<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----- -----
COMMISSION FILE NUMBER: 0-27000
ARGYLE TELEVISION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2717523
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
200 CONCORD PLAZA, SUITE 700 (210) 828-1700
SAN ANTONIO, TEXAS 78216 (Registrant's telephone number,
(Address of principal executive offices) including area code)
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of May 13, 1997, the Registrant had 11,346,914 shares of common stock
outstanding. Consisting of 4,010,914 shares of Series A Common Stock, 36,000
shares of Series B Common Stock and 7,300,000 shares of Series C Common Stock.
================================================================================
<PAGE>
ARGYLE TELEVISION, INC.
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AT DECEMBER 31,
1996 AND MARCH 31, 1997 (UNAUDITED)..........................3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED).......5
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)........6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)..................................................7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)..................................................8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................12
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................................16
ITEM 2. CHANGES IN SECURITIES.........................................16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........16
ITEM 5. OTHER INFORMATION.............................................16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................16
SIGNATURES....................................................................17
<PAGE>
ARGYLE TELEVISION, INC.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
1996 (UNAUDITED)
---------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 949 $ 3,239
ACCOUNTS RECEIVABLE, NET 14,936 14,165
BARTER PROGRAM RIGHTS 5,912 4,736
PROGRAM RIGHTS 3,934 3,692
OTHER 1,895 1,832
---------------------------
TOTAL CURRENT ASSETS 27,626 27,664
PROPERTY, PLANT AND EQUIPMENT, NET 39,213 50,174
INTANGIBLE ASSETS:
FCC LICENSES 126,009 198,910
NETWORK AFFILIATION AGREEMENTS 121,272 43,961
OTHER 12,764 8,221
---------------------------
260,045 251,092
LESS ACCUMULATED AMORTIZATION (28,190) (14,310)
---------------------------
231,855 236,782
OTHER ASSETS:
DEFERRED ACQUISITION AND FINANCING 5,788 5,653
COSTS, NET
BARTER PROGRAM RIGHTS, NONCURRENT 5,334 2,759
PROGRAM RIGHTS, NONCURRENT 3,580 3,677
OTHER 15,212 14,738
---------------------------
TOTAL ASSETS $328,608 $341,447
===========================
</TABLE>
<PAGE>
ARGYLE TELEVISION, INC.
Condensed Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
March 31,
December 31, 1997
1996 (Unaudited)
-------------------------
<S> <C> <C>
(In Thousands)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,001 $ 1,761
Accrued liabilities 5,612 9,515
Barter program rights payable 6,776 4,215
Program rights payable 4,251 4,389
Other 868 233
-------------------------
Total current liabilities 18,508 20,113
Barter program rights payable 5,333 2,759
Program rights payable 3,610 4,118
Long-term debt 171,500 191,500
Other liabilities 505 104
Stockholders' equity:
Series A preferred stock, 10,938
shares issued and outstanding 1 1
Series B preferred stock, 10,938
shares issued and outstanding 1 1
Series A common stock, par value
$.01 per share, 35,000,000 shares
authorized and 3,846,914 and
4,010,914 shares issued and
outstanding in 1996 and 1997,
respectively 38 39
Series B common stock, par value
$.01 per share, 200,000 shares
authorized, 200,000 and 36,000
shares issued and outstanding in
1996 and 1997, respectively 2 1
Series C common stock, par value
$.01 per share, 14,800,000 shares
authorized, 7,300,000 shares issued
and outstanding 73 73
Additional paid-in capital 159,454 159,358
Retained deficit (30,417) (36,620)
-------------------------
Total stockholders' equity 129,152 122,853
Total liabilities and stockholders' equity $328,608 $341,447
=========================
</TABLE>
See accompanying notes.
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1996 1997
------------------
<S> <C> <C>
(IN THOUSANDS)
Total revenues $15,495 $17,879
Station operating expenses 8,898 10,781
Amortization of program rights 1,289 1,057
Depreciation and amortization 4,986 6,558
------------------
Station operating income (loss) 322 (517)
Corporate general and administrative
expenses 983 1,008
Non-cash compensation expense 169 260
------------------
Operating loss (830) (1,785)
Interest expense, net 3,500 4,418
------------------
Net loss $(4,330) $(6,203)
Less preferred stock dividends -- (356)
------------------
Loss applicable to common stock $(4,330) $(6,559)
==================
Loss per common share $(.39) $(.58)
==================
Weighted average number of common
shares outstanding 11,119 11,347
==================
</TABLE>
See accompanying notes.
-5-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON AND ADDITIONAL RETAINED
PREFERRED PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
-----------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Balances at December 31, 1996 $115 $159,454 $(30,417) $129,152
Compensation element of 260 260
stock options
Dividends paid on (356) (356)
preferred stock
Net loss (6,203) (6,203)
------------------------------------------------
Balances at March 31, 1997 $115 $159,358 $(36,620) $122,853
================================================
</TABLE>
See accompanying notes.
-6-
<PAGE>
ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1996 1997
------------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(4,330) $ (6,203)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation 1,020 1,353
Amortization of intangible assets 3,966 5,204
Amortization of deferred financing costs 177 162
Amortization of program rights 1,289 1,057
Program payments (797) (1,229)
Compensation element of stock options 169 260
Fair value adjustments of interest
rate protection agreements (580) (328)
Changes in operating assets and
liabilities, net 2,726 4,727
------------------
Net cash provided by operating
activities 3,640 5,003
INVESTING ACTIVITIES
Acquisition of stations (61) (20,921)
Purchases of property, plant, and
equipment (2,449) (1,436)
Partial payment on relocation of studio (927)
------------------
Net cash used in investing activities (3,437) (22,357)
FINANCING ACTIVITIES
Financing costs (40)
Dividends paid on preferred stock (356)
Proceeds from issuance of long-term debt 1,000 22,000
Payment of long-term debt (1,000) (2,000)
------------------
Net cash provided by (used in)
financing activities (40) 19,644
------------------
Increase in cash and cash equivalents 163 2,290
Cash at beginning of period 2,206 949
------------------
Cash and cash equivalents at end of
period $ 2,369 $ 3,239
==================
Businesses acquired in purchase
transaction:
Fair market value of assets acquired $ $ 20,935
Liabilities assumed 14
------------------
Net cash paid for acquisitions $ $ 20,921
==================
Supplemental cash flow information:
Purchase price valuation adjustment
affecting equipment and FCC licenses $ 1,277 $
</TABLE>
See accompanying notes
-7-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. Summary of Accounting Policies
The condensed consolidated financial statements include the accounts of
Argyle Television, Inc. (the "Company") and its wholly owned subsidiaries. All
significant intercompany accounts have been eliminated in consolidation.
References herein to the Company include its subsidiaries, unless the context
requires otherwise.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997.
2. Acquisitions
In November 1996, the Company entered into a definitive agreement (the
Gannett Swap) with Gannett Co., Inc. (Gannett) to swap the Company's WZZM and
WGRZ for Gannett's WLWT, the NBC affiliate in Cincinnati, Ohio, and KOCO, the
ABC affiliate in Oklahoma City, Oklahoma. In connection with this transaction,
the Company agreed to pay Gannett $20 million in additional consideration,
funded by borrowings under the Company's credit agreement. This transaction
closed on January 31, 1997.
This acquisition was accounted for as a purchase and, accordingly, the
purchase price and related acquisition costs have been allocated to the acquired
assets and liabilities based upon their fair market values. The excess of the
purchase price over the net fair market value of the tangible assets acquired
and the liabilities assumed was allocated to identifiable intangible assets
including FCC licenses and network affiliation agreements. The condensed
consolidated financial statements include the results of operations of the
acquired stations since the date of the acquisition.
Giving effect to the Gannett Swap discussed above, unaudited pro forma
results of operations reflecting combined historical results for WAPT, KITV,
WLWT, KOCO, the Arkansas Stations and the Company's share of the combined
broadcast cash flows from the Clear Channel Venture (Six Stations) (See Item 2.
Management's Discussion and Analysis, Results of Operations) as if all
acquisitions occurred at the beginning of the respective periods, are as
follows:
-8-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
<TABLE>
<CAPTION>
Six Stations
Three Months Ended March 31,
----------------------------
1996 1997
----------------------------
(In Thousands)
<S> <C> <C>
Total revenues $18,326 $18,854
Loss from continuing operations
attributable to common stock $(5,436) $(6,012)
Loss from continuing operations per
share attributable to common stock $ (.48) $ (.53)
Pro Forma weighted average number of
shares used in calculations 11,347 11,347
</TABLE>
The above pro forma results are presented in response to applicable
accounting rules relating to business acquisitions and are not necessarily
indicative of the actual results that would be achieved had each of the stations
been acquired at the beginning of the periods presented, nor are they indicative
of future results of operations.
On March 26, 1997, the Company entered into an agreement with The Hearst
Corporation (Hearst) to combine the television broadcast group of Hearst with
and into the Company. The agreement has been approved by the boards of
directors of both companies and is expected to be submitted to shareholders of
the Company for approval in August 1997. Argyle Television Investors, L.P.;
Television Investment Partners, L.P.; Argyle Television Partners, L.P. and
certain other shareholders, which collectively own approximately two-thirds of
the Common Stock outstanding of the Company, have agreed to vote the shares they
hold in favor or the merger to effect this combination.
3. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
---------------------------------
<S> <C> <C>
Bank Credit Agreement dated October
27, 1995:
Revolving credit facility $ 21,500,000 $ 41,500,000
Senior Subordinated Notes 150,000,000 150,000,000
Less current maturities
$171,500,000 $191,500,000
=================================
</TABLE>
Under the terms of the Company's Bank Credit Agreement, the Company is
required to enter into interest rate protection agreements to modify the
interest characteristics of a portion (approximately 50%) of its outstanding
borrowings thereunder from a floating rate to a fixed rate.
-9-
<PAGE>
ARGYLE TELEVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
The Company wrote two options that gave the option holder the right to enter
into two interest rate swap agreements with the Company during May and June
1996. Option premiums for these two options were $1,000,477. The option holder
exercised these options in May and June 1996, effectively fixing the Company's
base interest rate at approximately 7% on $35 million of its borrowings until
June 1999.
Additional information regarding these interest rate protection agreements in
effect at March 31, 1997 follows:
<TABLE>
<CAPTION>
Notional Average Average Estimated
Amount Receive Rate Pay Rate Fair Value
-----------------------------------------------
<S> <C> <C> <C> <C>
Interest rate swap agreements:
Fixed rate agreement $20,000,000 LIBOR 7.01% $ 220,716
Fixed rate agreement $15,000,000 LIBOR 6.98% $(165,706)
</TABLE>
The Company is exposed to credit loss in the event the other parties on the
above agreements do not perform, but the Company does not anticipate non-
performance by any of these counter parties, all of which are major financial
institutions.
4. Income Taxes
As a result of the losses incurred by the Company for the periods through
March 31, 1997, no federal income tax expense has been recorded.
At March 31, 1997, the Company has available net operating loss carryforwards
for federal income tax purposes of approximately $13.35 million, $16.55 million,
and $5.85 million, which will expire in 2010, 2011, and 2012, respectively.
5. Related Party Transactions
The Company has entered into separate agreements with one of its
shareholders, Argyle Television Investors, L.P., and the shareholder's general
partner, ATI General Partner, L.P. (the Partnerships), under which the Company
provides to the Partnerships personnel, office, property, services, expertise,
systems and other assets and amenities. In consideration for such, the
partnerships are required to reimburse the Company for expenses and costs
allocated to providing these services to the Partnerships. During the three
months ended March 31, 1996 and 1997, the Company recognized total
reimbursements of $175,000 and $196,407, respectively, under these agreements.
Such reimbursements are offset against corporate general and administrative
expenses in the accompanying statements of operations.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Recent Developments
- -------------------
On March 26, 1997, the Company entered into an agreement with The Hearst
Corporation (Hearst) to combine the television broadcasting group of Hearst with
and into the Company. The agreement has been approved by the boards of
directors of both companies and is expected to be submitted to shareholders of
the Company for approval in August 1997. Argyle Television Investors, L.P.;
Television Investment Partners, L.P.; Argyle Television Partners, L.P. and
certain other shareholders, which collectively own approximately two-thirds of
the Common Stock outstanding of the Company, have agreed to vote the shares they
hold in favor of the merger to effect this combination.
The following discussion of results of operations does not include the pro
forma effects of this anticipated transaction.
Results of Operations
- ---------------------
In January 1995, the Company acquired three television stations -- WZZM, WNAC
and WAPT (Northstar Stations). The Company acquired KITV in June 1995 and WGRZ
in December 1995. In June 1996, the Company acquired KHBS and its S-2 satellite
KHOG (Arkansas Stations). On July 1, 1996, the Company entered into a Joint
Marketing and Programming Agreement (Clear Channel Venture) with Clear Channel
Communications, Inc. involving WNAC and WPRI, the CBS affiliate in Providence,
Rhode Island, owned by Clear Channel Communications, Inc. On January 31, 1997,
the Company swapped WZZM and WGRZ under the terms of an agreement (Gannett Swap)
for WLWT and KOCO with Gannett Co., Inc. (Gannett). (See Note 2 to the
financial statements.)
The following discussion includes a comparison of 1997 results of operations,
which includes WAPT, KITV and the Arkansas Stations for the three months ended
March 31, 1997; WZZM and WGRZ for January 1997, only; WLWT and KOCO from
February 1 to March 31, 1997, and the Company's share of the Clear Channel
Venture for the three months ended March 31, 1997 to 1996 results of operations,
which includes the Northstar Stations, KITV and WGRZ for the three months ended
March 31, 1996. The Company's share of the Clear Channel Venture broadcast cash
flows is included in total revenues, only.
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
- -------------------------------------------------------------------------------
Total Revenues. Total revenues for the three months ended March 31, 1997
were $17.9 million, as compared to $15.5 million for the three months ended
March 31, 1996, an increase of $2.4 million, or 15.5%. The increase was
primarily attributable to (i) the acquisition of the Arkansas Stations, which
added $1.9 million to total revenues for the 1997 period and (ii) the Gannett
Swap, which added $1.5 million, net to total revenues for the 1997 period.
These
-11-
<PAGE>
revenue gains were offset by the net effects of the Clear Channel Venture, which
accounted for a $1.0 million decrease in recorded total revenues, because only
the Company's share of the Clear Channel Venture broadcast cash flow is
included in total revenues.
