdings and each of its subsidiaries is in compliance in all
material respects with all federal, state and local laws, rules, regulations and
ordinances applicable or relating to the conduct and operation of Holdings's and
each of its subsidiaries' business, except for any noncompliance by Holdings and
its subsidiaries that would not have a material adverse effect on Holdings and
its subsidiaries taken as a whole.
(b) With respect to the operation of its business, Holdings and each
of its subsidiaries possesses and is in compliance with all permits,
certificates, licenses, approvals, registrations and authorizations required
under all applicable laws, rules and regulations, all of which are in full force
and effect, and the business has been conducted and is now being conducted in
compliance with all applicable laws, rules, regulations, judgments and orders of
the United States, its states, counties municipalities and agencies and any
other jurisdiction, including laws, rules and regulations relating to pollution
and environmental control, equal employment opportunity, health and safety,
insurance and zoning, except for such noncompliance which, individually or in
the aggregate would not
<PAGE> 20
reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or prospects of
Holdings and its subsidiaries taken as a whole.
4.14 TAXES. Holdings and each of its subsidiaries has filed all Tax
Returns with the appropriate Governmental Authority in all jurisdictions in
which such Tax Returns are required to be filed, and all Taxes shown on such Tax
Returns have been properly accrued or paid to the extent such Taxes have become
due.
4.15 EMPLOYEE BENEFIT PLANS.
(a) No "employee benefit plans," as defined by Section 3(3) of
ERISA, or other bonus or other incentive compensation, stock option, stock
purchase, stock appreciation, deferred compensation, salary continuation,
severance, disability, section 125 cafeteria, company car, club membership or
education assistance plan, policy or arrangement to which Holdings or any of its
subsidiaries has any obligation or liability, contingent or otherwise (the
"Holdings Employee Plans") constitutes a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
(b) Each Holdings Employee Plan intended to qualify under Section
401 of the Code does so qualify, and any trust maintained pursuant thereto is
exempt from federal income taxation under Section 501 of the Code. For each of
the last six years, each Holdings Employee Plan and Holdings and its
subsidiaries have complied with applicable laws, and Holdings and its
subsidiaries do not have any liability (contingent or otherwise) on account of a
nonexempt "prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code.
(c) All contributions required by law or by the terms of any
Holdings Employee Plan to have been made under such Holdings Employee Plan by
Holdings or any of its subsidiaries have been timely made (without regard to any
waivers granted under Section 412 of the Code). Holdings has no knowledge
whether all contributions required by law or by the terms of any Holdings
Employee Plan have been timely made by any other party.
(d) None of the Holdings Employee Plans subject to Title IV of ERISA
has been terminated or within the preceding twelve months had a reportable event
(as defined in Section 4403 of ERISA and for which the 30-day notice requirement
has not been waived by the regulations thereunder) occur.
4.16 LABOR AGREEMENTS AND ACTIONS.
(a) None of Holdings or any of its subsidiaries is a party to or
bound by any collective bargaining or other labor agreement except as set forth
on SCHEDULE 4.16.
(b) Except as disclosed on Schedule 4.16, none of Holdings or any of
its subsidiaries has agreed to recognize any union or other collective
bargaining unit, nor
<PAGE> 21
has any union or other collective bargaining unit been certified as representing
any of their employees.
(c) Holdings and each of its subsidiaries, (i) is and has been in
Compliance for the past five years with all applicable laws regarding employment
and employment practices, including without limitation, laws relating to terms
and conditions of employment, wages and hours, occupational safety and health
and workers' compensation and is not engaged in any unfair labor practices,
except where the failure to so comply could not reasonably be expected to have a
material adverse effect with respect to Holdings, (ii) has no unfair labor
practice charges or complaints pending or threatened against it before the
National Labor Relations Board, (iii) has no grievances pending or threatened
against it, and (iv) has no charges pending before the Equal Employment
Opportunity Commission of any state or local agency responsible for the
prevention of unlawful employment practices.
4.17 NOT AN INVESTMENT COMPANY. Holdings is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.18 SOLVENCY. As of and at the Closing, upon consummation of the
transactions contemplated by this Agreement, Holdings:
(a) is and will be able to pay its debts as they become due;
(b) owns and will own property whose fair saleable value is greater
than the amount required to pay its debts (including a reasonable estimate of
the amounts of all contingent liabilities);
(c) has and will have adequate capital to carry on its business;
(d) is making no transfer of property and is incurring no
obligations in connection with the transactions contemplated by this Agreement
with the intent to hinder, delay or defraud any of the present or future
creditors of Holdings.
SECTION 5. OPERATIONS OF THE STATION PRIOR TO CLOSING
5.1 GENERALLY.
(A) During the period commencing on the Agreement Date and ending on
the earlier of the Closing Date or the termination of this Agreement, LIN-Texas
shall operate the Station's Business in all material respects in the ordinary
course of business (except where such conduct would conflict with the following
covenants or with LIN-Texas's other obligations under this Agreement). LIN-Texas
shall maintain and repair facilities and equipment related to LIN-Texas's
operations with respect to the Station, maintain its present inventory of
supplies, parts and other materials and keep books of account, records, and
files, in each case in the ordinary course of business consistent with past
practice to the extent commercially reasonable. LIN-Texas shall continue its
operations at the Station in accordance with applicable licenses in all material
respects
<PAGE> 22
and in compliance in all material respects with all applicable laws, rules and
regulations. Holdings and LIN-Texas agree that any and all actions taken by or
on behalf of LIN-Texas (including any failure to act) under the Sub-Programming
Agreement shall be deemed to satisfy in full LIN-Texas's obligations under this
Section 5.1(a).
(b) Prior to the Closing Date, except as otherwise permitted by any
provision of this Section or except to the extent such activities are within the
control of SSTI pursuant to the Sub-Programming Agreement, LIN-Texas shall not,
without the prior written consent of Holdings, which shall not be unreasonably
withheld:
(i) except in the ordinary course of business, (A) enter into,
renew, renegotiate, modify or amend any time sales contracts or production
contracts except for those that may be canceled on not more than ninety (90)
days' notice with respect to the Station or (B) incur any receivables;
(ii) except with respect to the implementation of digital
broadcasting, make any material change in the Station's buildings, leasehold
improvements, or fixtures that is not in the ordinary course of business, except
when such change is necessary to maintain or continue the transmission of the
Station's signal at substantially the same power and strength and interference
level as transmitted on the date hereof;
(iii) except for contracts that LIN-Texas is willing to
designate (and Holdings is willing to agree to designate) as Excluded Contracts
or otherwise in the ordinary course of business, enter into, renew, amend or
modify any contract, lease, license or other agreement unless any such document
(A) requires the payment by or on behalf of the Station of consideration
consisting of no more than Ten Thousand Dollars ($10,000) annually or (B) will
be subject to termination on ninety (90)-days notice or (C) will be fully
performed and satisfied on or prior to the first anniversary of its execution;
(iv) assign, lease, or otherwise transfer or dispose of any of
the Assets, except where no longer used in the Station's Business or in
connection with the acquisition of replacement property of equivalent kind and
use;
(v) collect the accounts receivable in a manner inconsistent
with past practices; or
(vi) except as required by law or existing contract, in which
case such agreements and contracts shall be assumed by Holdings and treated as
Assumed Liabilities hereunder, (A) hire any employee except in the ordinary
course of business, (B) enter into, renew, amend or modify any contract of
employment, collective bargaining agreement or other labor contract except in
the ordinary course of business or (C) permit any increases in the compensation
of any of the employees of any Station except in the ordinary course of
business; provided, however, that LIN-Texas may pay bonuses to any of its
employees so long as such bonuses do not create binding obligations upon
Holdings after the Closing Date.
<PAGE> 23
(c) Whenever, pursuant to subsections (b)(i) through (vi) above,
LIN-Texas shall request the consent of Holdings, the request shall be sent in
writing via facsimile to Holdings in accordance with Section 11.3. Unless
Holdings gives or denies its written consent by the end of the second Business
Day after the request for consent is transmitted to Holdings, Holdings's written
consent will be presumed to have been given as of that deadline.
5.2 ENCUMBRANCES. LIN-Texas shall not create, assume or permit to exist
any Liens upon any of the Assets except for Permitted Liens and Liens that will
be discharged prior to or on the Closing Date.
5.3 ACCESS TO INFORMATION. LIN-Texas shall give Holdings and its
employees and other authorized representatives, during normal business hours and
with reasonable prior notice, access to the Assets and to all other books,
records, and documents of LIN-Texas relating to the Station for the purpose of
audit and inspection, and will furnish or cause to be furnished to Holdings or
its authorized representatives, upon reasonable notice, all information with
respect to the Station's Business that Holdings may reasonably request.
5.4 INSURANCE. LIN-Texas shall maintain the existing insurance policies
on the Assets or other policies providing substantially similar coverages until
the Closing Date.
5.5 FINANCIAL INFORMATION. LIN-Texas shall furnish Holdings within
thirty (30) days after the end of each month ending between the date of this
Agreement and the Closing Date an unaudited statement of income and expense for
such month and such other financial information prepared by LIN-Texas, as
Holdings may reasonably request.