Station Operating Expenses. Station operating expenses for the three months
ended March 31, 1997 were $10.8 million, as compared to $8.9 million for the
three months ended March 31, 1996, an increase of $1.9 million, or 21.3%. The
increase was primarily attributable to (i) the acquisition of the Arkansas
Stations, which added $1.3 million to station operating expenses during the 1997
period; (ii) the Gannett Swap, which added $1.3 million, net to station
operating expenses for the 1997 period; and (iii) a slight increase in trade and
barter expenses at WAPT and KITV. This was offset by the Clear Channel Venture,
which accounted for a $0.8 million decrease in station operating expenses during
the 1997 period as a result of WNAC expenses being eliminated (netted with total
revenues), and only the Company's share of the Clear Channel Venture broadcast
cash flow being included in total revenues.
Depreciation and Amortization. Depreciation and amortization of intangible
assets for the three months ended March 31, 1997 were $6.6 million, as compared
to $5.0 million for the three months ended March 31, 1996, an increase of $1.6
million, or 32.0%. The increase was primarily attributable to (i) the
acquisition of the Arkansas Stations, which added $0.7 million to depreciation
and amortization of intangibles during the 1997 period; (ii) the Gannett Swap,
which added $0.5 million, net to depreciation and amortization of intangibles
during the 1997 period; and (iii) a $0.4 million increase in amortization
related to the capitalized amount paid under the Clear Channel Venture, included
in other assets.
Station Operating Income (loss). Station operating losses for the three
months ended March 31, 1997 were $0.5 million, as compared to station operating
income of $0.3 million for the three months ended March 31, 1996, a decrease of
$0.8 million, or 267%. This decrease was primarily attributable to the increase
in station operating expenses and depreciation and amortization of intangible
assets, which more than offset the increase in total revenues.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses were $1.0 million in both the three months ended March
31, 1997 and 1996. The corporate structure did not change period to period, and
expenses were maintained at a relatively constant level.
Non-cash Compensation Expense. Non-cash compensation expenses were $0.3
million in the three months ended March 31, 1997, as compared to $0.2 million in
the three months ended March 31, 1996, an increase of $0.1 million or 50%. This
represents stock option compensation expense recorded in compliance with FASB
Statement 123.
Interest Expense, Net. Interest expense, net was $4.4 million of the three
months ended March 31, 1997, as compared to $3.5 million for the three months
ended March 31, 1996, an increase of $0.9 million, or 25.7%. This increase in
interest expense, net was primarily attributable to a larger outstanding debt
balance in 1997 than 1996, which was the result of the
-12-
<PAGE>
acquisitions and related financings of the Arkansas Stations, the Clear Channel
Venture and the Gannett Swap. Interest expense, net for the three months ended
March 31, 1997 was reduced by $0.3 million and $0.6 million, respectively, which
reflects the change in fair market value of interest rate protection agreements
since December 31, 1996 and 1995, respectively, recorded in compliance with FASB
Statement 119.
Net Loss. As a result of the factors discussed above, the net loss for the
three months ended March 31, 1997 was $6.2 million, as compared to $4.3 million
for the three months ended March 31, 1996.
Broadcast Cash Flow. Broadcast cash flow is defined as station operating
income, plus depreciation and amortization, plus amortization of program rights,
minus program payments. Broadcast cash flow was $5.9 million for the three
months ended March 31, 1997 as compared to $5.8 million for the three months
ended March 31, 1996, an increase of $0.1 million, or 1.7%. The broadcast cash
flow increase resulted primarily from the inclusion of the Arkansas Stations
during the 1997 period, net of the effect of the Gannett Swap. The broadcast
cash flow margin decreased to 33.0% for the three months ended March 31, 1997,
from 37.4% for the three months ended March 31, 1996. The decrease was primarily
due to the addition of WLWT and KOCO pursuant to the Gannett Swap and the
Arkansas Stations, which are lower margin stations than the historical margins
of the Argyle station group.
Liquidity and Capital Resources
The Company's primary sources of liquidity are current cash balances, cash
flow from operations and borrowing capacity under the existing Bank Credit
Agreement. Including the Company's initial public offering of its Series A
Common Stock in October 1995 and the November 1995 exercise by the underwriters
of such offering of an over-allotment option, the Company has received $131.2
million in net equity capital contributions since inception.
Upon completion of the Gannett Swap in January 1997, the Company amended and
restated its Bank Credit Agreement providing up to $65.0 million of borrowing
capacity of which $20.0 million was borrowed to fund the cash payment to
Gannett. As of March 31, 1997, there was $41.5 million outstanding under the
Bank Credit Agreement. There was no outstanding balance as of March 31, 1996.
The Company may borrow amounts under the Bank Credit Agreement from time to time
for additional acquisitions, capital expenditures and working capital, subject
to the satisfaction of certain conditions on the date of borrowing.
Under the terms of the Bank Credit Agreement, the Company is required to
enter into Interest Rate Protection Agreements covering approximately 50% of its
floating rate debt. Accordingly, the Company, in compliance with its covenant
obligations, entered into various appropriate swap and cap agreements in
February 1995. In response to subsequent acquisition and financing
transactions, modifications were made to the underlying agreements. See Notes
2. and 3. to the Company's audited consolidated financial statements included
herein.
-13-
<PAGE>
In October 1995, the Company issued $150,000,000 of 9 3/4% Senior
Subordinated Notes due 2005. Interest on the Notes is payable semi-annually, and
no principal payments on the Notes are due prior to their maturity on November
1, 2005. The Notes are redeemable at the option of the Company, in whole or in
part, at any time after November 1, 2000 at specified redemption prices. The
annual interest expense associated with the Notes is $14.6 million.
Capital expenditures were $6.6 million in 1996 and are $1.4 million through
March 31, 1997. The Company expects to invest approximately $9.3 million in
1997 related to the construction of a new all-digital studio and station
facility for KITV, of which $1.8 million was escrowed in 1996. KITV will vacate
its leased facility at that time and terminate the lease.
The Company anticipates that its operating cash flow, together with amounts
available to it under the Bank Credit Agreement, will be sufficient to finance
the operating and working capital requirements of its stations, the Company's
debt service requirements and anticipated capital expenditures for Company for
both the next 12 months and the foreseeable future thereafter.
Income Taxes
- ------------
The Company has gross deferred tax assets related to acquired intangible
assets and net operating loss carryforwards of approximately $2.0 and $35.8
million, respectively. These deferred tax assets are fully reserved at March
31, 1997. The Company sustained a net operating loss for tax purposes of
approximately $5.85 million in the three months ended March 31, 1997. Net
operating loss carryforwards of approximately $13.35 million, $16.55 million,
and $5.85 million will expire in 2010, 2011, and 2012, respectively.
-14-
<PAGE>
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
----------------------------------
Item 2. Changes in Securities - Not Applicable
--------------------------------------
Item 3. Defaults Upon Senior Securities - Not Applicable
------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
--------------------------------------------------------------------
Item 5. Other Information - Not Applicable
----------------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit No.
2 Agreement and Plan of Merger dated as of March 26, 1997 by
and among The Hearst Corporation, HAT Merger Sub, Inc., HAT
Contribution Sub, Inc. and Argyle Television, Inc.
*10.8a Affiliation Agreement among Multimedia, Inc.; Multimedia
Entertainment, Inc. (Re: WLWT) and NBC.
*10.8b Affiliation Agreement between Combined Communications
Corporation of Oklahoma, Inc. (Re: KOCO) and ABC.
27.1 Financial Data Schedule.
99 Press release issued March 26, 1997.
(b) Reports on Form 8-K
During the quarter ended March 31, 1997, the Company filed a Form
8-K dated as of January 31, 1997, as amended, relating to the
transaction with Gannett to exchange WZZM and WGRZ for WLWT and
KOCO. The filing reported information under Items 2 and 7 of Form
8-K, including the financial statements more fully described in the
Company's Form 8-K/A filed on April 15, 1997.
______________
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
December 31, 1996.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Argyle Television, Inc.
-----------------------
Registrant
May 15,1997 By: /s/ Harry T. Hawks
- ----------- ------------------------------------------------
Date Harry T. Hawks, Chief Financial Officer,
Assistant Secretary, and Treasurer
(Principal Financial Officer)
May 15, 1997 By: /s/ Teresa D. Lopez
- ----------- ------------------------------------------------
Date Teresa D. Lopez, Controller and
Assistant Secretary
(Principal Accounting Officer)
-16-
<PAGE>
Execution Copy
AGREEMENT AND PLAN OF MERGER
dated as of March 26, 1997
by and among
THE HEARST CORPORATION,
HAT MERGER SUB, INC.,
HAT CONTRIBUTION SUB, INC.
and
ARGYLE TELEVISION, INC.
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TABLE OF CONTENTS
Page
No.
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ARTICLE I.
THE MERGER
1.01 The Merger....................................................... 3
1.02 Effective Time................................................... 3
1.03 Closing.......................................................... 4
1.04 Certificate of Incorporation and Bylaws of the Surviving
Corporation..................................................... 4
1.05 Directors and Officers of the Surviving Corporation.............. 4
1.06 Effects of the Merger............................................ 4
1.07 Further Assurances............................................... 4
ARTICLE II.
CERTAIN PRE-MERGER TRANSACTIONS
2.01 Restated Charter................................................. 5
2.02 Contribution of Contributed Cash and Parent Station Assets;
Assumption of Bridge Debt, Private Placement Debt and Parent..... 5
2.03 Issuance of Company Series B Common Stock........................ 10
ARTICLE III.
CONVERSION OF SHARES
3.01 Conversion of Capital Stock...................................... 10
3.02 Election Procedures.............................................. 13
3.03 Selection of Company Common Stock and Company Options............ 15
3.04 The Company To Make Cash and Certificates Available.............. 18
3.05 Dividends........................................................ 19
3.06 Dissenting Shares................................................ 20
3.07 Electing Optionholders Supplemental Election..................... 20
ARTICLE IV.
CERTAIN ADJUSTMENTS
4.01 Parent Station Business Adjustment............................... 21
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No.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.01 Organization and Qualification................................... 22
5.02 Capital Stock.................................................... 22
5.03 Authority Relative to this Agreement; Restated Charter........... 24
5.04 Non-Contravention; Approvals and Consents........................ 24
5.05 SEC Reports and Financial Statements............................. 26
5.06 Absence of Certain Changes or Events............................. 27
5.07 Absence of Undisclosed Liabilities............................... 27
5.08 Legal Proceedings................................................ 27
5.09 Compliance with Laws and Orders.................................. 27
5.10 Taxes............................................................ 28
5.11 Employee Benefit Plans; ERISA.................................... 29
5.12 Labor Matters.................................................... 30
5.13 Environmental Matters............................................ 30
5.14 Intangible Property.............................................. 31
5.15 Title; Condition................................................. 31
5.16 Opinion of Financial Advisor..................................... 31
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PARENT
6.01 Organization and Qualification................................... 31
6.02 Capital Stock.................................................... 32
6.04 Non-Contravention; Approvals and Consents........................ 33
6.05 Financial Statements............................................. 33
6.06 Absence of Certain Changes or Events............................. 34
6.07 Absence of Undisclosed Liabilities............................... 34
6.08 Legal Proceedings................................................ 34
6.09 Compliance with Laws and Orders.................................. 35
6.10 Material Contracts............................................... 35
6.11 Employee Benefit Plans........................................... 36
6.12 Labor Matters.................................................... 37
6.13 Title to Parent Station Assets; Entire Business.................. 37
6.14 Condition of Parent Station Assets............................... 38
6.15 Environmental Matters............................................ 38
6.16 Intangible Property.............................................. 38
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No.
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ARTICLE VII.
COVENANTS RELATING TO CONDUCT OF BUSINESS
7.01 Conduct of Business by Company................................... 38
7.02 Conduct of Parent Station Business by Parent..................... 41
ARTICLE VIII.
ADDITIONAL AGREEMENTS
8.01 No Solicitations................................................. 43
8.03 Access to Information; Audited Financial Statements;
Confidentiality................................................. 44
8.04 Registration Statement........................................... 46
8.05 Approval of Stockholders and Board Recommendation................ 47
8.06 Regulatory and Other Approvals................................... 47
8.07 Tax Matters...................................................... 49
8.08 Affiliate Letters; Resales....................................... 49
8.09 Governance....................................................... 49
8.10 Directors' and Officers' Indemnification and Insurance........... 50
8.11 Expenses......................................................... 50
8.12 Brokers or Finders............................................... 51
8.13 Fulfillment of Conditions........................................ 51
8.14 Indemnification.................................................. 51
8.15 Cross-Ownership.................................................. 52
ARTICLE IX.
CONDITIONS
9.01 Conditions to Each Party's Obligation to Effect the
Contribution and the Merger..................................... 53
9.02 Conditions to Obligation of Parent, Merger Sub
and Cash Sub to Effect the Contribution and the Merger.......... 54
9.03 Conditions to Obligation of the Company to Effect the Merger..... 56
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Page
No.
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ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
10.01 Termination..................................................... 57
10.02 Effect of Termination and Abandonment........................... 58
10.03 Amendment....................................................... 59
10.04 Waiver.......................................................... 59
ARTICLE XI.
GENERAL PROVISIONS
11.01 Non-Survival of Representations, Warranties, Covenants and
Agreements..................................................... 59
11.02 Certain Definitions............................................. 60
11.03 Notices......................................................... 71
11.04 Entire Agreement................................................ 72
11.05 Public Announcements............................................ 72
11.06 No Third Party Beneficiary...................................... 72
11.07 No Assignment; Binding Effect................................... 73
11.08 Headings........................................................ 73
11.09 Invalid Provisions.............................................. 73
11.10 Governing Law................................................... 73
11.11 Counterparts.................................................... 73
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EXHIBITS
Exhibit A Form of Restated Charter
Exhibit B Form of Registration Rights Agreement
Exhibit 1.05 Directors and Officers of the
Surviving Corporation
Exhibit 8.08 Form of Affiliate Letter
Exhibit 9.01(i) Terms of Management Contract, TV
Option Contract, and Radio Facilities
Lease
Exhibit 9.02(f) Form of Tax Sharing Agreement
Exhibit 9.02(g) Form of License Agreement
Exhibit 9.02(h)(A) List of Persons Delivering Management
Transfer Restriction Agreements
Exhibit 9.02(h)(B) Form of Management Transfer
Restriction Agreement
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This AGREEMENT AND PLAN OF MERGER dated as of March 26, 1997, is made
and entered into by and among The Hearst Corporation, a Delaware corporation
("Parent"), HAT Merger Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), HAT Contribution Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Cash Sub"), and Argyle
Television, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent is engaged in the business of owning and operating the
following television broadcast stations: KMBC-TV in Kansas City, Kansas, WBAL-TV
in Baltimore, Maryland, WCVB-TV in Boston, Massachusetts, WDTN-TV in Dayton,
Ohio, WISN-TV in Milwaukee, Wisconsin, and WTAE-TV in Pittsburgh, Pennsylvania
(collectively, the "Parent Stations");
WHEREAS, the Company is engaged in the business of owning and
operating the following television broadcast stations: WLWT-TV in Cincinnati,
Ohio, KOCO-TV in Oklahoma City, Oklahoma, WNAC-TV in Providence, Rhode Island,
KITV-TV in Honolulu, Hawaii, WAPT-TV in Jackson, Mississippi, KHBS-TV in Ft.