5.6 UPDATED SCHEDULES. LIN-Texas shall promptly disclose in writing to
Holdings, and Holdings shall promptly disclose in writing to LIN-Texas, any
information contained in its respective representations and warranties or any of
the Schedules hereto which, because of an event occurring after the Agreement
Date, is incomplete or is no longer correct as of all times after the Agreement
Date and until the Closing Date. Any such disclosure shall be in the form of an
updated Schedule, marked to reflect the new or amended information. In the event
that LIN-Texas or Holdings makes any such disclosure prior to the Closing and
the Closing occurs, such disclosure shall be deemed to amend and supplement the
representations and warranties and the applicable Schedule hereto, and in such
event neither Holdings nor LIN-Texas, as the case may be, shall have the right
to be indemnified for any matter contained in such disclosure. Nothing contained
in this Section 5.6 shall be construed as changing any party's right to
terminate this Agreement as provided in Section 9. Notwithstanding the foregoing
or anything to the contrary contained herein, from the Agreement Date through
the Closing Date, Holdings and its subsidiaries (including, for the purposes
hereof, persons which will become subsidiaries immediately after giving effect
to the Additional Transactions) (i) shall be entitled to enter into (A)
contracts and agreements in the ordinary course of business consistent with past
practice and (B) all contracts ancillary to effecting the Additional
Transactions in a manner consistent with Exhibit hereto, in each case
<PAGE> 24
regardless of whether or not such contracts would otherwise be required to be
disclosed pursuant to Section 4.13 or any other representation or warranty of
Holdings contained in Section 4, (ii) shall notify LIN-Texas of such contracts
at any time prior to the Closing Date (but in any event no later than five
business days prior to the Closing Date) and (iii) provided such contract was
entered into in accordance with this sentence, such notice shall operate to cure
(for all purposes, including for the purposes of the indemnification provisions
hereof) any breach of the applicable representations and warranties made herein
or any schedule referred to herein or attached hereto that otherwise would have
been caused by the execution of such Contracts absent the application of this
sentence.
5.7 NOTICE OF CERTAIN MATTERS. LIN-Texas shall give prompt written
notice to Holdings and Holdings shall give prompt written notice to LIN-Texas,
of any failure of LIN-Texas or Holdings, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
5.8 NOTICE OF PROCEEDINGS. LIN-Texas and Holdings shall promptly notify
the other in writing upon becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of this
Agreement or the transactions contemplated hereunder, or upon receiving any
notice from any Governmental Authority of its intention to institute an
investigation into, or institute a suit or proceeding to restrain or enjoin the
consummation of this Agreement or the transactions contemplated hereby.
LIN-Texas and Holdings will each use commercially reasonable efforts to contest,
defend and resolve any such suit, proceeding or injunction brought against it so
as to permit the prompt consummation of the transactions contemplated hereby.
LIN-Texas shall notify Holdings promptly of any material action filed or
threatened against the Station or relating to the Station's Business or the
Assets.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 HSR ACT FILING. LIN-Texas and Holdings agree to (a) file, or cause
to be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade
Commission ("FTC") all filings, if any, that are required in connection with the
transactions contemplated hereby under the HSR Act within 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 that may be reasonably
required in connection with such filings; (d) promptly following the Filing of a
Notification and Report Form under the HSR Act, request an early termination of
the statutory filing period required to elapse after such filing; (e) promptly
file, after any request by the FTC or DOJ and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; (f) furnish each other with any correspondence from
or to, and notify each other of any other communications with, the FTC or DOJ
that relate to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ; and (g) subject to the immediately following sentence,
<PAGE> 25
enter into reasonable stipulations, consent orders, or other agreements
reasonably requested by the FTC or DOJ to ensure approval of the transaction.
Notwithstanding the foregoing to the contrary, neither Holdings nor LIN-Texas
shall be required hereunder to appeal any injunction, to divest any of its
assets or to take any other specific step which in its sole judgement would not
be in its best interest under the circumstances.
6.2 CONFIDENTIALITY.
(a) Each party will not use or disclose to third parties (except as
may be necessary for the consummation of the transactions contemplated hereby,
or as required by law, and then only with prior notice to the other party
hereto) this Agreement or any information received from the other party hereto
or their agents in the course of investigating, negotiating and performing the
transactions contemplated by this Agreement; provided, however, that each party
may disclose such information to such party's officers, directors, employees,
lenders, advisors, attorneys and accountants who need to know such information
in connection with the consummation of the transactions contemplated by this
Agreement and who are informed by such party of the confidential nature of such
information. Nothing shall be deemed to be confidential information that: (i) is
already in such party's possession, provided that such information is not known
by such party to be subject to another confidentiality agreement with or other
obligation of secrecy to the other party hereto or another party, or (ii)
becomes generally available to the public other than as a result of a disclosure
by such party or such party's officers, directors, employees, lenders, advisors,
attorneys or accountants, or (iii) becomes available to such party on a
nonconfidential basis from a source other than another party hereto or its
advisors, provided that such source is not known by such party to be bound by a
confidentiality agreement with or other obligation of secrecy to the other party
hereto or another party, or (iv) is developed independently by either party
without resort to the confidential information of the other party. In the event
this Agreement is terminated and the purchase and sale contemplated hereby
abandoned, each party will return to the other party all information, including
all documents, work papers and other written confidential material, obtained by
such party from the other party in connection with the transactions contemplated
by this Agreement. The covenant contained in this Section 6.4(a) shall survive
for a period of five (5) years from the earlier of the Closing Date or the date
in which this Agreement is terminated pursuant to Section 9.
(b) No party shall publish any press release or make any other
public announcement concerning this Agreement or the transactions contemplated
hereby without the prior written consent of the other party, which shall not be
withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to the other party, from
making any filings with governmental authorities that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
6.3 COOPERATION. Holdings and LIN-Texas 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
<PAGE> 26
Holdings and LIN-Texas shall execute such other documents as may be necessary or
desirable to obtain such Consents or to implement and consummate this Agreement,
and otherwise use their commercially reasonable efforts to consummate the
transactions contemplated hereby and to fulfill their obligations under this
Agreement. LIN-Texas and Holdings shall each diligently make, and cooperate with
the other in making, all commercially reasonable efforts to obtain or cause to
be obtained prior to the Closing Date (a) all Consents without any change in the
terms or conditions of any Assumed Contract or License that could reasonably be
expected to be materially less advantageous to Holdings than those pertaining
under the Assumed Contract or License as in effect on the date of this Agreement
and (b) estoppel certificates, in customary form reasonably satisfactory to
Holdings and LIN-Texas, relating to the Real Property leased to LIN-Texas.
Holdings agrees to use all commercially reasonable efforts to assist LIN-Texas
in obtaining such Consents and such estoppel certificates, and to take all
commercially reasonable actions necessary or desirable to obtain such Consents
and such estoppel certificates, including without limitation, executing such
assumption instruments and other documents as may be required in connection with
obtaining the Consents and the estoppel certificates. LIN-Texas will cooperate
with Holdings in Holdings's efforts to obtain title policies relating to the
Real Property.
6.4 MLB AND NHL APPROVAL.
(a) As promptly as practicable following the date hereof (but not in
any event prior to the initial public announcement of the execution of this
Agreement), Holdings and, if applicable, LIN-Texas, shall apply to Major League
Baseball ("MLB"), the National Association of Professional Leagues, Inc.
("National Association"), the Office of the Commissioner of Baseball, the
National Hockey League ("NHL") and to such other governing bodies as may be
necessary, for approval of the transactions contemplated by this Agreement
(including approval of LIN-Texas to own the Membership Interests in accordance
with and pursuant to the requirements of MLB, the Office of the Commissioner of
Baseball, the National Association, the NHL, the applicable provisions of the
Constitution of the American League and any other applicable governing documents
or policies of such governing bodies) (the "MLB and NHL Approvals"). LIN-Texas
recognizes that such approval is within the sole discretion of MLB, the National
Association and NHL. LIN-Texas shall fully cooperate with Holdings in all
reasonable respects in seeking the MLB and NHL Approvals and shall furnish to
Holdings all such information in its possession as may be necessary for the
completion of the filings, reports or notifications to be filed with such
governing bodies. Holdings shall fully cooperate with LIN-Texas and its
respective partners in all respects in seeking the MLB and NHL Approvals,
including but not limited to, the prompt filing of all documents and information
reasonably required of Holdings by MLB, the Office of the Commissioner of
Baseball, the National Association, and NHL in connection therewith. Without
limiting the generality of the foregoing, Holdings and LIN-Texas shall, and
LIN-Texas shall use its reasonable best efforts to cause its partners to, use
their respective reasonable best efforts to obtain the MLB and NHL Approvals.
All reasonable fees, costs and expense incurred by LIN-Texas in connection with
seeking and obtaining the MLB and NHL Approvals shall be paid by Holdings within
a reasonable time following LIN-Texas's request therefor.
<PAGE> 27
(b) Without limiting the generality of the foregoing, as promptly as
practicable following the date hereof, Holdings shall provide to LIN-Texas, and
LIN-Texas shall deliver to each of its partners, all necessary reports,
applications, questionnaires and other materials required to be submitted by
such partners in order to obtain the MLB and NHL Approvals (collectively, the
"MLB and NHL Approval Documentation"). LIN-Texas shall use its reasonable best
efforts to cause such partners to properly complete and return to Holdings, as
applicable, all such MLB and NHL Approval Documentation within the time period
specified therein, and Holdings shall as promptly as practicable thereafter
provide such MLB and NHL Approval Documentation to MLB, the Commissioner of
Baseball, the National Association, NHL and such other governing bodies included
therein. Each such partner shall be required to covenant, among other
requirements, that all information contained in documents or statements provided
by or on behalf of them to MLB, the Office of the Commissioner of Baseball, the
National Association or NHL shall be true, complete and correct in all material
respects and shall not contain any untrue or misleading information.
6.5 ACCESS TO BOOKS AND RECORDS. LIN-Texas shall provide Holdings
access and the right to copy for a period of seven (7) years from the Closing
Date any books and records relating to the Assets but not included in the
Assets. Holdings shall provide LIN-Texas access and the right to copy for a
period of seven (7) years after the Closing Date any books and records relating
to the Assets that are included in the Assets.
6.6 CURE. For all purposes under this Agreement, the existence or
occurrence of any event or circumstance that constitutes or causes a breach of a
representation or warranty of LIN-Texas (including under the information
disclosed in the Schedules hereto) on the date such representation or warranty
is made shall be deemed not to constitute a breach of such representation or
warranty if such event or circumstance is cured in all material respects on or
prior to the Closing Date.
6.7 ENVIRONMENTAL REPORTS.
(a) Holdings, at its election and cost, may obtain any Phase I
environmental report for, as determined by Holdings, each owned site and for
each tower, office and studio site included in the Real Property. To the extent
Holdings so elects, Holdings shall use commercially reasonable efforts to
obtain, and LIN-Texas shall cooperate with Holdings in obtaining, at Holdings's
expense, as soon as is reasonably practicable after the Agreement Date (which
Holdings shall use its commercially reasonable efforts to be within forty-five
(45) days) such Phase I environmental reports. If the Phase I environmental
report shows any potential environmental liability, Holdings shall use
reasonable efforts to obtain, and LIN-Texas shall and will cooperate with
Holdings in obtaining, at Holdings's expense, as soon as is reasonably
practicable after such potential environmental liability becomes known to
Holdings, a Phase II environmental report for each such parcel of Real Property
owned or leased by LIN-Texas with any potential environmental liability. The
Phase I and Phase II environmental reports are hereinafter referred to as the
"Assessments."
<PAGE> 28
(b) Copies of each Assessment shall be delivered to LIN-Texas by
Holdings promptly after receipt by Holdings. LIN-Texas and Holdings agree that
the results of any Assessment carried out pursuant to this Section shall not be
disclosed to any third party, unless such disclosure is required by law;
provided, however, that each party may disclose such information to such party's
officers, directors, employees, lenders, advisors, attorneys and accountants who
need to know such information in connection with the consummation of the
transactions contemplated by this Agreement and who are informed by such party
of the confidential nature of such information.
(c) If any Assessment reveals any reasonable potential of liability
under any Applicable Environmental Laws ("Environmental Noncompliance"),
Holdings shall be responsible for up to the first $50,000 of the costs of
remediation, and LIN-Texas shall be responsible for the costs of remediation in
excess of the first $50,000, but not to exceed a total of $50,000. If the cost
of such remediation exceeds $100,000 in the aggregate for all parcels subject to
this Section 6.7, then either Holdings or LIN-Texas may terminate this Agreement
as provided for in Sections 9.1 and 9.2; provided, however, notwithstanding the
foregoing, to the extent such remediation costs exceed $100,000 (i) LIN-Texas
may elect to pay such remediation costs in excess of $100,000 and shall make
arrangements reasonably satisfactory to Holdings to pay such excess costs, and
in such event Holdings may not terminate this Agreement as a result of such
remediation costs exceeding $100,000; or (ii) Holdings may elect to pay such
remediation costs in excess of $100,000 and in such event LIN-Texas may not
terminate this Agreement as a result of such environmental costs exceeding
$100,000. If the Closing is not consummated hereunder, neither party shall have
any obligation to remediate hereunder.
(d) If the cost of such remediation does not exceed $50,000, then
notwithstanding any provision of this Agreement to the contrary, Holdings shall
have no claim against LIN-Texas for the cost of such remediation.
6.8 EMPLOYEES. The parties hereto agree that they will cooperate and
use all commercially reasonable efforts to cause Employees of the LIN-Texas with
respect to the Station's Business to physically report to work on the Closing
Date or as soon thereafter as is practicable. Holdings shall offer employment as
of the Closing Date to each individual who is an Employee of the LIN-Texas with
respect to the Station's Business immediately prior to the Closing Date and
physically reports to work on the Closing Date or, if absent from work on the
Closing Date solely by reason of vacation or regularly scheduled non-working
days, on the day immediately following such vacation or days off. Each such
Employee shall be offered employment with Holdings in a position similar to his
or her position immediately prior to the Closing Date. Holdings shall also offer
employment to each individual who is an Employee of the LIN-Texas immediately
prior to the Closing Date but is absent from work on the Closing Date for any
reason other than vacation or regularly scheduled days off. Each such Employee
shall be offered employment with Holdings in a position similar to such
Employee's last position with the LIN-Texas as of the date such Employee
physically returns to work duty. Each Employee of the LIN-Texas who is actively
at work in connection with the Station's Business as of the Closing Date or
returns to active work duty with the Station's Business
<PAGE> 29
from an authorized leave or absence after the Closing Date shall hereinafter be
referred to as a "Transferred Employee", and the first date on which such
Transferred Employee is actively at work with the Station's Business on or after
the Closing Date shall hereinafter be referred to as the "Transfer Date" with
respect to such Transferred Employee. Notwithstanding anything to the contrary
contained herein, unless otherwise provided under the terms of a written
employment or collective bargaining agreement, each Transferred Employee shall
be employed by Holdings on an at will basis and nothing shall prohibit Holdings
from terminating such employment at any time after the Closing.
6.9 CONTINUATION OF BENEFITS. During the twelve (12) month period after
the Closing Date, Holdings shall maintain or cause to be maintained wages,
compensation levels, employee pension and welfare plans for the benefit of the
Transferred Employees, which in the aggregate are equal or greater than those
wages, compensation levels and other benefits provided to such Transferred
Employees on the date of execution of the Agreement.
6.10 SEVERANCE ARRANGEMENTS AND EMPLOYMENT AGREEMENTS.
(a) With respect to any Transferred Employee who is covered by a
severance compensation agreement, employment agreement or other severance policy
or plan separate from the standard severance policy for the Employees of
LIN-Texas, Holdings shall maintain or cause to be maintained such severance
compensation agreement, employment agreement or other separate policy or plan as
in effect as of the Agreement Date (except as may be otherwise agreed by such
Transferred Employee), and, as to all other Transferred Employees, Holdings
shall maintain or cause to be maintained severance benefits at least as
favorable as those provided under the standard severance policy of LIN-Texas
applicable to such employees as in effect as of the Agreement Date until the
first anniversary of the Closing Date.
(b) Holdings shall honor or cause to be honored all severance
agreements and employment agreements with any Transferred Employees.
6.11 BONUS ARRANGEMENTS. Holdings shall maintain or cause to be
maintained the bonus practices of LIN-Texas as applicable to Transferred
Employees, as in effect on the Agreement Date, through the end of LIN-Texas's
fiscal year in which the Closing occurs, with bonuses to be paid to the
Transferred Employees participating thereunder at levels consistent with past
practice.
6.12 WELFARE PLANS. Holdings shall (a) waive or cause to be waived all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Transferred
Employees under any welfare plan that such employees may be eligible to
participate in after the Closing Date and (b) provide or cause to be provided to
each Transferred Employee credit for any co-payment and deductibles paid prior
to the Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date.
<PAGE> 30
6.13 DEFINED CONTRIBUTION PLAN.
(a) Prior to the Closing Date, LIN-Texas shall take or cause to be
taken all actions necessary to provide that each Transferred Employee is fully
(100%) vested in all amounts credited to the Transferred Employee's account
under each defined contribution plan ("LIN-Texas Defined Contribution Plan") of
LIN-Texas applicable to such Transferred Employee.
(b) As soon as practicable following the Closing Date, Holdings
shall adopt or designate one or more defined contribution plans (as defined in
Section 3(34) of ERISA) intended to meet the requirements of Section 401(a) of
the Code ("Holdings Defined Contribution Plan"), the terms of which shall be
determined in the sole discretion of Holdings, subject to its obligation under
Section 6.10. To the extent permitted by ERISA and the Code, LIN-Texas shall
take or cause to be taken all actions necessary to permit the distribution and
rollover, or the direct transfer (under Code Section 401(a)(31)), of the account
balance of each Transferred Employee under each LIN-Texas Defined Contribution
Plan to a Holdings Defined Contribution Plan designated by Holdings; provided,
however, that each Holdings Defined Contribution Plan designated by Holdings
shall be required to accept such rollovers or transfers only to the extent that
they are made in cash, and shall not be required to accept rollovers or
transfers of participant loan notes, securities or other in-kind assets.