Smith, Arkansas, and KHOG-TV in Fayetteville, Arkansas (collectively, the
"Company Stations");
WHEREAS, the Board of Directors of the Company has approved and
determined it advisable that the Company adopt certain amendments to the
Company's Certificate of Incorporation and a restatement of such Certificate of
Incorporation reflecting such amendments, in the form attached hereto as Exhibit
A (the "Restated Charter"), which Restated Charter shall be in effect
immediately prior to the consummation of the Merger described below;
WHEREAS, the Boards of Directors of Parent, Cash Sub, Merger Sub and
the Company each have approved the execution and delivery of this Agreement and
have determined, as applicable, that it is advisable and in the best interests
of their respective stockholders for (i) Parent to contribute, or cause to be
contributed, to the Company certain of the assets and liabilities of the Parent
Stations in exchange for shares of Company Series B Common Stock (as hereinafter
defined), (ii) Cash Sub to contribute to the Company the Contributed Cash and
the Bridge Debt (each as hereinafter defined) in exchange for one (1) share of
Company Series B Common Stock, (iii) the Company to contribute the assets and
liabilities of the Parent Stations to one or more direct or indirect wholly-
owned subsidiaries of the Company (collectively, the "Broadcast Subsidiaries"),
and (iv) Merger Sub to merge with and into the Company, as a result of which the
Company shall be the surviving corporation (the "Merger");
WHEREAS, for federal income tax purposes, it is intended that the
Contribution (as hereinafter defined) will qualify as a tax-free exchange under
the provisions of Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a redemption under the provisions of Section 302 of the
Code with respect to those stockholders of the Company who receive cash pursuant
to the Merger;
<PAGE>
WHEREAS, Argyle Television Investors, L.P. (together with any
successor partnership, "ATILP") is the holder of 6,600,000 shares of the Series
C Common Stock of the Company, par value $.01 per share ("Existing Series C
Common Stock"); Television Investment Partners L.P. ("TIP") is the holder of
700,000 shares of Existing Series C Common Stock; Argyle Television Partners,
L.P. ("ATP") is the holder of 36,000 shares of the Series B Common Stock of the
Company, par value $.01 per share ("Existing Series B Common Stock"); and Robin
(a/k/a Robert) Hernreich ("Hernreich") is the holder of 159,358 shares of the
Series A Common Stock of the Company, par value $.01 per share (the "Existing
Series A Common Stock"); Argyle Foundation is the holder of 99,000 shares of
Existing Series A Common Stock; and Skylark Foundation is the holder of 65,000
shares of Existing Series A Common Stock;
WHEREAS, ATILP (and its general partner) has adopted a plan of
liquidation of ATILP (the "ATILP Liquidation Plan") providing for the
distribution of shares of Existing Series A Common Stock (into which shares of
Existing Series C Common Stock held by ATILP will be converted pursuant to the
Voting Agreements described below) to the partners of ATILP in accordance with
the terms of the Amended and Restated Agreement of Limited Partnership of ATILP;
WHEREAS, TIP (and its general partner) has adopted a plan of
liquidation of TIP (the "TIP Liquidation Plan") providing for the distribution
of shares of Existing Series A Common Stock (into which shares of Existing
Series C Common Stock will be converted pursuant to the Voting Agreements
described below) to the partners of TIP in accordance with the terms of the
Amended and Restated Agreement of Limited Partnership of TIP;
WHEREAS, ATP (and its general partner) has adopted a plan of
liquidation of ATP (the "ATP Liquidation Plan") providing for the distribution
to the partners of ATP in accordance with the terms of the Agreement of Limited
Partnership of ATP, as amended, of (i) 36,000 shares of Existing Series B Common
Stock and (ii) Existing Series A Common Stock which will be received by ATP upon
its receipt of liquidating distributions from ATILP, TIP and ATI General
Partner, L.P. ("ATIGP");
WHEREAS, ATIGP (and its general partner) has adopted a plan of
liquidation of ATIGP (the "ATIGP Liquidation Plan") providing for the
distribution to the partners of ATIGP in accordance with the terms of the ATIGP
partnership agreement of Existing Series A Common Stock which will be received
by ATIGP upon its receipt of a liquidating distribution from ATILP;
WHEREAS, although ATILP, TIP, ATP and ATIGP respectively, desire to
effectuate the ATILP Liquidation Plan, the TIP Liquidation Plan, the ATP
Liquidation Plan and the ATIGP Liquidation Plan as soon as practicable, Parent,
Merger Sub and Cash Sub are unwilling to enter into this Agreement unless each
of ATILP, TIP, ATP, Hernreich, Argyle Foundation and Skylark Foundation
concurrently with the execution and delivery of this Agreement, enter into
agreements (the "Voting Agreements") pursuant to which, subject to the terms
thereof, (i) each of ATILP and TIP agrees to convert all of the shares of
Existing Series C Common Stock held by it into shares of the Existing Series A
Common Stock into which such shares of Existing Series C Common Stock are
convertible, and (ii) each of ATILP and TIP agrees to vote such shares of
Existing Series
2
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A Common Stock held by it, ATP agrees to vote all shares of Existing Series B
Common Stock held by it, and each of Hernreich, Argyle Foundation and Skylark
Foundation agrees to vote all shares of Existing Series A Common Stock held by
each of them, in favor of the Restated Charter and the Merger; and the Board of
Directors of the Company has approved the execution and delivery of the Voting
Agreements;
WHEREAS, on behalf of the partners of ATILP, TIP, and ATP, each of
ATILP, TIP and ATP have agreed pursuant to the Voting Agreements that they will
not effectuate the ATILP Liquidation Plan, the TIP Liquidation Plan or the ATP
Liquidation Plan until the day immediately following stockholder approval;
WHEREAS, upon consummation of the Merger, the Company intends to enter
into a Registration Rights Agreement with certain holders described therein in
substantially the form attached hereto as Exhibit B (the "Registration Rights
Agreement"); and
WHEREAS, certain capitalized terms used herein have the meanings
ascribed to such terms in Section 11.02.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.01 The Merger. At the Effective Time (as defined in Section 1.02),
upon the terms and subject to the conditions of this Agreement, Merger Sub shall
be merged with and into the Company in accordance with the General Corporation
Law of the State of Delaware (the "DGCL"). The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation"). Merger Sub and the
Company are sometimes referred to herein as the "Constituent Corporations". As
a result of the Merger, the outstanding shares of capital stock of the
Constituent Corporations shall be converted or cancelled in the manner provided
in Article III.
1.02 Effective Time. At the Closing (as defined in Section 1.03), a
certificate of merger (the "Certificate of Merger") shall be duly prepared and
executed by the Surviving Corporation and thereafter delivered to the Secretary
of State of the State of Delaware (the "Secretary of State") for filing, as
provided in Section 251 of the DGCL, on, or as soon as practicable after, the
Closing Date (as defined in Section 1.03). The Merger shall become effective at
the time of the filing of the Certificate of Merger with the Secretary of State
or, if the Certificate of Merger specifies a subsequent time for effectiveness,
then at such specified time (the date and time of such filing or as specified in
the Certificate of Merger being referred to herein as the "Effective Time").
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1.03 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Rogers & Wells, 200 Park Avenue, New York, New York
10166, or at such other place as the parties hereto mutually agree, on a date
and at a time to be specified by the parties, which shall in no event be later
than 10:00 a.m., local time, on the third Business Day after the conditions set
forth in Article IX have been satisfied or, if permissible, waived in accordance
with this Agreement, or on such other date as the parties hereto mutually agree
(the "Closing Date"). At the Closing there shall be delivered to Parent and the
Company the certificates and other documents and instruments required to be
delivered under Article IX or under other provisions of this Agreement.
1.04 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time (as amended and
restated, as provided in Section 2.01) shall be the Certificate of Incorporation
of the Surviving Corporation, except that Article "One" of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the Corporation is Hearst/Argyle Television, Inc.," and (ii) the
Bylaws of the Company as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation, except that the Bylaws shall be
amended such that Section 2 of Article III thereof shall be amended and restated
in its entirety to read as follows until thereafter amended as provided by law:
Section 2. Number of Directors. Effective upon the merger of HAT
Merger Sub, Inc. with and into the corporation, the number of
directors shall be twelve (12); thereafter, the number of directors
shall consist of no fewer than seven (7) members and no more than
fifteen (15) members as determined from time to time in accordance
with these Bylaws by resolution of the Board of Directors, but no
decrease in the number of directors shall have the effect of
shortening the term of any incumbent director.
1.05 Directors and Officers of the Surviving Corporation. From and
after the Effective Time, the directors and officers of the Surviving
Corporation shall be the persons set forth on Exhibit 1.05 hereto and eight
other individuals to be designated as directors by Parent pursuant to a written
notice delivered to the Company prior to the Effective Time, until their
successors shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
1.06 Effects of the Merger. Subject to the provisions of this
Agreement, the effects of the Merger shall be as provided in the applicable
provisions of the DGCL.
1.07 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other transactions and purposes of this Agreement.
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ARTICLE II.
CERTAIN PRE-MERGER TRANSACTIONS
2.01 Restated Charter. At the Closing but prior to the Effective
Time, the Company shall duly execute and file the Restated Charter with the
Secretary of State, as provided in Section 245 of the DGCL, so that the Restated
Charter shall be in effect and operative as the Certificate of Incorporation of
the Company at the Effective Time (the date and time of such Restated Charter
filing being referred to herein as the "Amendment Time").
2.02 Contribution of Contributed Cash and Parent Station Assets;
Assumption of Bridge Debt, Private Placement Debt and Parent Station
Liabilities.
(a) Contribution of Contributed Cash and Parent Station Assets. Upon
the terms and subject to the conditions of this Agreement (and except as
contemplated by Section 8.15), at the Closing and immediately prior to the
Merger but after the Amendment Time, (x) Cash Sub shall contribute, transfer,
assign, convey and deliver to the Company, and the Company shall receive,
acquire and accept from Cash Sub, cash in the amount of Two Hundred Million and
Twenty-Six Dollars and Fifty Cents ($200,000,026.50) (the "Contributed Cash")
and (y) Parent shall contribute, transfer, assign, convey and deliver to the
Company and immediately following such transactions the Company shall
contribute, transfer, assign, convey and deliver to the Broadcast Subsidiaries,
and the Company shall receive, acquire and accept from Parent, and thereupon the
Company shall cause the Broadcast Subsidiaries to receive, acquire and accept
from the Company, all of Parent's right, title and interest in and to all of the
assets, properties and rights of Parent owned or used by Parent solely in the
conduct of the business and operations of the Parent Stations and of Hearst
Broadcasting Productions (collectively, the "Parent Station Business"), of every
type and description, real, personal and mixed, tangible and intangible,
wherever located, as and to the extent existing at the time of the Contribution,
other than those assets, properties and rights which are specifically excluded
pursuant to Section 2.02(b) (the assets, properties and rights described in this
clause (y) are hereinafter collectively referred to as the "Parent Station
Assets"). The contribution by Cash Sub to the Company of the Contributed Cash
and the contribution by Parent to the Company of the Parent Station Assets is
hereinafter referred to collectively as the "Contribution.") Without limitation
of the foregoing, but except as specifically excluded pursuant to Section
2.02(b), the Parent Station Assets shall include the following as and to the
extent existing at the time of the Contribution:
(i) Tangible Personal Property. All equipment, machinery,
vehicles, furniture, fixtures, transmitters, transmitting
towers, antennae, computer hardware and software, office
materials and supplies, spare parts and other tangible
personal property of every kind and description, owned,
leased, used or held for use by Parent and which relate
solely to the conduct of the Parent Station Business, and
any additions, improvements, replacements and alterations
thereto ("Parent Station Tangible Property");
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(ii) Owned Real Property. All real property described in Section
2.02(a)(ii) of the Parent Disclosure Letter (as hereinafter
defined), together with all easements, licenses and other
interests and rights arising out of the ownership thereof
or appurtenant thereto, and all buildings, transmitters,
towers and antennae, fixtures and improvements thereon;
(iii) Real Property Leases. The leases or subleases of real
property, buildings, transmitters, tower and antennae as to
which Parent is the lessor/sublessor or lessee/sublessee
set forth in Section 2.02(a)(iii) of the Parent Disclosure
Letter, together with any options to purchase the
underlying property and leasehold improvements thereon, to
which Parent is a party or by which the Parent Station
Business is bound, and which relate solely to the conduct
of the Parent Station Business (the "Parent Station
Leases");
(iv) Contracts. All contracts and other agreements (other than
the Parent Station Leases), to which Parent is a party or
by which the Parent Station Business is bound, and which
relate solely to the conduct of the Parent Station
Business, including, but not limited to, all orders and
agreements for the sale of advertising, program agreements,
network affiliation agreements and employment contracts
with television talent, all leases of Parent Station
Tangible Property as to which Parent is the
lessor/sublessor or lessee/sublessee together with any
options to purchase the underlying property (the "Parent
Station Contracts");
(v) Permits. To the extent transferable under applicable law,
all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights
and applications for any of the foregoing and which relate
solely to the conduct of the Parent Station Business,
including but not limited to FCC Licenses ("Parent Station
Permits");
(vi) Accounts Receivable. All trade accounts receivable and all
notes, bonds and other evidences of indebtedness of and
rights to receive payments arising out of sales occurring
in the conduct of the Parent Station Business and the
security agreements related thereto, including any rights
of Parent with respect to any third party collection
procedures which have been commenced in connection
therewith, to the extent related solely to the conduct of
the Parent Station Business;
(vii) Prepaid Expenses. All prepaid expenses relating solely to
the conduct of the Parent Station Business;
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(viii) Security Deposits. All security deposits deposited or made
by Parent and which relate solely to the Parent Station
Assets (including but not limited to those made as lessee
or sublessee under any of the Parent Station Leases and
Parent Station Contracts);
(ix) Intangible Property. All patents and applications
therefor, copyrights and applications therefor (including
rights to renew), trademarks and applications therefor,
trade names and applications therefor, service marks and
applications therefor, computer software and television
station call letters ("Intangible Property") which relate
solely to the Parent Station Business;
(x) Books and Records. All general, financial and personnel
records, correspondence and other files and records,
including all FCC logs and other records, of Parent
pertaining solely to the conduct of the Parent Station
Business; and
(xi) Goodwill. All of Parent's goodwill in the Parent Station
Business;
(b) Excluded Assets. Any provision of this Agreement to the contrary
notwithstanding, the Company shall not acquire from Parent and there shall be
excluded from the Parent Station Assets the following (the "Parent Station
Excluded Assets"):
(i) Cash. All cash, marketable securities, commercial paper,
certificates of deposit and other bank deposits, treasury
bills and other cash equivalents (the "Excluded Cash");
(ii) Bank Accounts. All rights with respect to bank accounts;
(iii) Radio Assets. All assets, properties and rights of Parent
owned, used or held for the use by Parent in the ownership
or operation of radio broadcast stations (the "Radio
Assets");
(iv) Tax Refunds. All rights of Parent with respect to any
federal, state, local or foreign income, franchise, excise,
stamp, real property, personal property, sales, use,
customs, transfer, gains or value added tax, tariff,
import, fee, duty, levy or other governmental charge
(collectively, "Taxes") incurred by Parent in the conduct
of the Parent Station Business or with respect to the
Parent Station Assets before the Contribution
(collectively, "Tax Refunds"), other than any Tax Refunds
attributable to Taxes accrued for on the Parent Station
Balance Sheet;
(v) Florida Station. All assets, properties and rights of
Parent owned, used or held for use by Parent and/or WWWB-TV
Company solely in the ownership or operation of the WWWB-TV
(Tampa, Florida) television broadcast station (the "Florida
Station Assets");
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(vi) Missouri LMA. The local marketing agreement of Parent with
respect to the operations of KCWB-TV (Kansas City,
Missouri), including all assets, properties and rights of
Parent with respect thereto (the "Missouri LMA");
(vii) Intercompany Accounts. All rights with respect to any
obligations of Parent, any Affiliate of Parent or any
director or officer of Parent or of any Affiliate of
Parent;
(viii) Certain Names. All rights to use the corporate names,
logos, trademarks or tradenames set forth in Section
2.02(b) of the Parent Disclosure Letter or any derivatives
or variances thereof, including but not limited to the
name "Hearst,", "The Hearst Corporation," or any
derivatives or variances thereof;
(ix) Insurance. All insurance policies and all rights of every
nature and description under or arising out of such
policies, except as provided in Section 2.02(g) of this
Agreement;
(x) Certain Programs. All rights to the television program
"Rebecca's Garden"; and
(xi) Other Matters. All rights of Parent under this Agreement
and the agreements and instruments delivered to Parent by
the Company or the Broadcast Subsidiaries pursuant to this
Agreement and all other assets, properties and rights of
Parent which are not owned or used by Parent solely in the
conduct of the Parent Station Business.