(c) The parties hereto shall cooperate and take all actions
reasonably necessary or appropriate to: (i) effectuate the rollovers and
transfers described herein; (ii) at the request of Holdings, assure that for a
period of up to one year following the Closing Date any participant loans taken
by any Transferred Employee under any pension plans (as defined in Section 3(2)
of ERISA) are not called due or deemed distributions by reason of the
transactions contemplated herein or by reason of any termination or deemed
termination of employment of any such Transferred Employee as a result of the
transactions contemplated herein; and (iii) share information necessary to each
party to effectuate the foregoing.
6.14 DEFINED BENEFIT PLANS. Prior to the Closing Date, LIN-Texas shall
take or cause to be taken all action necessary to provide that each employee of
the Station's Business who participates in any defined benefit plan ("Defined
Benefit Plan") (as defined in Section 3(35) of ERISA) maintained by LIN-Texas
prior to the Closing Date is fully (100%) vested in all benefits accrued by such
employee under each such Defined Benefit Plan as of the Closing Date.
6.15 PAST SERVICE CREDIT. Holdings agrees that, with respect to all of
the employee benefit programs and arrangements covering or otherwise benefitting
any of the Transferred Employees on or after the Closing Date, service with
LIN-Texas shall be included for purposes of determining any period of
eligibility to participate or to vest in benefits under such programs and
arrangements (but not for benefit accrual or any other purpose under such
programs or arrangements).
<PAGE> 31
6.16 WARN ACT. Holdings and LIN-Texas agree to cooperate in good faith
to determine whether any notification may be required under the Worker
Adjustment and Retraining Notification Act (the "WARN Act"), as a result of the
transactions contemplated under the Agreement, and, if such notices are
required, to provide such notice in a manner that is reasonably satisfactory to
each of the parties hereto.
6.17 MEMBERS AGREEMENT. Holdings and LIN-Texas shall enter into a
Members Agreement, together with certain other holders of the Class A Units and
Class B Units, in substantially the form attached hereto as Exhibit E (the
"Members Agreement").
SECTION 7. CONDITIONS TO OBLIGATIONS OF HOLDINGS AND LIN-TEXAS
7.1 CONDITIONS TO OBLIGATIONS OF HOLDINGS. All obligations of Holdings
at the Closing hereunder are subject at Holdings's option to the fulfillment
prior to or at the Closing Date of each of the following conditions:
(a) All representations and warranties of LIN-Texas contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as though made at and as of that time except (i) 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 accurate as of such earlier specified date or dates, and (ii) for
changes that are permitted or contemplated pursuant to this Agreement.
(b) LIN-Texas 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) All Required Consents shall have been obtained and delivered to
Holdings.
(d) The waiting period under the HSR Act shall have expired or
terminated without adverse action by DOJ or the FTC to prevent the Closing and
there shall not be pending any action instituted by the FTC or the DOJ under the
HSR Act.
(e) No injunction, restraining order or decree of any nature of any
Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits Holdings from consummating the transactions contemplated
by this Agreement.
(f) All approvals from MLB, the National Association and the NHL
necessary for the consummation of the transactions contemplated hereby
(including, without limitation, the issuance of the Membership Interests to
LIN-Texas), and the Additional Transactions shall have been obtained.
(g) LIN-Texas shall have made or stand willing to make all the
deliveries to Holdings described in Section 8.2.
<PAGE> 32
7.2 CONDITIONS TO OBLIGATIONS OF LIN-TEXAS. All obligations of
LIN-Texas at the Closing hereunder are subject at LIN-Texas's option to the
fulfillment prior to or at the Closing Date of each of the following conditions:
(a) All representations and warranties of Holdings contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as though made at and as of that time except to the extent (i) any
such representation or warranty is expressly stated only as of a specified
earlier date or dates, in which case such representation and warranty shall be
true and accurate as of such earlier specified date or dates, or (ii) changes
are permitted or contemplated pursuant to this Agreement.
(b) Holdings 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) The waiting period under the HSR Act shall have expired or
terminated without adverse action by DOJ or the FTC to prevent the Closing and
there shall not be pending any action instituted by the FTC or the DOJ under the
HSR Act.
(d) No injunction, restraining order or decree of any nature of any
Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits LIN-Texas from consummating the transactions contemplated
by this Agreement.
(e) Holdings and its members shall have adopted the LLC Regulations.
(f) All approvals from MLB, the National Association and the NHL
necessary for the consummation of the transactions contemplated hereby
(including, without limitation, the issuance of the Membership Interests to
LIN-Texas) and the Additional Transactions shall have been obtained.
(g) The Additional Transactions shall have been consummated.
(h) Holdings shall have made or stand willing to make all the
deliveries described in Section 8.3.
SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 CLOSING. The Closing shall occur within five (5) business days
following the satisfaction or waiver of the conditions precedent set forth in
Section 7.1 and Section 7.2, but in any event no later than June 30, 1999, and
shall be held at the offices of Weil, Gotshal & Manges, LLP, 100 Crescent Ct.,
Suite 1300, Dallas, Texas 75214, at 9:00 a.m. local time, or at such other time
and place as LIN-Texas and Holdings may mutually agree. Notwithstanding the
actual time the deliveries of the parties hereto are made on the Closing Date,
the parties hereto agree that the Closing shall be effective and deemed for all
purposes to have occurred as of 12:01 a.m., local time, on the Closing Date.
<PAGE> 33
8.2 DELIVERIES BY LIN-TEXAS. Prior to or on the Closing Date, LIN-Texas
shall deliver to Holdings the following in form and substance reasonably
satisfactory to Holdings and its counsel:
(a) Duly executed assignments and other conveyancing documents that
are sufficient to convey and vest good and, in the case of owned Real Property,
marketable, title to the Assets to Holdings, free and clear of all Liens, except
for Permitted Liens. Such documents shall include, but shall not be limited to,
the following:
(i) Assignment and Assumption agreement in the form attached
hereto as EXHIBIT B;
(ii) limited warranty deeds (the "Deeds") in recordable form
conveying fee simple title to all Real Property owned by LIN-Texas and used in
the business of the Station subject to Permitted Liens and without expanding the
indemnity limitations set forth in this Agreement;
(iii) assignments of the leases for the leased Real Property;
(iv) stock certificates representing all of LIN-Texas's shares
of common stock in KXTX-Texas, with accompanying stock powers executed in blank;
and
(v) a Bill of Sale in the form attached hereto as EXHIBIT C.
(b) A certificate, dated as of the Closing Date, executed by an
officer of LIN-Texas's general partner, certifying to the fulfillment of the
conditions set forth in Sections 7.1(a) and 7.1(b);
(c) A certificate, dated as of the Closing Date, executed by the
secretary, or any assistant secretary, of LIN-Texas's general partner,
certifying that the resolutions, as attached to such certificate, were duly
adopted by the Board of Directors and shareholders (if required) of LIN-Texas's
general partner, authorizing and approving the execution of this Agreement and
the consummation of the transactions contemplated hereby and that such
resolutions remain in full force and effect;
(d) Certificates of incumbency for the officers of LIN-Texas duly
authorized to execute and deliver this Agreement and the agreements contemplated
hereby;
(e) A copy of any instrument evidencing any Consent received;
(f) Any mortgage discharges or releases of liens that are necessary
in order for the Assets to be free and clear of all Liens, other than the
Permitted Liens;
(g) A certificate as to the formation and good standing of LIN-Texas
issued by the Secretary of State of the State of Delaware, dated not more than
ten (10) days before the Closing Date, and a certificate issued by the Secretary
of State of the State of Texas as to the qualification of LIN-Texas to do
business in the State of Texas;
<PAGE> 34
(h) Standard documentation (including a certified copy of the
partnership agreement and certain affidavits of LIN-Texas) that may be
reasonably requested of LIN-Texas by Holdings in connection with Holdings
obtaining title policies relating to the Real Property and any estoppel
certificates that may have been obtained by LIN-Texas relating to the Real
Property leased to LIN-Texas;
(i) The Members Agreement duly executed and delivered by LIN-Texas;
(j) The Preliminary Closing Adjustments (if applicable); and
(k) Such other documents as may reasonably be requested by Holdings.