(c) Assumption of Bridge Debt, Private Placement Debt and Parent
Station Liabilities. Subject to the terms set forth in this Agreement and
except as provided in Section 2.02(d), in consideration for the Contribution and
simultaneously therewith, (x) the Company shall assume and thereafter pay,
perform and discharge when due: (i) the Bridge Debt, (ii) the Private Placement
Debt and (iii) any and all obligations and liabilities of Parent to the extent
related to the Parent Station Business, whether fixed, contingent, choate,
inchoate or otherwise, as and to the extent existing at the time of the
Contribution other than the Parent Station Excluded Liabilities (as defined
below) (the "Parent Station Assumed Liabilities"), and (y) immediately following
such transactions the Company shall cause the Broadcast Subsidiaries to assume
and thereafter pay, perform and discharge when due the Private Placement Debt
and the Parent Station Assumed Liabilities. Without limitation of the
foregoing, but except as provided in Section 2.02(d) and Section 2.02(f), the
Parent Station Assumed Liabilities shall include the following as and to the
extent existing at the time of the Contribution:
(i) Balance Sheet Liabilities. All liabilities set forth on the
balance sheet of the Parent Station Business as of December
31, 1996 referred to in Section 6.05;
8
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(ii) Obligations Under Leases, Contracts and Permits. All
liabilities and obligations of Parent under any Parent
Station Leases, Parent Station Contracts and Parent Station
Permits;
(iii) Employees. All liabilities and obligations of Parent
relating to the Parent Station Employees (as defined
below);
(d) Liabilities Not Assumed. Anything contained in this Agreement to
the contrary notwithstanding, the Company shall not assume and there shall be
excluded from the Parent Station Assumed Liabilities the following obligations
and liabilities of Parent (collectively, the "Parent Station Excluded
Liabilities"):
(i) Non-Trade Indebtedness. All liabilities under any bonds,
notes, debentures or similar instruments, any indebtedness
for borrowed money or any guarantees thereof other than the
Private Placement Debt;
(ii) Tax Liabilities. Any liabilities for Taxes incurred by
Parent in the conduct of the Parent Station Business or
with respect to the Parent Station Assets before the
Contribution, except to the extent accrued for on the
Parent Station Balance Sheet or as provided in Section
8.11;
(iii) Parent Station Employee Benefit Plans. All liabilities and
obligations (x) of Parent under the Parent Station Employee
Benefit Plans, other than collective bargaining agreements
and employment agreements with respect to Parent Station
Employees, (y) to employees of Parent who are not Parent
Station Employees (as hereinafter defined), and (z) under
the employment agreements set forth in Section 2.02(d)(iii)
of the Parent Disclosure Letter;
(iv) Intercompany Accounts. All liabilities to Parent or any
affiliate of Parent (other than amounts owed to Parent
Station Employees);
(v) Excluded Assets. All liabilities or obligations to the
extent relating to the acquisition, ownership, operations
or use of any of the Parent Station Excluded Assets.
Parent shall pay, perform and discharge in a timely manner or shall make
adequate provision for all of the Parent Station Excluded Liabilities; provided,
however, that Parent may contest, in good faith, any claim of liability asserted
by a third party in respect thereof.
(e) Nonassignable Parent Station Contracts and Parent Station Permits.
To the extent that transfer and assignment hereunder by Parent to the Company or
by the Company to the Broadcast Subsidiaries of any Parent Station Lease, Parent
Station Contract or Parent Station Permit is not permitted or is not permitted
without the consent of any third party, this Agreement shall not be deemed to
constitute an undertaking to assign the same if such consent is not given or if
such an
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undertaking otherwise would constitute a breach thereof or cause a loss
of benefits thereunder. Parent will use commercially reasonable efforts to
obtain any and all such third party consents; provided, however, that except as
otherwise provided in Section 8.06, Parent shall not be required to pay or incur
any cost or expense to obtain any third party consent which Parent is not
otherwise required to pay or incur in accordance with the terms of the
applicable Parent Station Lease, Parent Station Contract or Parent Station
Permit. If any such third party consent is not obtained before the transfer of
the Parent Station Business contemplated by this Section 2.02, Parent will
cooperate with the Company, at its expense, in any reasonable arrangement
designed to thereafter provide to the Broadcast Subsidiaries the benefits under
the applicable Parent Station Lease, Parent Station Contract or Parent Station
Permit.
(f) Parent Station Employees. Effective upon the Contribution, all
employees of Parent employed in the Parent Station Business, except those
employees identified in Section 2.02(f) of the Parent Disclosure Letter, shall
become employees (the "Parent Station Employees") of the Company or one or more
of the Broadcast Subsidiaries at the Closing and simultaneous with the
Contribution.
(g) Risk of Loss. The risk of loss or damage to any of the Parent
Station Assets to be contributed by Parent to the Company and by the Company to
the Broadcast Subsidiaries shall be on Parent prior to the Closing and
thereafter shall be on the Company. If any of the Parent Station Assets shall
suffer any material damage, destruction or loss after the date of this Agreement
but before the Closing Date, and such Parent Station Asset and the related
casualty are covered by any insurance policy maintained by Parent or the Parent
Station Business with a third party insurer: Parent shall pay the Company at the
Closing or as soon as practicable after receipt by Parent, if later than the
Closing, in cash, the amount by which the proceeds from such policy in respect
of such damage, destruction or loss exceed the sum of (i) any amount accrued for
on the Parent Station Balance Sheet as a current liability with respect to
repair, restoration or replacement related to such damage, destruction or loss
and (ii) the amount by which the current assets included in the Parent Station
Balance Sheet shall have been reduced by reason of any current asset so damaged,
destroyed or lost.
2.03 Issuance of Company Series B Common Stock. In exchange for the
transfer of the Contributed Cash and the Parent Station Assets to the Company
pursuant to Section 2.02 above, and simultaneously therewith but after the
Restated Charter has been duly filed and is in effect as provided in Section
2.01, (i) the Company shall issue to Parent 38,611,000 shares of the Company
Series B Common Stock and (ii) the Company shall issue to Cash Sub one share of
the Company Series B Common Stock.
ARTICLE III.
CONVERSION OF SHARES
3.01 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any share of
capital stock of Merger Sub or the Company:
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(a) Capital Stock of Merger Sub. Each issued and outstanding share of
the common stock, par value $.01 per share, of Merger Sub ("Merger Sub Common
Stock") shall be converted into and become one fully paid and nonassessable
share of Series B Voting Common Stock, par value $.01 per share, of the
Surviving Corporation ("Surviving Corporation Series B Common Stock"). Each
certificate representing outstanding shares of Merger Sub Common Stock shall at
the Effective Time represent an equal number of shares of Surviving Corporation
Series B Common Stock.
(b) Cancellation of Treasury Stock. Each share of Company Series A
Common Stock and Company Series B Common Stock, and each share of the Company
Series A Preferred Stock and Company Series B Preferred Stock that is owned by
the Company as treasury stock shall be cancelled and retired and shall cease to
exist and no stock of the Company or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Each issued and outstanding
share of Company Series B Common Stock shall be converted into and become one
fully paid and nonassessable share of Surviving Corporation Series B Common
Stock. Each certificate representing outstanding shares of Company Series B
Common Stock shall at the Effective Time represent an equal number of shares of
Surviving Corporation Series B Common Stock. Except as otherwise provided in
Section 3.06 and subject to Section 3.01(b), at the Effective Time each issued
and outstanding share of Company Series A Common Stock shall be converted into
one of the following:
(i) Each share of Company Series A Common Stock which under the
terms of Section 3.03 is to be converted into the right to
receive solely shares of Series A Voting Common Stock, par
value $.01 per share, of the Surviving Corporation
("Surviving Corporation Series A Common Stock") shall be
converted into the right to receive one share of Surviving
Corporation Series A Common Stock (the "Stock
Consideration");
(ii) Each share of Company Series A Common Stock which under the
terms of Section 3.03 is to be converted into the right to
receive solely cash shall be converted into the right to
receive cash, without interest, in an amount equal to
$26.50 (the "Cash Consideration"); and
(iii) Each share of Company Series A Common Stock which under the
terms of Section 3.03 is to be converted into the right to
receive a combination of shares of Surviving Corporation
Series A Common Stock and cash, shall be converted into the
right to receive 0.50 shares of Surviving Corporation
Series A Common Stock and $13.25 in cash, without interest
(the "Mixed Consideration").
(d) Conversion of Company Preferred Stock. Except as otherwise
provided in Section 3.06 and subject to Section 3.01(b), at the Effective Time
each issued and outstanding share of Company Series A Preferred Stock shall be
converted into one share of the Surviving Corporation's Series A Voting
Preferred Stock, par value $.01 per share (the "Surviving Corporation
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Series A Preferred Stock"), and each issued and outstanding share of Company
Series B Preferred Stock shall be converted into one share of the Surviving
Corporation's Series B Voting Preferred Stock, par value $.01 per share (the
"Surviving Corporation Series B Preferred Stock"). Each certificate representing
outstanding shares of Company Series A Preferred Stock or shares of Company
Series B Preferred Stock shall at the Effective Time represent an equal number
of shares of Surviving Corporation Series A Preferred Stock or Surviving
Corporation Series B Preferred Stock, as the case may be.
(e) Company Options. Each option or similar right to purchase shares
of Company Series A Common Stock which is outstanding at the Effective Time
(each such option, as it relates to each such share, being referred to herein as
a "Company Option") shall be cancelled, by virtue of the Merger and without
further action by the Company or the holder of a Company Option, without
consideration except as provided in this Section 3.01(e). Each person shown on
the books of the Company to be a holder of a Company Option, whether or not
immediately exercisable, shall be entitled to receive subject to and in
accordance with the terms of Section 3.03, as soon as practicable after the
Effective Time, at such holder's election, one of the following:
(i) an option to purchase shares of Surviving Corporation
Series A Common Stock ("Surviving Corporation Options"),
into which the Company Options shall be converted and
assumed by the Surviving Corporation. Each Surviving
Corporation Option shall be fully vested and shall
otherwise be exercisable upon the same terms and conditions
as set forth in the option agreement respecting the Company
Option converted into such Surviving Corporation Option (an
"Option Rollover"); or
(ii) a number of shares of Surviving Corporation Series A Common
Stock ("Option Stock") equal to (x) the number of shares of
Company Series A Common Stock underlying such Company
Option multiplied by (y) a fraction, of which the numerator
is the amount by which the Cash Consideration exceeds the
per share exercise or purchase price provided under such
Company Option and the denominator is an amount equal to
the Cash Consideration; or
(iii) cash ("Option Cash") in an amount equal to (x) the Cash
Consideration multiplied by (y) the number of shares of
Option Stock which such holder would be entitled to receive
pursuant to paragraph (ii) above; or
(iv) the sum of (A) a number of shares of Surviving Corporation
Series A Common Stock equal to (x) the number of shares of
Option Stock which such holder would be entitled to receive
pursuant to paragraph (ii) above multiplied by (y) 50%,
plus (B) cash in an amount equal to (x) the Cash
Consideration multiplied by (y) the number of shares by
which the Option Stock which such holder would be entitled
to receive pursuant to paragraph (ii) above exceeds the
number of shares of Surviving Corporation Series A Common
Stock which such holder
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is entitled to receive pursuant to this paragraph (iv) (the
"Option Mixed Consideration").
Except as permitted by the terms of this Agreement or as otherwise
agreed to by the parties, the Company shall use reasonable efforts to ensure
that no person shall have any right under any stock option plan (or any option
granted thereunder) or other plan, program or arrangement with respect to,
including any right to acquire, equity securities of the Surviving Corporation
following the Effective Time.