8.3 DELIVERIES BY HOLDINGS. Prior to or on the Closing Date, Holdings
shall deliver to LIN-Texas the following, in form and substance reasonably
satisfactory to LIN-Texas and its counsel:
(a) Duly executed certificates evidencing the Membership Interests;
(b) A certificate, dated as of the Closing Date, executed on behalf
of Holdings by an officer of Holdings certifying to the fulfillment of the
conditions set forth in Sections 7.2(a) and 7.2(b);
(c) A certificate, dated as of the Closing Date, executed by an
officer of Holdings, certifying that (i) the LLC Regulations attached thereto
are true, correct and complete; and (ii) the resolutions, as attached to such
certificate, were duly adopted by the Managers and members (if required) of
Holdings, authorizing and approving the execution of this Agreement and the
consummation of the transactions contemplated hereby and that such resolutions
remain in full force and effect;
(d) Certificates of incumbency for the officers of Holdings duly
authorized to execute and deliver this Agreement and the agreements contemplated
hereby;
(e) Appropriate assumption and acceptance agreements pursuant to
which Holdings shall assume and undertake to perform LIN-Texas's obligations
arising after Closing under the Assumed Contracts, including the Assignment and
Assumption Agreement in the form attached hereto as EXHIBIT B;
(f) The Articles of Organization of Holdings, certified by the
Secretary of State of the State of Texas as of a date no more than ten (10) days
before the Closing Date;
(g) A certificate as to the existence and good standing of Holdings
issued by the Secretary of State of the State of Texas, dated not more than ten
(10) days before the Closing Date, and certificates issued by the appropriate
governmental authority as to the qualification of Holdings to do business in
each jurisdiction in which such
<PAGE> 35
qualification is necessary for Holdings to own the Assets and operate the
Station's Business;
(h) The Members Agreement duly executed and delivered by Holdings
and each of the parties thereto;
(i) Documentation reasonably satisfactory to LIN-Texas evidencing
the consummation of the Additional Transactions; and
(j) Such other documents as may be reasonably requested by
LIN-Texas.
SECTION 9. TERMINATION
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated only as
follows:
(a) at any time by mutual written consent of LIN-Texas and Holdings;
(b) by LIN-Texas, if LIN-Texas is not in default or breach in any
material respect of its obligations under this Agreement and Holdings is in
material breach of its obligations hereunder, including without limitation its
obligation to enter into the Closing in accordance with Section 8.1 hereof,
provided that LIN-Texas has given Holdings notice of such breach and Holdings
has failed to cure said breach prior to the earlier of (i) thirty (30) days
after the date of such notice and (ii) one hundred eighty (180) days after the
date of this Agreement;
(c) by Holdings, if Holdings is not in default or breach in any
material respect of its obligations under this Agreement and LIN-Texas is in
material breach of its obligations hereunder, including without limitation its
obligation to enter into the Closing in accordance with Section 8.1 hereof,
provided that Holdings has given LIN-Texas notice of such breach and LIN-Texas
has failed to cure said breach prior to the earlier of (i) thirty (30) days
after the date of such notice and (ii) one hundred eighty (180) days after the
date of this Agreement;
(d) by either Holdings or LIN-Texas, if the terminating party is not
in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before June 30,
1999, provided, however, that if on June 30, 1999, the Closing has not occurred
solely because any required notice period for Closing has not lapsed, such date
shall be extended until the lapse of such period; or
(e) by Holdings or LIN-Texas pursuant to Section 6.7.
<PAGE> 36
9.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or both
of Holdings and/or LIN-Texas pursuant to Section 9.1, prompt written notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto, but subject to and without limiting
any of the rights of the parties specified herein in the event a party is in
default or breach in any material respect of its obligations under this
Agreement. If this Agreement is terminated as provided herein:
(i) None of the parties hereto nor any of their respective
partners, directors, officers, shareholders, employers, agents, or Affiliates
(each, a "Related Party") (including any Related Party of the general partner of
the LIN-Texas) shall have any liability or further obligation to the other party
or any of their respective Related Parties pursuant to this Agreement with
respect to which termination has occurred, except for the obligations of
LIN-Texas and Holdings (but not including LIN-Texas's or Holdings's Related
Parties (or any Related Party of the general partner of the LIN-Texas)) as
stated in Sections 3.18, 4.5, 6.2, 9.2(b) and 11.1 hereof; and
(ii) All filings, applications and other submissions relating to
the transactions contemplated hereby as to which termination has occurred shall,
to the extent practicable, be withdrawn from the agency or other person to which
made.
(B) (i) If this Agreement is terminated pursuant to Section 9.1(b)
or 9.1(d), in addition to the amounts payable under Section 9.2(c) hereof,
LIN-Texas shall have the right to receive the Escrow Amount as liquidated
damages for and, in addition to the amounts provided under Section 9.2(c), as
the exclusive remedy of LIN-Texas as a consequence of Holdings's default (which
aggregate amount, together with the amount payable under Section 9.2(c) hereof,
the parties agree is a reasonable estimate of the damages that will be suffered
by LIN-Texas and does not constitute a penalty, the parties hereby acknowledging
the inconvenience and nonfeasibility of otherwise obtaining an adequate remedy);
(ii) If this Agreement is terminated pursuant to Section 9.1(c),
the Escrow Amount shall be returned to SSTI without limitation of any other
remedies available to Holdings or SSTI;
(iii) Escrow Amount shall be returned to SSTI and none of
Holdings, SSTI or LIN-Texas shall have any recourse against the other, including
any right to pursue any legal or equitable remedy for breach of contract or
otherwise; and
(iv) Without limiting the generality of the foregoing, or any
applicable law, neither Holdings, on the one hand, nor LIN-Texas, on the other
hand, may rely on the failure of any condition precedent set forth in Section 7
to be satisfied as a ground for termination of this Agreement by such party if
such failure was caused by such party's (or parties') failure to act in good
faith, or a breach of or failure to perform
<PAGE> 37
its representations, warranties, covenants or other obligations in accordance
with the terms hereof.
(c) Upon termination of this Agreement by any party for any reason,
SSTI shall pay to LIN-Texas, within ten (10) Business Days of termination, a
lump sum payment in an amount equal to the total aggregate amount paid by
LIN-Texas to SSTI or its Affiliate under the Sub-Programming Agreement.
9.3 ATTORNEYS' FEES. In the event of a default by either party that
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses (whether incurred in
arbitration, at trial, or on appeal).
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; CERTAIN
REMEDIES
10.1 SURVIVAL. The representations and warranties of Holdings and
LIN-Texas contained herein shall survive the Closing for a period of one (1)
year after the Closing Date and shall terminate on such date except to the
extent that any claims for indemnification in respect of a breach of any such
representation or warranty is made on or before such date, in which case such
representation or warranty shall survive until the resolution of such claim.
Holdings's obligation to pay, perform or discharge the Assumed Liabilities shall
survive until such Assumed Liabilities have been paid, performed or discharged
in full. Any claim for indemnification in respect of a covenant or agreement of
Holdings or LIN-Texas hereunder to be performed before the Closing shall be made
before the expiration of the twelve (12) month anniversary of the Closing Date.
The covenants and agreements of LIN-Texas contained herein and to be performed
to any extent after the Closing Date shall survive the Closing for a period of
twelve (12) months after the Closing Date and shall terminate on such date and
any claims for indemnification in respect of a breach of such covenants to be
performed in any respect after the Closing Date must be made on or before such
date. The covenants and agreements of Holdings contained herein to be performed
in any respect after the Closing Date shall survive the Closing Date until fully
discharged and performed.
10.2 INDEMNIFICATION BY LIN-TEXAS.
(a) After the Closing, LIN-Texas hereby agrees to indemnify, defend
and hold Holdings harmless against and with respect to, and shall reimburse
Holdings for:
(i) Any and all losses, liabilities or damages resulting from
any breach of any representation or warranty made pursuant to this Agreement, or
any failure by LIN-Texas to perform any covenant or obligation of LIN-Texas set
forth herein or in any certificate, document or instrument prepared by LIN-Texas
and delivered to Holdings hereunder;
<PAGE> 38
(ii) Any and all losses, liabilities or damages resulting from
or related to the Retained Liabilities; and
(iii) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity; and
provided, however, that notwithstanding anything contained herein to the
contrary, LIN-Texas shall not be obligated to indemnify or hold Holdings or SSTI
harmless from and against any losses, liabilities or damages arising out of or
in any way related to (i) any actions or failure to act by SSTI under the
Sub-Programming Agreement, or (ii) a breach of any representation or warranty
hereunder if SSTI had actual knowledge of the information or event giving rise
to such breach and such breach relates to a transaction or event occurring after
the Agreement Date.
(b) LIN-Texas's obligation to indemnify Holdings pursuant to Section
10.2(a) shall be subject to all of the following limitations:
(i) No indemnification shall be required to be made by LIN-Texas
as the Indemnifying Party under Section 10.2(a) until the aggregate amount of
damages of Holdings as Claimant exceeds $250,000 and then only with respect to
the amount of such damages in excess of $250,000.
(ii) Holdings shall be entitled to indemnification only for
those damages arising with respect to any claim as to which Holdings has given
the LIN-Texas written notice within the appropriate time period set forth in
Section 10.1 hereof for such claim.
(iii) Holdings agrees that the payment of any and all claims
made by Holdings for indemnification hereunder, for whatever reason, other than
for claims for indemnification with respect to any Retained Liabilities, shall
be limited to Five Million Dollars ($5,000,000) in the aggregate, and Holdings
waives and releases, and shall have no recourse against, LIN-Texas in excess of
such amount as a result of the breach of any representation, warranty, or
covenant of LIN-Texas contained herein, or otherwise arising out of or in
connection with the transactions contemplated hereby or the operations of the
Station; provided, however, that such cap on LIN-Texas's indemnification
obligations hereunder shall not apply to claims by Holdings with respect to any
Retained Liabilities.