(f) Per Share Amount. The applicable consideration into which each
share of any class or series of the capital stock of the Company shall be
converted pursuant to Section 3.01(c) or 3.01(d) above shall be hereinafter
referred to, collectively and individually, as the "Per Share Amount".
3.02 Election Procedures.
(a) Company Common Stock. Each holder of Company Series A Common
Stock (other than holders of Company Series A Common Stock to be cancelled as
set forth in Section 3.01(b)) shall have the right to choose to receive
(subject to the allocation and proration procedures set forth below) one of the
following in exchange for each share of such holder's Company Series A Common
Stock in the Merger:
(i) only cash (a "Cash Election");
(ii) only shares of Surviving Corporation Series A Common Stock
(a "Stock Election"); or
(iii) the Mixed Consideration (a "Mixed Election").
As used herein, the term "Election" shall refer to either a Cash Election, a
Stock Election or a Mixed Election.
(b) Company Options. Each holder of a Company Option shall have the
right to choose to receive (subject to the allocation and proration procedures
set forth below) one of the following in exchange for cancellation of such
holder's Company Option in the Merger:
(i) an Option Rollover (a "Rollover Election");
(ii) only Option Cash (an "Option Cash Election");
(iii) only Option Stock (an "Option Stock Election"); or
(iv) the Option Mixed Consideration (an "Option Mixed
Election").
As used herein, the term "Option Election" shall refer to either a Rollover
Election, an Option Cash Election, an Option Stock Election or an Option Mixed
Election.
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(c) Parent and the Company shall authorize one or more persons to
receive Elections and to act as Exchange Agent hereunder (the "Exchange Agent")
pursuant to an agreement or agreements satisfactory to Parent and the Company.
(d) Parent and the Company shall prepare a form (the "Form of
Election") pursuant to which each holder of Company Series A Common Stock may
make an Election with respect to each share of Company Series A Common Stock and
which shall be mailed to stockholders of record of the Company as of the record
date for the Company Stockholders' Meeting contemplated by Section 8.05 (and
shall accompany the Proxy Statement/Prospectus referred to in Section 8.04).
Parent and the Company also shall prepare a form pursuant to which each holder
of a Company Option may make an Option Election and which shall be provided to
each person shown on the books of the Company to be a holder of a Company Option
(the "Option Election Form").
(e) The Company will use its best efforts to make the Form of Election
(accompanied by the Proxy Statement/Prospectus) available to all persons who
become Company stockholders of record during the period between such record date
and the Business Day immediately prior to the Election Date (including those
partners of ATILP, TIP, and ATP and ATIGP to whom shares of Existing Series A
Common Stock or Existing Series B Common Stock have been distributed pursuant to
the Liquidation Plans). As used herein, "Election Date" means a date mutually
agreed upon by Parent and the Company and announced by the Company, in a news
release delivered to the Dow Jones News Service, as the last day on which Forms
of Election will be accepted, provided, however, that such day shall be a
Business Day no earlier than 20 Business Days prior to the Effective Time and at
least two Business Days after the Company Stockholders' Meeting (as defined in
Section 8.05).
(f) Any Election shall have been properly made only if the Exchange
Agent at its office designated in the Form of Election shall have received in
the city in which, for purposes of this Agreement, such Exchange Agent is
located, by 5:00 p.m. local time on the Election Date (the "Election Deadline"),
a Form of Election properly completed and signed. Any Election relating to
shares of Company Series A Common Stock with respect to which the holder thereof
has filed and not withdrawn as of the Effective Time a written demand for
payment of the fair value of Company Series A Common Stock in accordance with
the provisions of Section 3.06 hereof shall be deemed to have been automatically
revoked as of the Election Date.
(g) Holders of record of shares of Company Series A Common Stock who
hold such shares as nominees, trustees or in other representative capacities (a
"Holder Representative") may submit multiple Forms of Election, provided that
such Holder Representative certifies that each such Form of Election covers all
the shares of Company Series A Common Stock held by each Holder Representative
for a particular beneficial owner.
(h) Any holder of Company Series A Common Stock at any time prior to
the Election Deadline may change his Election by written notice received by the
Exchange Agent at or prior to the Election Deadline accompanied by a properly
completed, revised Form of Election.
(i) Any holder of Company Series A Common Stock at any time prior to
the Election Deadline may revoke his Election by written notice received by the
Exchange Agent at or prior to the Election Deadline.
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(j) The Company and Parent shall have the right to make rules not
inconsistent with the terms of this Agreement governing the validity of the
Forms of Election and the Option Election Forms, the manner and extent to which
Elections and Option Elections are to be taken into account in making the
determinations prescribed by this Article III, the issuance and delivery of
certificates for Surviving Corporation Series A Common Stock into which Company
Series A Common Stock and Company Options are converted in the Merger and the
payment for shares of Company Series A Common Stock and Company Options
converted into the right to receive cash in the Merger. All such rules and
determinations thereunder shall be final and binding on all holders of shares of
Company Series A Common Stock and all holders of Company Options.
3.03 Selection of Company Common Stock and Company Options. The
manner in which each share of Company Series A Common Stock (other than shares
of Company Series A Common Stock to be cancelled as set forth in Section
3.01(b)) and each Company Option shall be converted at the Effective Time into
cash or Surviving Corporation Series A Common Stock shall be as set forth below
in this Section 3.03:
(a) As is more fully set forth below, the number of shares of Company
Series A Common Stock and Company Options to be converted into the right to
receive cash in the Merger pursuant to this Agreement (the "Cash Conversion
Number") shall not exceed the amount which is equal as nearly as practicable to
6,025,319 shares. The number of shares of Company Series A Common Stock and
Company Options to be converted into Surviving Corporation Series A Common Stock
in the Merger pursuant to this Agreement (the "Stock Conversion Number") shall
not exceed the amount which is equal as nearly as practicable to 8,277,054
shares.
(b) If the sum of (i) the aggregate number of shares of Company Series
A Common Stock covered by effective Cash Elections (the "Cash Election Shares"),
(ii) the aggregate number of such shares covered by Mixed Elections (the "Mixed
Election Shares") to be acquired for cash (determined by multiplying the number
of Mixed Election Shares by 50%) (such number of shares referred to as the
"Mixed Election Cash Shares"), (iii) the aggregate number of Company Options
covered by Option Cash Elections (the "Option Cash Shares") and (iv) the
aggregate number of Company Options covered by Option Mixed Elections to be
cancelled for cash (the "Mixed Option Cash Shares") exceeds the Cash Conversion
Number, then (i) each share of Company Series A Common Stock for which a Stock
Election has been made, each Company Option for which an Option Stock Election
has been made, and each Non-Electing Company Common Share (as defined in Section
3.03(h)), shall be converted into a right to receive Surviving Corporation
Series A Common Stock in the Merger, (ii) each share of Company Series A Common
Stock for which a Mixed Election has been made and each Common Option for which
an Option Mixed Election has been made shall be converted into the right to
receive the Mixed Consideration or the Option Mixed Consideration, respectively,
in the Merger, and (iii) each share of Company Series A Common Stock for which a
Cash Election has been made and each Company Option for which an Option Cash
Election has been made shall be converted into a right to receive cash or
Surviving Corporation Series A Common Stock in the following manner:
(i) A cash proration factor (the "Cash Proration Factor") shall
be determined by dividing (i) the Cash Conversion Number
minus the sum of (A) the number of Mixed Election Cash
Shares and (B) the number of Mixed Option Cash Shares, by
(ii) the sum of (A) the total
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number of Cash Election Shares and (B) the total number of
Option Cash Shares;
(ii) The number of shares of Company Series A Common Stock
covered by each Cash Election to be converted into the
right to receive cash shall be determined by multiplying
the Cash Proration Factor by the total number of shares of
Company Series A Common Stock covered by such Cash
Election, rounded to the next higher integer;
(iii) The number of Company Options covered by each Option Cash
Election to be converted into the right to receive cash
shall be determined by multiplying the Cash Proration
Factor by the total number of Company Options covered by
such Option Cash Election, rounded to the next higher
integer; and
(iv) Each share of Company Series A Common Stock covered by a
Cash Election and each Company Option covered by an Option
Cash Election which in each case are not converted into a
right to receive cash as set forth above shall be converted
into the right to receive shares of Surviving Corporation
Series A Common Stock in the Merger.
(c) If the sum of (i) the aggregate number of shares of Company Series
A Common Stock covered by effective Stock Elections (the "Stock Election
Shares"), (ii) the aggregate number of Mixed Election Shares to be acquired for
stock (determined by multiplying the number of Mixed Election Shares by 50%)
(such number of shares referred to as the "Mixed Election Stock Shares"), (iii)
the aggregate number of Company Options covered by Option Stock Elections (the
"Option Stock Shares") and (iv) the aggregate number of Company Options covered
by Option Mixed Elections to be cancelled for stock (the "Mixed Option Stock
Shares") exceeds the Stock Conversion Number, then (i) each share of Company
Series A Common Stock for which a Cash Election has been made, each Company
Option for which an Option Cash Election has been made, and each Non-Electing
Company Common Share shall be converted into the right to receive cash in the
Merger, (ii) each share of Company Series A Common Stock for which a Mixed
Election has been made and each Company Option for which an Option Mixed
Election has been made shall be converted into the right to receive the Mixed
Consideration or the Option Mixed Consideration, respectively, in the Merger,
and (iii) the shares of Company Series A Common Stock for which a Stock Election
has been made and each Company Option for which an Option Stock Election has
been made shall be converted into Surviving Corporation Series A Common Stock or
the right to receive cash in the following manner:
(i) A stock proration factor (the "Stock Proration Factor")
shall be determined by dividing (i) the Stock Conversion
Number minus the sum of (A) the number of Mixed Election
Stock Shares and (B) the number of Mixed Option Stock
Shares, by (ii) the sum of (A) the total number of Stock
Election Shares and (B) the total number of Option Stock
Shares;
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(ii) The number of shares of Company Series A Common Stock
covered by each Stock Election to be converted into
Surviving Corporation Series A Common Stock shall be
determined by multiplying the Stock Proration Factor by the
total number of shares of Company Series A Common Stock
covered by such Stock Election, rounded to the next lower
integer;
(iii) The number of Company Options covered by each Option Stock
Election to be converted into Surviving Corporation Series
A Common Stock shall be determined by multiplying the Stock
Proration Factor by the total number of shares of Company
Series A Common Stock covered by such Option Stock
Election, rounded to the next higher integer; and
(iv) Each share of Company Series A Common Stock covered by a
Stock Election and each Company Option covered by an Option
Stock Election which in each case are not converted into a
right to receive Surviving Corporation Series A Common
Stock as set forth above shall be converted into the right
to receive the cash in the Merger.
(d) If Cash Elections and Option Cash Elections are received for a
number of shares of Company Series A Common Stock which is in the aggregate
equal to or less than the Cash Conversion Number, each share of Company Series A
Common Stock covered by a Cash Election and each Company Option covered by an
Option Cash Election shall be converted into a right to receive the Cash
Consideration and the Option Cash, respectively.
(e) If Stock Elections and Option Stock Elections are received for a
number of shares of Company Series A Common Stock which is in the aggregate
equal to or less than the Stock Conversion Number, each share of Company Series
A Common Stock covered by a Stock Election and each Company Option covered by an
Option Stock Election shall be converted into the right to receive the Stock
Consideration and the Option Stock, respectively.
(f) Each share of Company Series A Common Stock covered by a Mixed
Election and each Company Option covered by an Option Mixed Election shall be
converted into the right to receive the Mixed Consideration and the Option Mixed
Consideration, respectively.
(g) If Non-Electing Company Common Shares are not converted under
either Section 3.03(b) or Section 3.03(c), the Exchange Agent shall determine by
lot (or by such other method as is deemed reasonable by Parent and the Company)
which of the holders of Non-Electing Company Common Shares shall receive in the
Merger the right to receive cash for each Non-Electing Company Common Share held
of record by such holder, provided that such selection by lot (or by such other
method) will cease when the sum of shares converted in such manner, plus the
total number of Cash Election Shares and Mixed Election Cash Shares for which
Cash Elections and Mixed Elections have been received, is as close as is
practicable to the Cash Conversion Number. Each Non-Electing Company Common
Share not so converted into the right to receive cash shall be converted into
Surviving Corporation Series A Common Stock in the Merger.
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(h) For the purposes of this Section 3.03, outstanding shares of
Company Series A Common Stock as to which an Election is not in effect as of the
Election Deadline shall be called "Non-Electing Company Common Shares." If
Parent and the Company shall determine for any reason that any Election was not
properly made with respect to shares of Company Series A Common Stock, such
Election shall be deemed to be not in effect and shares of Company Series A
Common Stock covered by such Election shall for purposes hereof be deemed to be
Non-Electing Company Common Shares.
(i) If Parent and the Company shall determine for any reason that any
Option Election was not properly made with respect to Company Options, such
Option Election shall be deemed not to be in effect and instead a Rollover
Election shall be deemed to have been made with respect to such Company Option.
3.04 The Company To Make Cash and Certificates Available.
(a) The Company shall make available to the Exchange Agent at the
Effective Time, an amount in cash equal to at least One Hundred Million Dollars
($100,000,000) and such additional amount of cash to the extent necessary under
this Article III to pay cash consideration to holders of the Company Series A
Common Stock and Company Options. As soon as practicable after the Effective
Time, the Exchange Agent shall distribute to holders of shares of Company Series
A Common Stock converted into the right to receive cash pursuant to Article III,
upon surrender to the Exchange Agent of one or more Certificates for
cancellation, a check for an amount equal to the Cash Consideration for each
share of Company Series A Common Stock so converted. In no event shall the
holder of any such surrendered Certificates be entitled to receive interest on
any of the funds to be received in the Merger. If such check is to be sent to a
person other than the person in whose name the Certificates surrendered for
exchange are registered, it shall be a condition of the exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the delivery of such check to a person other than
the registered holder of the certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Series A Common
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(b) As soon as practicable after the Effective Time, each holder of
shares of Company Series A Common Stock converted into shares of Surviving
Corporation Series A Common Stock pursuant to Article III upon surrender to the
Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more Certificates of such shares of Company Series A Common
Stock for cancellation, will be entitled to receive certificates representing
the number of shares of Surviving Corporation Series A Common Stock to be
issued in respect of the aggregate number of such shares of Company Series A
Common Stock previously represented by the Certificates surrendered.
Notwithstanding any other provision hereof, no fractional shares of Surviving
Corporation Series A Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued, and no right to receive
cash in lieu thereof shall entitle the holder thereof to any voting or other
rights of a holder of shares or fractional share interests. All fractional
shares of Surviving Corporation Series A Common Stock to which a holder of
Company Series A Common Stock immediately prior to the Effective Time would
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otherwise be entitled, at the Effective Time, shall be aggregated. If a
fractional share results from such aggregation, such stockholder shall be
entitled after the later of the Effective Time and the surrender of such
stockholder's Certificate or Certificates which represent such shares of Company
Series A Common Stock, to receive from the Surviving Corporation an amount in
cash in lieu of such fractional share, based on the Cash Consideration. The
Surviving Corporation will make available to the Exchange Agent, as required,
without regard to any other cash being provided to the Exchange Agent, cash
necessary for this purpose. Notwithstanding the foregoing, neither Parent, the
Surviving Corporation, the Exchange Agent nor any party hereto shall be liable
to a holder of shares of Company Series A Common Stock for any Surviving
Corporation Series A Common Stock or dividends thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(c) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record (other than Parent and Cash Sub) of a
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Series A Common Stock (the
"Certificates") (i) a form letter of transmittal (which shall specify that
delivery shall be effective, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates.
(d) The cash paid and shares of Surviving Corporation Series A Common
Stock issued, upon the surrender of Certificates in accordance with the terms
hereof, shall be deemed to have been paid and issued in full satisfaction of all
rights pertaining to such shares of Company Series A Common Stock, as the case
may be.
3.05 Dividends. No dividends or other distributions, if any, that
are declared after the Effective Time with respect to Surviving Corporation
Series A Common Stock payable to holders of record thereof after the Effective
Time shall be paid to the Company's stockholders entitled to receive
certificates representing Surviving Corporation Series A Common Stock until such
stockholders surrender their Certificates. Upon such surrender, there shall be
paid to the stockholder in whose name the certificates representing such
Surviving Corporation Series A Common Stock shall be issued any dividends which
shall have become payable with respect to such Surviving Corporation Series A
Common Stock between the Effective Time and the time of such surrender, without
interest. After such surrender, there shall also be paid to the stockholder in
whose name the certificates representing such Surviving Corporation Series A
Common Stock shall be issued any dividend on such Surviving Corporation Series A
Common Stock that shall have a record date subsequent to the Effective Time and
prior to such surrender and a payment date after such surrender and such payment
shall be made on such payment date. In no event shall the stockholders entitled
to receive such dividends be entitled to receive interest on such dividends.
All dividends or other distributions declared after the Effective Time with
respect to Surviving Corporation Series A Common Stock and payable to the
holders of record thereof after the Effective Time that are payable to the
holders of Certificates not theretofore surrendered and exchanged for
certificates representing shares of Surviving Corporation Series A Common Stock
pursuant to this Section 3.05 shall be paid or delivered by the Surviving
Corporation to the Exchange Agent, in trust, for the benefit of such holders.
All such dividends or other distributions held by the Exchange Agent for payment
or delivery to the holders of unsurrendered Certificates and unclaimed at the
end of one year from the Effective Time shall be repaid or redelivered by the
Exchange Agent to the Surviving
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Corporation, after which time any holder of Certificates who has not theretofore
surrendered such Certificates to the Exchange Agent, subject to applicable law,
shall look as a general creditor only to the Surviving Corporation for payment
or delivery of such dividends or distributions, as the case may be. Any
Surviving Corporation Series A Common Stock delivered or made available to the
Exchange Agent pursuant to Section 3.04 hereof and not exchanged for
Certificates within one year after the Effective Time pursuant to this Section
3.05 shall be returned by the Exchange Agent to the Surviving Corporation which
shall thereafter act as Exchange Agent subject to the rights of holders of
unsurrendered Certificates under this Article III. Notwithstanding the
foregoing, neither Parent, the Surviving Corporation, the Exchange Agent nor any
other party hereto shall be liable to a holder of Company Common Stock for any
Surviving Corporation Series A Common Stock, or dividends or distributions
thereon, delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
3.06 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
each outstanding share of Company Common Stock or Company Preferred Stock, the
holder of which has not voted in favor of the Merger, has perfected such
holder's right to an appraisal of such holder's shares in accordance with the
applicable provisions of the DGCL and has not effectively withdrawn or lost such
right to appraisal (a "Dissenting Share"), shall not be converted into or
represent a right to receive the applicable Per Share Amount, but the holder
thereof shall be entitled only to such rights as are granted by the applicable
provisions of the DGCL; provided, however, that any Dissenting Share held by a
person at the Effective Time who shall, after the Effective Time, withdraw the
demand for appraisal or lose the right of appraisal, in either case pursuant to
the DGCL, shall be deemed to be converted into, as of the Effective Time, the
right to receive the applicable Per Share Amount.
(b) The Company (or the Surviving Corporation, as the case may be)
shall give Parent (x) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other instruments served pursuant
to the applicable provisions of the DGCL relating to the appraisal process
received by the Company (or the Surviving Corporation, as the case may be) and
(y) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under the DGCL. Prior to the Effective Time,
the Company will not voluntarily make any payment with respect to any demands
for appraisal and will not, except with the prior written consent of Parent,
settle or offer to settle any such demands.
3.07 Electing Optionholders Supplemental Election. Notwithstanding
any other provision of this Article III, an Electing Optionholder may make a
supplemental election for the Option Cash Election of Section 3.01(e)(iii) not
to be subject to any pro ration under Section 3.03 provided that (i) the
aggregate amount of cash to be received pursuant to Section 3.03 under any
Section 3.01(c) election made by such Electing Optionholder shall be reduced by
the difference between (x) the Option Cash to be received by such Electing
Optionholder making this supplemental election less (y) the Option Cash that
would have been received by such Electing Optionholder were such Option Cash
election subject to any pro ration under Section 3.03 (with the difference of
(x) minus (y) being the "Option Cash Difference"); and (ii) the number of shares
of stock to be received pursuant to Section 3.03 under any Section 3.01(c)
election made by such Electing Optionholder shall be increased by a number equal
to the Option Cash Difference divided by $26.50.
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An Electing Optionholder may only make the supplemental election provided by
this Section 3.07 in the event that the aggregate amount of cash that would be
received pursuant to any Section 3.01(c) election by such Electing Optionholder
absent a supplemental election under this Section 3.07 equals or exceeds the
Option Cash Difference.
ARTICLE IV.
CERTAIN ADJUSTMENTS
4.01 Parent Station Business Adjustment.
(a) As promptly as practicable, but in any event not later than sixty
(60) days after the Closing Date, Parent shall cause to be prepared and
delivered to the Surviving Corporation a balance sheet for the Parent Station
Business as of the Closing Date (the "Parent Station Balance Sheet"), which
shall be audited by Deloitte & Touche LLP, certified public accountants, and
certified by such firm to have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and in
substantially the manner used to prepare the Parent Station Financial Statements
(as hereinafter defined). The Parent Station Balance Sheet shall be accompanied
by a statement (the "Parent Station Statement of Net Assets") prepared by such
accountants and setting forth the Parent Station Net Assets, which shall be
calculated by reference to the Parent Station Balance Sheet.
(b) Within thirty (30) days after delivery of the Parent Station
Balance Sheet and the Parent Station Statement of Net Assets pursuant to Section
4.01(a) above, (i) Parent shall pay to the Surviving Corporation the amount, if
any, by which the amount of the Parent Station Net Assets is less than Thirty
Million Dollars ($30,000,000) or (ii) the Surviving Corporation shall pay to
Parent the amount (the "Parent Adjustment Amount"), if any, by which the amount
of the Parent Station Net Assets exceeds Thirty Million Dollars ($30,000,000);
provided, however, that Parent at its option may elect to receive in lieu of
such payment from the Surviving Corporation additional shares of Surviving
Corporation Series B Common Stock or any combination thereof. The number of
shares of Surviving Corporation Series B Common Stock which Parent shall be
entitled to receive shall be determined by dividing the Parent Adjustment Amount
by the Market Price as determined as of the date of payment. Payments, if any,
by the Surviving Corporation or Parent pursuant to this subsection (b) shall be
made by wire transfer of immediately available funds. It is understood and
agreed that to the extent any payments are made by the Company to Parent
pursuant to this subsection (b), such payments shall be deemed for tax purposes
to effectively reduce the amount contributed by Parent to the Company of the
Parent Station Assets.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company SEC Reports filed by the Company
prior to the execution and delivery of this Agreement or in the disclosure
letter delivered to Parent by the Company at or prior to the execution and
delivery of this Agreement (the "Company Disclosure Letter"), the Company
represents and warrants to Parent as follows:
5.01 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except (in the
case of any Subsidiary) for such failures to be so organized, existing and in
good standing or to have such power and authority which, individually or in the
aggregate, are not having and could not be reasonably expected to have a Company
Material Adverse Effect (as defined below). Each of the Company and its
Subsidiaries is duly qualified, licensed or admitted to do business and is in
good standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to be
so qualified, licensed or admitted and in good standing which, individually or
in the aggregate, (i) are not having and could not be reasonably expected to
have a Company Material Adverse Effect, or (ii) could not be reasonably expected
to adversely affect in any material respect the ability of the Company to
perform its obligations hereunder. For purposes of this Agreement, "Company
Material Adverse Effect" means a material adverse effect on the business,
results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole. Section 5.01 of the Company Disclosure Letter
sets forth the name and jurisdiction of incorporation of each Subsidiary of the
Company. The Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity. For purposes of this
Agreement, "Subsidiary" means, with respect to any party, any corporation or
other organization whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or voting control of,
such corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
5.02 Capital Stock.
(a) The authorized capital stock of the Company consists solely of (i)
50,000,000 shares of common stock, of which 35,000,000 shares are designated as
Existing Series A Common Stock, 200,000 shares are designated as Existing Series
B Common Stock, and 14,800,000 shares are designated as Existing Series C Common
Stock and (ii) 2,000,000 shares of preferred stock, of which 12,500 shares are
designated as Existing Series A Preferred Stock, and 12,500 shares are
designated as Existing Series B Preferred Stock. Each share of Existing Series
B Common Stock and Existing Series C Common Stock is convertible into one share
of Existing Series A Common Stock. As of the date of this Agreement, (i)
4,010,914 shares of Existing Series A Common Stock are issued and outstanding,
(ii) 36,000 shares of Existing Series B Common Stock are issued and outstanding,
all or which are held by ATP, (iii) 7,300,000 shares of Existing Series C Common
Stock
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are issued and outstanding, of which 6,600,000 shares are held the ATILP and
700,000 shares are held by TIP, (iv) 10,938 shares of Existing Series A
Preferred Stock are issued and outstanding; (v) 10,938 shares of Existing Series
B Preferred Stock are issued and outstanding; (vi) no shares of Existing Common
Stock and no shares of Existing Preferred Stock are held in the treasury of the
Company; (vii) 15,312,515 shares of Existing Series A Common Stock are reserved
for issuance upon conversion of the Existing Series B Common Stock, the Existing
Series C Common Stock, the Existing Series A Preferred Stock and the Existing
Series B Preferred Stock, and (viii) 6,000,000 shares of Existing Series A
Common Stock are reserved for issuance under the Company's stock option plans
(such plans having been amended prior to the Company's execution and delivery of
this Agreement so that such options are not with respect to Existing Series C
Common Stock). Other than as described above, there are no other shares or
series of Existing Common Stock or Existing Preferred Stock issued and
outstanding, held in treasury or reserved for issuance. All of the issued and
outstanding shares of each series of Existing Common Stock and Existing
Preferred Stock are, and all shares reserved for issuance will be, upon issuance
in accordance with the terms specified in the instruments or agreements pursuant
to which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. All of the shares of Company Series B Common Stock to be issued
to Parent and Cash Sub pursuant to Section 2.03, when so issued, will be duly
authorized, validly issued, fully paid and non-assessable. Except pursuant to
this Agreement and the Voting Agreements, there are no outstanding
subscriptions, options, warrants, rights (including "phantom" stock rights),
preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company or any of its Subsidiaries to issue or sell any shares of capital
stock of the Company or to grant, extend or enter into any Option with respect
thereto.
(b) All of the outstanding shares of capital stock of each Subsidiary
of the Company are duly authorized, validly issued, fully paid and nonassessable
and are owned, beneficially and of record, by the Company or a Subsidiary wholly
owned, directly or indirectly, by the Company, free and clear of any liens,
claims, mortgages, encumbrances, pledges, security interests, equities and
charges of any kind (each a "Lien"). There are no (i) outstanding Options
obligating the Company or any of its Subsidiaries to issue or sell any shares of
capital stock of any Subsidiary of the Company or to grant, extend or enter into
any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
the Company or a Subsidiary wholly owned, directly or indirectly, by the Company
with respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of the Company.
(c) There are no outstanding contractual obligations of the Company or
any Subsidiary of the Company to repurchase, redeem or otherwise acquire any
shares of any series of Company Common Stock or any capital stock of any
Subsidiary of the Company or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary of the
Company or any other person.
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5.03 Authority Relative to this Agreement; Restated Charter.