(iv) Following the Closing, the sole and exclusive remedy for
Holdings for any claim (whether such claim is framed in tort, contract or
otherwise) arising out of a breach of any representation, warranty, covenant or
other agreement herein or otherwise arising out of or in connection with the
transactions contemplated by this Agreement or the operations of the Station
shall be a claim for indemnification pursuant to this Section 10.
<PAGE> 39
(v) No Related Party of LIN-Texas (including any Related Party
of the general partner of the LIN-Texas) shall have (A) any personal liability
to Holdings as a result of the breach of any representation, warranty, covenant
or agreement of LIN-Texas contained herein or otherwise arising out of or in
connection with the transactions contemplated hereby or the operations of the
Station or (B) any personal obligation to indemnify Holdings for any of
Holdings's claims pursuant to Section 10.2(a), and Holdings waives and releases
and shall have no recourse against any of such Related Parties as a result of
the breach of any representation, warranty, covenant or agreement of LIN-Texas
contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or the operations of the Station.
10.3 INDEMNIFICATION BY HOLDINGS.
(a) After the Closing, Holdings hereby agrees to indemnify, defend
and hold LIN-Texas harmless against and with respect to, and shall reimburse
LIN-Texas for:
(i) Any and all losses, liabilities or damages resulting from
any breach of any representation or warranty made pursuant to this Agreement, or
any failure by Holdings to perform any covenant or obligation of Holdings set
forth herein or in any certificate, document or instrument delivered to
LIN-Texas under this Agreement;
(ii) Any and all losses, liabilities or damages resulting from
or relating to the Assumed Liabilities;
(iii) Any and all losses, liabilities or damages arising out of
the actions or failure to act by Holdings under the Sub-Programming Agreement;
and
(iv) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
(b) Holdings's obligation to indemnify LIN-Texas pursuant to Section
10.3(a) shall be subject to all of the following limitations:
(i) No indemnification shall be required to be made by Holdings
as the Indemnifying Party under Section 10.3(a) until the aggregate amount of
damages of LIN-Texas as Claimant exceeds $250,000 and then only with respect to
the amount of such damages in excess of $250,000.
(ii) LIN-Texas shall be entitled to indemnification only for
those damages arising with respect to any claim as to which LIN-Texas has given
Holdings written notice within the appropriate time period set forth in Section
10.1 hereof for such claim.
<PAGE> 40
(iii) No Related Party of Holdings shall have (A) any personal
liability to LIN-Texas as a result of the breach of any representation,
warranty, covenant or agreement of Holdings contained herein or otherwise or (B)
personal obligation to indemnify LIN-Texas for any of LIN-Texas's claims
pursuant to Section 10.3(a), and LIN-Texas waives and releases and shall have no
recourse against any one of such Related Parties as the result of the breach of
any representation, warranty, covenant or agreement of Holdings contained herein
or otherwise arising out of or in connection with the transactions contemplated
hereby or the operations of the Station.
(iv) LIN-Texas agrees that the payment of any and all claims
made by LIN-Texas for indemnification with respect to a breach of any
representation or warranty by Holdings hereunder other than a breach of a
representation or warranty contained in Sections 4.1, 4.3, 4.4 and 4.6 shall be
limited to Five Million Dollars ($5,000,000), in the aggregate, and LIN-Texas
waives and releases, and shall have no recourse against, Holdings in excess of
such amount as a result of the breach by Holdings of any representation or
warranty contained herein.
10.4 PROCEDURE FOR INDEMNIFICATION. The procedure for indemnification
shall be as follows:
(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, specifying in reasonable detail the factual
basis for the claim, the amount thereof, estimated in good faith, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such indemnification claim shall have occurred. 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 ten (10)
business days after written notice of such action, suit, or proceeding was given
to 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 (30) days to make such investigation of the claim as the
Indemnifying Party deems necessary or desirable, and the Claimant agrees to make
available to the Indemnifying Party and its authorized representatives the
information relied upon by the Claimant to substantiate the claim. If the
Claimant and the Indemnifying Party agree at or prior to the expiration of the
thirty (30)-day period to the validity and amount of such claim, the
Indemnifying Party shall immediately pay to the Claimant the full amount of the
claim, subject to the terms hereof. If the Claimant and the Indemnifying Party
do not agree within the thirty (30)-day period, the Claimant may seek
appropriate remedy at law or equity, as applicable, subject to the limitations
hereof.
(c) With respect to any claim by a third party against the Claimant,
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
<PAGE> 41
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, then the Claimant
may defend through counsel of its own choosing and (so long as it gives the
Indemnifying Party at least fifteen (15)-days' notice of the terms of the
proposed settlement thereof and permits the Indemnifying Party to then undertake
the defense thereof) settle such claim, action or suit, and to recover from the
Indemnifying Party the amount of such settlement or of any judgment and the
costs and expenses of such defense. The Indemnifying Party shall not compromise
or settle any third party claim, action or suit without the prior written
consent of the Claimant, which consent will not be unreasonably withheld or
delayed.
(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) Subject to the limitations set forth herein and without
expanding the total liability of Holdings or LIN-Texas hereunder, the
indemnification rights provided in Section 10.2 and Section 10.3 shall extend to
the Related Parties of any Claimant although for the purpose of the procedures
set forth in this Section 10.4, any indemnification claims by such Related
Parties shall be made by and through the Claimant.
SECTION 11. MISCELLANEOUS
11.1 FEES AND EXPENSES. 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; provided, however, that (a) all transfer Taxes, recordation
taxes, sales Taxes and document stamps in connection with the transactions
contemplated by this Agreement shall be paid by Holdings and (b) all filing
fees, and other charges levied by any Governmental Authority in connection with
the transactions contemplated by this Agreement, shall be paid by Holdings and
(c) Holdings shall pay the reasonable legal fees and expenses incurred by
LIN-Texas from and after March 1, 1999 that relate to either (i) the negotiation
and consummation of the transactions contemplated hereunder or (ii) the Rader
Lease or the Rader Lease Matter.
11.2 BULK TRANSFER LAWS. Holdings hereby waives compliance with the
provisions of any applicable bulk transfer laws.
11.3 NOTICES. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be (i) in writing, (ii)
sent by facsimile (with receipt personally confirmed by telephone), delivered by
personal delivery, or sent by commercial delivery service or certified mail,
return receipt requested, (iii) deemed to have been given on the date sent by
facsimile with receipt confirmed, the date of personal
<PAGE> 42
delivery, or the date set forth in the records of the delivery service or on the
return receipt, and (iv) addressed as follows:
TO HOLDINGS:
Southwest Sports Group Holdings LLC
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
and
Weil, Gotshal & Manges LLP
Suite 1300
100 Crescent Court
Dallas, Texas 75201
Attention: Glenn D. West, Esq.
Telephone: (214) 746-7700
Facsimile: (214) 746-7777
TO SSTI:
Southwest Sports Television, Inc.
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Thomas O. Hicks
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
<PAGE> 43
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7300
Facsimile: (214) 740-7313
and
Weil, Gotshal & Manges LLP
Suite 1300
100 Crescent Court
Dallas, Texas 75201
Attention: Glenn D. West, Esq.
Telephone: (214) 746-7700
Facsimile: (214) 746-7777
TO LIN-TEXAS: LIN Television of Texas, L.P.
c/o LIN Television Corporation
1 Richmond Square, Suite 230
Providence, Rhode Island
Attention: Gary R. Chapman, President
Telephone: 401-454-2880
Facsimile: 401-454-2817
with a copy to:
Gregory M. Schmidt
Vice President, New Development
and General Counsel
LIN Television Corporation
1001 G Street, N.W.
Washington, D.C. 20001
Telephone: 202-879-9355
Facsimile: 202-879-9397
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. No party hereto may assign this
Agreement without the prior written consent of the other party hereto provided,
however, that (a) nothing in this Agreement is intended to limit Holdings's
ability to sell or to transfer any or all of the Assets following the Closing
and (b) prior to the Closing, upon notice to LIN-Texas, Holdings may assign or
delegate to any direct or indirect wholly owned subsidiary of Holdings the right
to acquire part or all of the Assets and its obligation to assume any Assumed
Liabilities in connection therewith. This Agreement shall be
<PAGE> 44
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.5 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, from time to time prior to, at and after the Closing Date, each party
hereto will use commercially reasonable efforts to take, or cause to be taken,
all such actions and to do or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the purchase and sale contemplated by this Agreement and the consummation of the
other transactions contemplated hereby, including executing and delivering such
documents as the other party may reasonably request in connection with the
consummation of this Agreement and the consummation of the other transactions
contemplated hereby.
11.6 GOVERNING LAW. This Agreement shall be governed, construed and
enforced in accordance with the laws of the state of Delaware (without regard to
the choice of laws provisions thereof).
11.7 ENTIRE AGREEMENT. This Agreement, the Schedules and Exhibits
hereto, and all documents, certificates and other documents to be delivered by
the parties pursuant hereto, collectively represent the entire understanding and
agreement between Holdings and LIN-Texas with respect to the subject matter of
this Agreement. This Agreement supersedes all prior negotiations between the
parties and cannot be amended, supplemented, or changed except by an agreement
in writing that is signed by the parties hereto. Holdings acknowledges and
agrees that LIN-Texas shall not be liable for or bound in any manner by, and
Holdings has not relied upon, any express or implied, oral or written
information, warranty, guaranty, promise, statement, inducement, presentation or
opinion pertaining to the transactions contemplated hereby, the LIN-Texas, the
Station, or the Assets except as is expressly set forth in this Agreement and
all Schedules and Exhibits hereto and the representations and warranties in the
certificate delivered by LIN-Texas pursuant to Section 8.2(b).