The Company has full corporate power and authority to enter into this Agreement
and, subject only to obtaining (i) with respect to the adoption of this
Agreement, and the issuance of shares of Company Series B Common Stock to Parent
and Cash Sub pursuant to Section 2.03, the affirmative vote of a majority of the
holders of record of the Existing Series A Common Stock and Existing Series B
Common Stock, voting together as one class, and (ii) with respect to the
approval of the Restated Charter (and assuming the conversion by ATI and TIP of
all shares of Existing Series C Common Stock held by them into shares of
Existing Series A Common Stock pursuant to the Voting Agreements), (A) the
affirmative vote of two-thirds of the holders of record of the Existing Series A
Common Stock and Existing Series B Common Stock, voting together as one class,
(B) the affirmative vote of a majority of the holders of record of the Existing
Series A Common Stock, voting as one class, and (C) the affirmative vote of a
majority of the holders of record of the Existing Series B Common Stock, voting
as one class (collectively, the "Company Stockholder Approval"), to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The transactions contemplated by the Voting Agreements have been duly and
validly approved by the Board of Directors of the Company prior to the execution
and delivery of such Voting Agreements in accordance with Section 203 of the
DGCL. The execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
including but not limited to the adoption of the Restated Charter (including the
amendments to the Company's Certificate of Incorporation reflected therein) have
been duly and validly approved by the Board of Directors of the Company, the
Board of Directors of the Company has declared the advisability of the Restated
Charter and recommended adoption of the Restated Charter and this Agreement by
the stockholders of the Company and directed that the Restated Charter and this
Agreement be submitted to the stockholders of the Company for their
consideration, and no other corporate proceedings on the part of the Company or
its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, other than obtaining the Company
Stockholder Approval. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any of
the assets or properties of the Company or any of its Subsidiaries under, any of
the terms, conditions or provisions of (i) the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of the Company
or any
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of its Subsidiaries, or (ii) subject to the taking of the actions and obtaining
the approvals described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any judgment, decree,
order, writ, permit or license (together, "Orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any domestic, state, county, city or other political
subdivision (a "Governmental or Regulatory Authority"), applicable to the
Company or any of its Subsidiaries or any of their respective assets or
properties, or (y) any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind (together, "Contracts") to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, excluding
from the foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, reimbursements, terminations, cancellations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a Company Material
Adverse Effect or adversely affect in any material respect the ability of the
Company to consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by
the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (ii) for the
filing of the Proxy Statement/Prospectus (as defined in Section 8.04) with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Securities
Act") and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), and filings on Schedules 13G or 13D
by certain affiliates of the Company pursuant to the Exchange Act, and filings
required to be made with the National Association of Securities Dealers, Inc.,
(iii) for the filing of the Restated Charter, the Certificate of Merger and
other appropriate merger documents required by the DGCL with the Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Constituent Corporations are qualified to do business, and (iv)
filings with, and approvals or orders of the FCC as may be required under the
Communications Act of 1934, as amended (the "Communications Act") and the FCC's
rules and regulations ("FCC Regulations") in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby (collectively, "FCC Approval"), no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority is necessary or
required for the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder or the consummation of
the transactions contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the case
may be, individually or in the aggregate, could not be reasonably expected to
have a Company Material Adverse Effect or adversely affect in any material
respect the ability of the Company to consummate the transactions contemplated
by this Agreement.
5.05 SEC Reports and Financial Statements.
(a) The Company has filed all forms, reports, schedules, registration
statements, and other documents required to be filed by it with the SEC since
the date of the Company's
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formation (as such documents have since the time of their filing been amended or
supplemented, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company has delivered to Parent (and Section 5.05 of the
Company Disclosure Letter includes) true, correct and complete copies of the
unaudited consolidated balance sheet of the Company as of December 31, 1996 and
the related unaudited statements of operations, stockholder's equity and cash
flows for the year then ended (the "Unaudited 1996 Financial Statements"). The
Unaudited 1996 Financial Statements and the audited consolidated financial
statements and audited interim consolidated financial statements (including, in
each case, the notes, if any, thereto) included in the Company SEC Reports
(together with the Unaudited 1996 Financial Statements, the "Company Financial
Statements") (A) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (B) were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Forms 10-Q and 8-K of the SEC)
and (C) fairly present in all material respects (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments which are not expected to be, individually or in the aggregate,
materially adverse to the Company and its Subsidiaries taken as a whole) the
consolidated financial position of the Company and its consolidated subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and cash flows for the respective periods then ended. Each Subsidiary
of the Company is treated as a consolidated subsidiary of the Company in the
Company Financial Statements for all periods covered thereby.
(b) The Company has delivered to Parent (and Section 5.05 of the
Company Disclosure Letter includes) true, correct and complete copies of the
unaudited pro forma consolidated balance sheets of the Company as of December
31, 1995 and December 31, 1996 and the related unaudited pro forma statements of
operations, stockholder's equity and cash flows for each of the years then
ended, giving effect to the Gannett Exchange Transactions (the "Pro Forma
Financial Statements"). The Pro Forma Financial Statements comply as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except as permitted by Form 8-K of the SEC) and fairly present
in all material respects the pro forma consolidated financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the pro
forma consolidated results of their operations and cash flows for the periods
then ended.
5.06 Absence of Certain Changes or Events. Since December 31, 1996
there has not been any change, event or development having, or that could be
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Between December 31, 1996 and the date hereof (i) the
Company and its Subsidiaries have conducted their respective businesses only in
the ordinary course consistent with past practice and (ii) neither the Company
nor
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any of its Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii) of Section
7.01(b).
5.07 Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the consolidated balance sheet of the Company
as of December 31, 1996 (or the footnotes thereto) included in the Company
Financial Statements or in the Pro Forma Financial Statements, neither the
Company nor any of its Subsidiaries had at such date, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due) of any nature that would be
required by GAAP to be reflected on a consolidated balance sheet of the Company
and its Subsidiaries (including the notes thereto), except liabilities or
obligations (i) which were incurred in the ordinary course of business
consistent with past practice since such date, and (ii) which have not had, and
could not be reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
5.08 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company and its Subsidiaries,
threatened against, relating to or affecting, nor to the knowledge of the
Company and its Subsidiaries are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, the Company or any of its Subsidiaries or any of their respective
assets and properties which, if determined adversely to the Company or any of
its Subsidiaries, individually or in the aggregate, could be reasonably expected
to have a Company Material Adverse Effect or adversely affect in any material
respect the ability of the Company to consummate the transactions contemplated
by this Agreement. Neither the Company nor any of its Subsidiaries is subject
to any Order of any Governmental or Regulatory Authority which, individually or
in the aggregate, is having or could be reasonably expected to have a Company
Material Adverse Effect or adversely affect in any material respect the ability
of the Company to consummate the transactions contemplated by this Agreement.
5.09 Compliance with Laws and Orders.
(a) The Company and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals (other than FCC Licenses) of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
failures so to comply which, individually or in the aggregate, are not having
and could not be reasonably expected to have a Company Material Adverse Effect.
The Company and its Subsidiaries are not in violation of any Law or Order of any
Governmental or Regulatory Authority, except for violations which, individually
or in the aggregate, are not having and could not be reasonably expected to have
a Company Material Adverse Effect.
(b) Except as does not materially jeopardize the operation by the
Company or applicable Subsidiary of the Company of any of the Company Stations
to which FCC Licenses apply:
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(i) the Company and those of its Subsidiaries that are required to hold FCC
Licenses, or that control FCC Licenses, to the knowledge of the Company, are
qualified to hold such FCC Licenses or to control such FCC Licenses, as the case
may be; (ii) the Company and those of its Subsidiaries that are required to hold
FCC Licenses hold such FCC Licenses; (iii) except as provided in Section 8.06
with respect to the divestiture of certain assets described therein, the Company
is not aware of any facts or circumstances relating to the Company or any of its
Subsidiaries that would prevent the granting of FCC Approval; (iv) each Company
Station is in material compliance with all FCC Licenses held by it; and (v)
there is not pending or, to the knowledge of the Company, threatened any
application, petition, objection or other pleading with the FCC or other
Governmental or Regulatory Authority which challenges the validity of, or any
rights of the holder under, any FCC License held by the Company or one of its
Subsidiaries, except for rule making or similar proceedings of general
applicability to persons engaged in substantially the same business conducted by
the Company Stations.
5.10 Taxes.
(a) Each of the Company and its Subsidiaries has filed all material
tax returns and reports required to be filed by it, or requests for extensions
to file such returns or reports have been timely filed and granted and have not
expired, and all such tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to file, or to have extensions
granted that remain in effect, as applicable, individually or in the aggregate,
would not have a Company Material Adverse Effect. The Company and each of its
Subsidiaries has paid (or the Company has paid on its behalf) all Taxes shown as
due on such tax returns and reports. The most recent financial statements
contained in the Company SEC Reports reflect an adequate reserve for all taxes
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or assessed against the
Company or any of its Subsidiaries that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a Company Material Adverse
Effect. No requests for waivers of the time to assess any taxes against the
Company or any of its Subsidiaries have been granted or are pending, except for
requests with respect to such taxes that have been adequately reserved for in
the most recent financial statements contained in the Company SEC Reports, or,
to the extent not adequately reserved, the assessment of which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 5.10(a) of the Company Disclosure Letter provides a list of all
elections with respect to Taxes which have been made by the Company and any of
its Subsidiaries. Section 5.10(a) of the Company Disclosure Letter also provides
a description of any tax audit, inquiry or controversy potentially involving
Taxes in excess of $50,000 of the Company or any Subsidiary.
(b) As a result of compliance with this Agreement and the matters
referred to herein, neither the Company nor any of its Subsidiaries will be
obligated to make a payment to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is to be performed in the future.
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5.11 Employee Benefit Plans; ERISA.
(a) None of the Company or any Company ERISA Affiliate sponsors,
maintains, has any obligation to contribute to, has liability under or is
otherwise a party to, any Company Employee Benefit Plan.
(b) To the knowledge of the Company, no prohibited transaction within
the meaning of Section 406 or 407 of ERISA, or Section 4975 of the Code with
respect to any Company Employee Benefit Plan has occurred which, individually or
in the aggregate, is having or could be reasonably expected to have a Company
Material Adverse Effect;
(c) There is no outstanding liability (except for premiums due) under
Title IV of ERISA with respect to any Company Employee Benefit Plan which,
individually or in the aggregate, is having or could be reasonably expected to
have a Company Material Adverse Effect; and, without limiting the foregoing,
full payment has been made of all amounts which the Company was required to have
paid as a contribution to each Company Employee Benefit Plan as of the last day
of the most recent fiscal year of each of the Company Employee Benefit Plans
ended prior to the date of this Agreement, respectively, and no Company Employee
Benefit Plan has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of such Company Employee Benefit
Plan ended prior to the date of this Agreement which, individually or in the
aggregate, is having or could be reasonably expected to have a Company Material
Adverse Effect;
(d) None of the Company or any Company ERISA Affiliate has at any time
(i) had any obligation to contribute to any "multiemployer plan" (as defined in
Section 3(37) of ERISA), or (ii) withdrawn in any complete or partial withdrawal
from any "multiemployer plan" (as defined in Section 3(37) of ERISA), with
respect to which there exists any unsatisfied obligations;
(e) The value of accrued benefits under each of the Company Employee
Benefit Plans which is subject to Title IV of ERISA, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Company Employee Benefit Plan's actuary with respect to each
such Company Employee Benefit Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Company Employee Benefit
Plan;
(f) Each of the Company Employee Benefit Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified and such determination has not been modified,
revoked or limited;
(g) Each of the Company Employee Benefit Plans is, and its
administration is and has been in all material respects in compliance with all
applicable laws and orders and prohibited transaction exemptions, including,
without limitation, the requirements of ERISA; and
(h) None of the Company or any Company ERISA Affiliate maintains or is
obligated to provide benefits under any life, medical or health plan which
provides benefits to
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retirees or other terminated employees other than benefit continuation rights
under the Consolidated Omnibus Reconciliation Act of 1985, as amended; and there
has been no violation of Section 4980B of the Code or Sections 601 through 608
of ERISA with respect to any Company Employee Benefit Plan that individually or
in the aggregate, is having or could be reasonably expected to have a Company
Material Adverse Effect.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby constitutes or will
constitute an event in respect of which a change in, or acceleration of,
benefits under any Company Employee Benefit Plan will or may occur.
5.12 Labor Matters. There is no material labor strike, slowdown,
work stoppage, lockout or other labor dispute in effect, or to the knowledge of
the Company, threatened, against or otherwise affecting the Company or any of
its Subsidiaries. To the knowledge of the Company, there are no union
organizational efforts presently being made involving any of the unorganized
employees of the Company or any of its Subsidiaries which in any such case or
all such cases together would have a Company Material Adverse Effect.
5.13 Environmental Matters. Except as for such matters that
individually or in the aggregate would not have a Company Material Adverse
Effect, to the knowledge of the Company: (i) the Company and its Subsidiaries
have complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by the Company and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances; (iii) the properties formerly owned
or operated by the Company or its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by the Company
or any of its Subsidiaries; (iv) neither the Company nor any of its Subsidiaries
is subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither the Company nor any of its Subsidiaries
has received any written notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vi) neither the Company nor
any of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental or Regulatory Authority or is subject to any
indemnity or other agreement with any third party relating to liability under
any Environmental Law or relating to Hazardous Substances; (vii) none of the
properties of the Company or its Subsidiaries contains any underground storage
tanks, asbestos-containing material, lead-based products, or polychlorinated
biphenyls; and (viii) neither the Company nor any of its Subsidiaries has
engaged in any activities involving the generation, use, handling or disposal of
any Hazardous Substances.
5.14 Intangible Property. The Company and its Subsidiaries own or
have rights to use all material items of Intangible Property used by the Company
or any such Subsidiary. To the knowledge of the Company, such use does not
conflict with any rights of others with respect thereto, except for such
conflicts that have not had and would not have a Company Material Adverse
Effect.
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5.15 Title; Condition. The Company and its Subsidiaries have good
title to all assets, properties and rights owned, used or held for use by them
in the conduct of their respective businesses (except for leasehold and licensed
interests) free and clear of any Liens, except for Permitted Liens. All
material items of equipment, machinery, vehicles, furniture, fixtures,
transmitters, transmitting towers, antennae and other tangible personal property
of every kind and description included in such assets and properties are in good
operating condition, normal wear and tear excepted.
5.16 Opinion of Financial Advisor. The Company has received the
opinion of Merrill Lynch & Co., dated the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Merger by the
stockholders of the Company is fair from a financial point of view to the
stockholders of the Company, and a true and complete copy of such opinion has
been delivered to Parent prior to the execution of this Agreement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the disclosure letter delivered to the Company
by Parent at or prior to execution and delivery of this Agreement (the "Parent
Disclosure Letter"), Parent represents and warrants to the Company as follows:
6.01 Organization and Qualification. Each of Parent, Merger Sub and
Cash Sub is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and Parent has full
corporate power and authority to conduct the Parent Station Business as and to
the extent now conducted and to own, use and lease the Parent Station Assets,
except for such failures to be so organized, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not be reasonably expected to have a Parent Material Adverse
Effect (as defined below). Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement and has engaged in
no other business activities and has conducted its operations only as
contemplated hereby. Each of Parent and Merger Sub is duly qualified, licensed
or admitted to do business and in good standing in each jurisdiction in which
the ownership, use or leasing of the Parent Station Assets, or the conduct or
nature of the Parent Station Business, makes such qualification, licensing or
admission necessary, except for such failures to be so qualified, licensed or
admitted and in good standing which, individually or in the aggregate, (i) are
not having and could not be reasonably expected to have a Parent Material
Adverse Effect, or (ii) could not be reasonably expected to adversely affect in
any material respect the ability of Parent or Merger Sub to perform its
obligations hereunder. For purposes of this Agreement, "Parent Material Adverse
Effect" means a material adverse effect on the business, results of operations
or financial condition of the Parent Station Business, taken as a whole.