11.8 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 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 11.8.
11.9 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, but all such counterparts shall constitute one and the same
instrument.
11.10 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other Persons or
<PAGE> 45
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid or unenforceable, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the greatest extent possible.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 46
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of Holdings and LIN-Texas as of the date first written
above.
HOLDINGS:
Southwest Sports Group Holdings LLC
/s/ Joseph B. Armes
-----------------------
Name: Joseph B. Armes
Title: Executive Vice President, General Counsel
and Secretary
LIN-TEXAS:
LIN Television of Texas, L.P.
By: LIN Television of Texas, Inc., its
General Partner
/s/ Gregory M. Schmidt
--------------------------
Name: Gregory M. Schmidt
Title: Vice President
SSTI:
Southwest Sports Television, Inc.
/s/ Joseph B. Armes
-----------------------
Name: Joseph B. Armes
Title: Vice President and Assistant Secretary
<PAGE> 47
ATTACHMENT A
DEFINED TERMS
"ACCOUNTS RECEIVABLE" means the rights of LIN-Texas as of the
Closing Date to payment for the sale of advertising time and other goods and
services by the Station prior to the Closing Date.
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with such Person.
"AGREEMENT DATE" means August 1, 1998.
"APPLICABLE ENVIRONMENTAL LAWS" means any and all laws,
statutes, regulations, and judicial interpretations thereof of the United
States, of any state in which the Assets, or any portion thereof, or the
Business of the Station, are located, and of any other government or
quasi-government authority having jurisdiction, that relate to the prevention,
abatement and elimination of pollution and/or protection of the environment,
including the federal Comprehensive Environmental Response, Compensation, and
Liability Act, the Resource Conservation and Recovery Act, the Clean Water Act,
the Clean Air Act, the Safe Drinking Water Act, the Toxic Substances Control
Act, and the Hazardous Materials Transportation Act, together with all state
statutes serving any similar or related purposes, as in effect on or prior to
the date of this Agreement.
"ASSUMED CONTRACTS" means (a) all Contracts listed on
SCHEDULES 3.5, 3.7 and 3.13, including the Programming Contracts, and all
Contracts of the type described in Sections 3.5, 3.7 and 3.13 that are not
required to be listed thereon pursuant to the exceptions set forth in such
Sections; (b) Contracts entered into with advertisers for the sale of
advertising time for cash or production services in the ordinary course of
business; (c) any Contracts entered into by LIN-Texas between the date of this
Agreement and the Closing Date that Holdings agrees in writing to assume; and
(d) other Contracts entered into by LIN-Texas between the date of this Agreement
and the Closing Date in compliance with Section 5.1; provided that Assumed
Contracts shall in no event include Excluded Contracts.
"BUSINESS DAY" means any day excluding Saturdays, Sundays and
any day that is a legal holiday under the laws of the United States or is a day
on which the Escrow Agent or banking institutions located in New York City, New
York are authorized or required by law or other governmental action to close.
"CLASS A UNITS" means the units of beneficial interest of
Holdings designated the Class A Units as set forth the LLC Regulations into
which the Membership Interests are convertible, in whole or in part, pursuant to
the terms of the LLC Regulations.
<PAGE> 48
"CLOSING" means the consummation of the sale and acquisition
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.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as
amended.
"CONSENTS" means the consents, permits, or approvals of
Government Authorities and other third parties necessary to transfer the Assets
to Holdings 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) of LIN-Texas or to which LIN-Texas is a party or that are
binding upon LIN-Texas and that relate to or affect the Assets or of the
Station's Business, and (a) that are in effect on the date of this Agreement or
(b) that are entered into by LIN-Texas between the date of this Agreement and
the Closing Date, but excluding any Contracts that terminate between the date of
this Agreement and the Closing Date.
"CONTROL" means having the power to direct the affairs of a
Person by reason of either (i) owning or controlling the right to vote a
sufficient number of shares of voting stock or other voting interest of such
Person or (ii) having the right to direct the general management of the affairs
of such Person by contract or otherwise.
"EFFECTIVE TIME" means 12:01 a.m., Dallas, Texas time, on the
Closing Date.
"EMPLOYEE PLAN" means any retirement, severance, medical,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA to which either of the LIN-Texas or any entity related to
LIN-Texas (under the terms of Sections 414 (b) or (c) of the Code) contributes
or which either of the LIN-Texas or any entity related to LIN-Texas (under the
terms of Sections 414 (b) or (c) of the Code) sponsors or maintains.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means Chase Bank of Texas, N.A.
"ESCROW AGREEMENT" means the Escrow Agreement, dated of even
date herewith, by and among LIN-Texas, SSTI and Escrow Agent, in the form
attached hereto as EXHIBIT A.
<PAGE> 49
"ESCROW AMOUNT" means the sum of the Escrow Deposit and all
interest or earnings accrued thereon.
"ESCROW DEPOSIT" means the sum of Two Million Five Hundred
Thousand and no/100 Dollars ($2,500,000) that is being deposited by Holdings
with the Escrow Agent in immediately available funds on the date hereof to
secure the obligations of Holdings to close under this Agreement, with such
deposit being held by the Escrow Agent in accordance with the Escrow Agreement.
"EXCLUDED NAME" means any name or logo that includes "LIN
Television Corporation" or any derivatives thereof.
"FCC" means the Federal Communications Commission.
"FCC CONSENT" means actions by the FCC granting its consent to
the Assignment Applications and consummation of the transactions contemplated
hereby.
"FCC LICENSES" means those Licenses issued by the FCC to
KXTX-Texas in connection with the Station.
"GAAP" means the United States generally accepted accounting
principles in effect from time to time consistently applied throughout the
period involved.
"GOVERNMENTAL AUTHORITY" means any government, any
governmental entity, department, commission, board, agency or instrumentality,
and any court, tribunal or judicial or arbitral body, whether federal, state or
local.
"HAZARDOUS SUBSTANCE" means any substance now or hereafter
designated pursuant to Section 307(a) and 311(b)(2)(A) of the federal Clean
Water Act, 33 USCA ss.ss. 1317(a), 1321(b)(2)(A), Section 112 of the federal
Clean Air Act, 42 USCA ss. 3412, Section 3001 of the federal Resource
Conversation and Recovery Act, 42 USCA ss. 6921, Section 7 of the federal Toxic
Substances Control Act, 15 USCA ss. 2606, or Section 101(14) and Section 102 of
the Comprehensive Environmental Response, Compensation, and Liability Act, 42
USCA ss.ss. 9601(14), 9602, as amended by the Superfund Amendments and
Reorganization Act of 1986.
"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, computer programs and computer license
interests to the extent owned by and transferable by LIN-Texas, patents,
permits, jingles, proprietary information, technical information and data, and
other similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) applied for, issued to, or owned by
LIN-Texas or under which LIN-Texas is licensed or franchised and that are used
or useful in the Station's Business, together with any additions thereto between
the date of this Agreement and the Closing Date.
<PAGE> 50
"KXTX, INC." means KXTX, Inc., a Delaware Corporation.
"KXTX OPTION" means the Option and Put Agreement, dated as of
May 31, 1994, by and among LIN-Texas, as assignee, KXTX-Texas and KXTX-Inc, as
amended by that certain Amendment to Option and Put Agreement, dated as of
December 24, 1997, by and among LIN, LIN-Texas, KXTX-Texas and KXTX, Inc.
"KXTX SHARES" means the 449 shares of common stock, without
par value, of KXTX-Texas owned of record by LIN-Texas at the date of this
Agreement.
"LICENSES" means all licenses, permits, construction permits
and other authorizations issued by federal, state, or local Governmental
Authorities to LIN-Texas, currently in effect and used in connection with the
Station's Business, together with any additions thereto between the date of this
Agreement and the Closing Date.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, restriction or encumbrance of any kind,
whether statutory or otherwise, in respect of such asset.
"LLC REGULATIONS" means the Amended and Restated Limited
Liability Company Regulations of Holdings attached as EXHIBIT D.
"LMA" means that certain Local Marketing Agreement, dated as
of May 31, 1994, by and between LIN-Texas, as assignee, and KXTX-Texas, as
amended by that certain Amendment to Local Marketing Agreement, dated as of
December 24, 1997, by and among LIN, LIN-Texas and KXTX-Texas.
"MEMBERSHIP INTERESTS" means 500,000 Series A Preferred Units.
"PERMITTED LIENS" means (a) liens for Taxes not yet due and
payable; (b) landlord's liens and liens for property Taxes not delinquent; (c)
inchoate materialmens', mechanics', carriers', warehousemen's, landlords',
workmen's, repairmen's, employees' or other like Liens arising in the ordinary
course of business and for which payment is not overdue; (d) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, social security and other like laws; (e)
restrictions or rights granted to Governmental Authorities under applicable law;
(f) zoning, building, or similar restrictions relating to or affecting property;
(g) all matters of record disclosed on SCHEDULE 3.5 or 3.6 as "continuing",
including leasehold interests in real property owned by others and operating
leases for personal property and leased interests in property leased to others;
(h) Liens on the Real Property currently of record (excluding, however, any
mortgage, deed to secure debt, deed of trust, security agreement, judgment, lien
or statutory claim of lien or any other title exception or defect that is
monetary in nature, LIN-Texas hereby agreeing to pay and satisfy of record any
such title defect or exception); (i) other Liens on the Real Property that do
not materially affect the current use and enjoyment thereof in the operation of
the Assets or those standard printed exceptions set forth in title policies or
title reports; (j) any other Liens disclosed in the Schedules hereto; and (k)
the Assumed Liabilities.
<PAGE> 51
"PERSON" means an individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership, or other entity or organization.
"PROGRAMMING CONTRACTS" means all contracts and agreements of
LIN-Texas listed on SCHEDULE 3.7 pursuant to which the Station is licensed,
authorized or obligated to air certain programs and films.
"RADER LEASE" means that certain Lease, dated November 15,
1973, as amended, by and between Homer J. Rader, Jr. (as assignee) and LIN-Texas
(as assignee) for the property at 3900 Harry Hines Boulevard, Dallas, Texas.
"RADER LEASE MATTER" means any claims or potential claims
raised by LIN-Texas against Homer J. Rader, Jr. in the Petition for Declaratory
Judgment and Injunctive Relief, filed on December 15, 1998 in the County Court
at Law Number 3, Dallas County, Texas and any claims and potential claims raised
by Homer J. Rader, Jr. against LIN-Texas with respect to the Rader Lease.
"REAL PROPERTY" means (a) all fee estates in real property,
and all buildings and other improvements thereon, owned or held by LIN-Texas
that are used or useful in the Station's Business; and (b) leases of any real
property used or useful in the Station's Business under which LIN-Texas is the
lessee, together with any additions thereto between the Agreement Date and the
Closing Date.
"REQUIRED CONSENTS" means such Consents as listed on SCHEDULE
3.3 that are designated with a double asterisk.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED UNITS" means the units of beneficial
interest of Holdings designated the Series A Preferred Units as set forth the
LLC Regulations.
"STATION'S BUSINESS" means the businesses currently conducted
by LIN-Texas with respect to the Station, taken as a whole, including the Assets
and operations thereof and the Assumed Liabilities to be sold or assumed
pursuant to this Agreement. Station Business shall exclude any and all
businesses and operations of the Station presently performed by KXTX-Texas
pursuant to the LMA.
"SUB-PROGRAMMING AGREEMENT" means that certain Sub-Programming
Agreement dated as of August 21, 1998, and effective as of August 1, 1998, by
and between LIN-Texas and SSTI.
"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment,
tools, vehicles, furniture, office equipment, plant, inventory, spare parts and
other tangible personal property owned or held by LIN-Texas that is used or
useful in the Station's Business, together with any additions thereto between
the date of this Agreement and the Closing Date.
<PAGE> 52
"TAX" means any federal, state, local, or foreign income,
gross receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or governmental assessment, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties.
"TAX RETURN" means any tax return, declaration of estimated
tax, tax report or other tax statement, or any other similar filing required to
be submitted by LIN-Texas relating to the Station to any governmental authority
with respect to any Tax.
The following terms have the meanings set forth in the
Sections indicated:
TERM SECTION
Accretion Start Date Section 2.4
Applicable Rate Section 2.4
Assessments Section 6.9
Assets Section 2.1
Assumed Employees Section 6.8(a)
Assumed Liabilities Section 2.7
Certificate of Designation Section 4.3(a)
Claimant Section 10.4(a)
Class A Units Section 4.3(b)
Class B Units Section 4.3(b)
Collection Period Section 6.6(a)
Deeds Section 8.2(a)
Defined Benefit Plan Section 6.16
DOJ Section 6.2
Employees Section 3.13
Environmental Noncompliance Section 6.9(c)
Estimated Purchase Price Section 2.4
Excluded Assets Section 2.2
Excluded Contracts Section 2.2(f)
Financial Statements Section 3.9
FTC Section 6.2
Hazardous Substance Section 3.17(a)
Holdings Preamble
Holdings Contracts Section 4.13
Holdings Defined Contribution Plan Section 6.15(b)
Holdings Intangible Rights Section 4.12
Indemnifying Party Section 10.4(a)
Initial Public Offering Section 6.19
LIN Employer Section 6.10
LIN-Texas Preamble
LIN-Texas Defined Contribution Plan Section 6.15(a)
Material License Section 3.4
Members Agreement Section 6.17
<PAGE> 53
MLB Section 6.4
MLB and NHL Approval Documentation Section 6.4
National Association Section 6.4
NHL Section 6.4
Preferred Stock Section 4.3(a)
Prior Agreement Recitals
Production Assets Section 2.2
Purchase Price Section 2.4
Related Party Section 9.2(a)(i)
Shares Section 2.1(j)
SSTI Recitals
Station Recitals
Stockholders Agreement Section 6.19
Tower Litigation Section 10.2(a)(ii)
Transfer Date Section 6.10
Transferred Employee Section 6.10
WARN Act Section 6.18
LIST OF EXHIBITS
EXHIBIT A Escrow Agreement
EXHIBIT B Assignment and Assumption Agreement
EXHIBIT C Bill of Sale
EXHIBIT D Amended and Restated Limited Liability Company Regulations of
Holdings
EXHIBIT E Members Agreement
EXHIBIT F Additional Transactions
LIST OF SCHEDULES
SCHEDULE 2.2(e) Excluded Contracts
SCHEDULE 3.3 Consents
SCHEDULE 3.4 Governmental Licenses
SCHEDULE 3.5 Real Property
SCHEDULE 3.6 Tangible Personal Property
SCHEDULE 3.7 Assumed Contracts
SCHEDULE 3.8 Intangibles
SCHEDULE 3.9 Financial Statements
SCHEDULE 3.10 Taxes
SCHEDULE 3.11 Insurance
SCHEDULE 3.13 Personnel
SCHEDULE 3.14 Claims and Legal Actions
SCHEDULE 3.16 Conduct of Business
SCHEDULE 3.17 Environmental Matters
<PAGE> 54
SCHEDULE 3.19 Transactions with Affiliates
SCHEDULE 4.3 Capitalization
SCHEDULE 4.5(a) Subsidiaries
SCHEDULE 4.9 Litigation
SCHEDULE 4.10 Holdings Title to Properties
SCHEDULE 4.11 Holdings Intellectual Property
SCHEDULE 4.13 Holdings Contracts
SCHEDULE 4.16 Holdings Labor Agreements and Actions
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LIN HOLDINGS
CORP. CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEET AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH LIN HOLDINGS CORP. ANNUAL
REPORT ON FORM 10-Q DATED JUNE 30, 1999.
</LEGEND>
<CIK> 0001062707
<NAME> LIN HOLDINGS CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,067
<SECURITIES> 0
<RECEIVABLES> 46,017
<ALLOWANCES> 1,671
<INVENTORY> 0
<CURRENT-ASSETS> 62,839
<PP&E> 150,987
<DEPRECIATION> 20,199
<TOTAL-ASSETS> 1,861,427
<CURRENT-LIABILITIES> 64,755
<BONDS> 526,658
0
0
<COMMON> 0
<OTHER-SE> 510,270
<TOTAL-LIABILITY-AND-EQUITY> 1,861,427
<SALES> 0
<TOTAL-REVENUES> 101,239
<CGS> 0
<TOTAL-COSTS> 90,512
<OTHER-EXPENSES> 34,868
<LOSS-PROVISION> (47)
<INTEREST-EXPENSE> 32,131
<INCOME-PRETAX> (24,141)
<INCOME-TAX> (2,172)
<INCOME-CONTINUING> (21,969)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,969)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LIN
TELEVISION CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED
BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH LIN
TELEVISION CORPORATION ANNUAL REPORT ON FORM 10-Q DATED JUNE 30, 1999.
</LEGEND>
<CIK> 0000931058
<NAME> LIN TELEVISION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,067
<SECURITIES> 0
<RECEIVABLES> 46,017
<ALLOWANCES> 1,671
<INVENTORY> 0
<CURRENT-ASSETS> 62,839
<PP&E> 150,987
<DEPRECIATION> 20,199
<TOTAL-ASSETS> 1,850,354
<CURRENT-LIABILITIES> 72,855
<BONDS> 299,361
0
0
<COMMON> 0
<OTHER-SE> 714,993
<TOTAL-LIABILITY-AND-EQUITY> 1,850,354
<SALES> 0
<TOTAL-REVENUES> 101,239
<CGS> 0
<TOTAL-COSTS> 90,512
<OTHER-EXPENSES> 23,497
<LOSS-PROVISION> (47)
<INTEREST-EXPENSE> 20,760
<INCOME-PRETAX> (12,770)
<INCOME-TAX> 3,028
<INCOME-CONTINUING> (15,798)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,798)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