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6.02 Capital Stock. At the Closing, all of the outstanding shares of
capital stock of Merger Sub will be duly authorized, validly issued, fully paid
and nonassessable and owned, beneficially and of record by Parent, free and
clear of any Liens other than Liens securing the Bridge Debt or the Private
Placement Debt. At the Closing, the authorized capital stock of Merger Sub will
consist solely of 1,000 shares of Merger Sub Common Stock, of which one share
will have been issued to Parent for cash consideration equal to $26.50 per
share. At the Closing, except as contemplated by this Agreement, there will be
no (i) outstanding Options obligating Parent or Merger Sub to issue or sell any
shares of capital stock of Merger Sub and to grant, extend or enter into any
such Option or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person with respect to the voting
of or the right to participate in dividends or other earnings on any capital
stock of Merger Sub.
6.03 Authority Relative to this Agreement. Each of Parent, Merger
Sub and Cash Sub has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent, Merger Sub and Cash Sub and the consummation
by each of Parent, Merger Sub and Cash Sub of the transactions contemplated
hereby have been duly and validly approved by its Board of Directors and
stockholder(s) and no other corporate proceedings on the part of Parent, Merger
Sub, Cash Sub or their stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Parent, Merger Sub and Cash Sub
and the consummation by Parent, Merger Sub and Cash Sub of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent, Merger Sub and Cash Sub and constitutes a legal, valid and
binding obligation of each of Parent, Merger Sub and Cash Sub enforceable
against Parent, Merger Sub and Cash Sub in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by Parent, Merger Sub
and Cash Sub do not, and the performance by Parent, Merger Sub and Cash Sub of
their obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the Parent Station Assets under,
any of the terms, conditions or provisions of (i) the certificates or articles
of incorporation or bylaws (or other comparable charter documents) of Parent,
Merger Sub or Cash Sub, or (ii) subject to the taking of the actions and
obtaining the approvals described in paragraph (b) of this Section, (x) any Law
or Order of any Governmental or Regulatory Authority applicable to Parent,
Merger Sub, Cash Sub or any Parent Station Assets, or (y) any Contract to which
Parent, Merger Sub or Cash Sub is a party or by which Parent, Merger Sub, Cash
Sub or any
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Parent Station Assets are bound, excluding from the foregoing clauses (x) and
(y) conflicts, violations, breaches, defaults, reimbursements, terminations,
cancellations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, could not be reasonably expected
to have a Parent Material Adverse Effect or adversely affect in any material
respect the ability of Parent, Merger Sub and Cash Sub to consummate the
transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report by
Parent under the HSR Act, (ii) for the filing of the Certificate of Merger and
other appropriate merger documents pursuant to the DGCL with the Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Constituent Corporations are qualified to do business, (iii) for the
FCC Approval, and (iv) such reports under Section 13(d) of the Exchange Act as
may be required in connection with this Agreement and the Voting Agreements and
the transactions contemplated hereby and thereby, no consent, approval or action
of, filing with or notice to any Governmental or Regulatory Authority for the
execution and delivery of this Agreement by Parent, Merger Sub and Cash Sub, the
performance by Parent, Merger Sub and Cash Sub of their respective obligations
hereunder or the consummation of the transactions contemplated hereby, other
than such consents, approvals, actions, filings and notices which the failure to
make or obtain, as the case may be, individually or in the aggregate, could not
be reasonably expected to have a Parent Material Adverse Effect or adversely
affect in any material respect the ability of Parent, Merger Sub and Cash Sub to
consummate the transactions contemplated by this Agreement.
6.05 Financial Statements. Parent has delivered to the Company (and
Section 6.05 of the Parent Disclosure Letter includes) true, correct and
complete copies of the unaudited balance sheet of the Parent Station Business as
of December 31, 1996 and the related unaudited statements of income for each of
the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 (such financial statements are hereinafter collectively referred to as the
"Parent Station Financial Statements"). The Parent Station Financial Statements
for the fiscal years ended December 31, 1994 and December 31, 1995 set forth
information which was contained in Parent's audited consolidated financial
statements for such fiscal years. Except for the absence of (x) information that
would ordinarily be contained in the footnotes to audited financial statements
of the Parent Station Business and (y) information and/or adjustments that would
ordinarily be contained in audited financial statements of the Parent Station
Business but would not be reflected or adjusted in the consolidating statements
in which the Parent Station Business is not a significant business in the
consolidated group, the Parent Station Financial Statements (A) were prepared
from the books and records of Parent in accordance with GAAP applied on a
consistent basis during the periods involved and (B) fairly present in all
material respects the financial condition and results of operations of the
Parent Station Business, as of the respective dates thereof and for the
respective periods covered thereby.
6.06 Absence of Certain Changes or Events. Since December 31, 1996,
there has not been any adverse change, or any event or development having, or
that could be reasonably expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
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Between December 31, 1996 and the date hereof Parent has conducted the Parent
Station Business only in the ordinary course consistent with past practice and
(ii) neither Parent nor any of its Subsidiaries has taken any action which, if
taken after the date hereof, would constitute a breach of any provision of
clause (ii) of Section 7.02(b).
6.07 Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet for the period ended December
31, 1996 included in the Parent Station Financial Statements (or the footnotes
thereto), the Parent Station Business did not have at such date and has not
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that are of a type that would be required by GAAP to be reflected on a
balance sheet of the Parent Station Business, except liabilities or obligations
(i) which were incurred in the ordinary course of business consistent with past
practice, and (ii) which have not had, and could not be reasonably expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
6.08 Legal Proceedings. There are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of Parent, threatened against, relating
to or affecting, nor to the knowledge of Parent are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting, Parent, any of Parent's Subsidiaries or any Parent
Station Assets which, if determined adversely to Parent or such Subsidiaries,
individually or in the aggregate, could be reasonably expected to have a Parent
Material Adverse Effect or adversely affect in any material respect the ability
of Parent and Merger Sub to consummate the transactions contemplated by this
Agreement. Neither Parent nor any of its Subsidiaries is subject to any Order
of any Governmental or Regulatory Authority which relates to the Parent Station
Business and which, individually or in the aggregate, could be reasonably
expected to have a Parent Material Adverse Effect or adversely affect in any
material respect the ability of Parent, Merger Sub and Cash Sub to consummate
the transactions contemplated by this Agreement.
6.09 Compliance with Laws and Orders.
(a) Parent and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals (other than FCC Licenses) of all Governmental
and Regulatory Authorities necessary for the lawful conduct of the Parent
Station Business (the "Parent Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Parent Material Adverse Effect. Parent and its Subsidiaries
are in compliance with the terms of the Parent Permits, except failures so to
comply which, individually or in the aggregate, are not having and could not be
reasonably expected to have a Parent Material Adverse Effect. Parent and its
Subsidiaries are not in violation of any Law or Order of any Governmental or
Regulatory Authority which relates to the Parent Station Business, except for
violations which, individually or in the aggregate, are not having and could not
be reasonably expected to have a Parent Material Adverse Effect.
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(b) Except as does not materially jeopardize the operation by Parent
of any of the Parent Stations to which FCC Licenses apply: (i) to the knowledge
of Parent, Parent is qualified to hold such FCC Licenses or to control such FCC
Licenses, as the case may be; (ii) Parent holds such FCC Licenses; (iii) except
as provided in Section 8.06 with respect to the divestiture of certain assets
described therein, Parent is not aware of any facts or circumstances relating to
Parent that would prevent the granting of FCC Approval; (iv) each Parent Station
is in material compliance with all FCC Licenses held by it; and (v) there is not
pending or, to the knowledge of Parent, threatened any application, petition,
objection or other pleading with the FCC or other Governmental or Regulatory
Authority which challenges the validity of, or any rights of the holder under,
any FCC License held by the Parent Stations, except for rule making or similar
proceedings of general applicability to persons engaged in substantially the
same business conducted by the Parent Stations.
6.10 Material Contracts. Section 6.10 of the Parent Disclosure
Letter sets forth a true, correct and complete list, as of the date of this
Agreement, of each Contract to which Parent or one of its Subsidiaries is a
party and which relate solely to the conduct of the Parent Station Business
(other than Contracts which (i) are not included in the Parent Station Assumed
Liabilities or (ii) are not included in the Parent Station Assets), but only to
the extent such contracts and agreements would be required to be disclosed in an
Annual Report on Form 10-K of the Parent Station Business if the Parent Station
Business was subject to the rules and regulations of the Exchange Act
(collectively, the "Material Parent Station Contracts"). Each of the Material
Parent Station Contracts is a binding agreement, enforceable in accordance with
its terms, of Parent or one of its Subsidiaries and, to the knowledge of Parent,
of each other party thereto; subject to the qualifications that enforcement of
the rights and remedies created thereby is subject to: (A) bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and (B) general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law), and none of Parent or any of its Subsidiaries is in default
in any material respect under any of such Material Parent Station Contracts, nor
does any condition exist that with notice or lapse of time or both would
constitute such a default. To the knowledge of Parent, no other party to any
such Material Parent Station Contract is in default in any material respect
thereunder, nor does any condition exist that with notice or lapse of time or
both would constitute such a default.
6.11 Employee Benefit Plans.
(a) None of Parent or any Parent ERISA Affiliate sponsors, maintains,
has any obligation to contribute to, has liability under or is otherwise a party
to, any Parent Station Employee Benefit Plan, provided, however, that any
employment contract that is not a Parent Station Assumed Liability shall not be
required to be set forth on the Parent Disclosure Letter.
(b) To the knowledge of Parent, no prohibited transaction within the
meaning of Section 406 or 407 of ERISA, or Section 4975 of the Code with respect
to any Parent Station Employee Benefit Plan has occurred which, individually or
in the aggregate, is having or could be reasonably expected to have a Parent
Material Adverse Effect;
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(c) There is no outstanding liability (except for premiums due) under
Title IV of ERISA with respect to any Parent Station Employee Benefit Plan
which, individually or in the aggregate, is having or could be reasonably
expected to have a Parent Material Adverse Effect; and, without limiting the
foregoing, full payment has been made of all amounts which Parent was required
to have paid as a contribution to each Parent Station Employee Benefit Plan as
of the last day of the most recent fiscal year of each of the Parent Station
Employee Benefit Plans ended prior to the date of this Agreement, respectively,
and no Parent Station Employee Benefit Plan has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal year
of such Parent Station Employee Benefit Plan ended prior to the date of this
Agreement which, individually or in the aggregate, is having or could be
reasonably expected to have a Parent Material Adverse Effect;
(d) With respect to employees of the Parent Station Business, none of
Parent or any Parent ERISA Affiliate has at any time (i) had any obligation to
contribute to any "multiemployer plan" (as defined in Section 3(37) of ERISA),
or (ii) withdrawn in any complete or partial withdrawal from any "multiemployer
plan" (as defined in Section 3(37) of ERISA), with respect to which there exists
any unsatisfied obligations;
(e) The value of accrued benefits under each of the Parent Station
Employee Benefit Plans which is subject to Title IV of ERISA, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Parent Station Employee Benefit Plan's actuary with
respect to each such Parent Station Employee Benefit Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Parent Station Employee Benefit Plan;
(f) Each of the Parent Station Employee Benefit Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified and such determination has not
been modified, revoked or limited;
(g) Each of the Parent Station Employee Benefit Plans is, and its
administration is and has been in all material respects in compliance with all
applicable laws and orders and prohibited transaction exemptions, including,
without limitation, the requirements of ERISA;
(h) With respect to employees and former employees of the Parent
Station Business, none of Parent or any Parent ERISA Affiliate maintains or is
obligated to provide benefits under any life, medical or health plan which
provides benefits to retirees or other terminated employees other than benefit
continuation rights under the Consolidated Omnibus Reconciliation Act of 1985,
as amended; and there has been no violation of Section 4980B of the Code or
Sections 601 through 608 of ERISA with respect to any Parent Station Employee
Benefit Plan that individually or in the aggregate, is having or could be
reasonably expected to have a Parent Material Adverse Effect; and
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(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby constitutes or will
constitute an event in respect of which a change in, or acceleration of,
benefits under any Parent Station Employee Benefit Plan will or may occur.
6.12 Labor Matters. There is no material labor strike, slowdown,
work stoppage, lockout or other labor dispute in effect, or to the knowledge of
Parent threatened against or otherwise affecting the Parent Station Business.
To the knowledge of Parent, there are no union organizational efforts presently
being made involving any of the unorganized Parent Station Employees which in
any such case or all such cases together would have a Parent Material Adverse
Effect.
6.13 Title to Parent Station Assets; Entire Business. Pursuant to
the Contribution, Parent will convey to the Company (or a Broadcast Subsidiary)
good title to all of the Parent Station Assets (except for leasehold and
licensed interests and except as contemplated by Section 8.15), free and clear
of any Liens, except for assets and properties disposed of in the ordinary
course of business without violation of this Agreement and Permitted Liens.
Except as contemplated by Section 8.15, the Parent Station Assets constitute all
assets, properties and rights necessary to operate the Parent Station Business
in substantially the manner in which it is currently being operated, except for
the Excluded Cash, the Florida Station Assets, the Missouri LMA, assets and
properties disposed of in the ordinary course of business without violation of
this Agreement and except for the services to be provided by Parent pursuant to
the services agreement referred to in Section 9.03(d).
6.14 Condition of Parent Station Assets. All material items of
Parent Station Tangible Property included in the Parent Station Assets are in
good operating condition, normal wear and tear excepted.
6.15 Environmental Matters. Except for such matters that
individually or in the aggregate would not have a Parent Material Adverse
Effect, and excluding all matters which are not related to the Parent Station
Business or the Parent Station Assets, to the knowledge of Parent: (i) Parent
and its Subsidiaries have complied with all applicable Environmental Laws; (ii)
the properties currently owned or operated by Parent and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances; (iii) the properties formerly
owned or operated by Parent or its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by Parent or
any of its Subsidiaries; (iv) neither Parent nor any of its Subsidiaries is
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither Parent nor any of its Subsidiaries has
received any written notice, demand, letter, claim or request for information
alleging that Parent or any of its Subsidiaries may be in violation of or liable
under any Environmental Law; (vi) neither Parent nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental or Regulatory Authority or is subject to any indemnity or other
agreement with any third party relating to liability under any Environmental
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Law or relating to Hazardous Substances; (vii) none of the properties of Parent
or its Subsidiaries contains any underground storage tanks, asbestos-containing
material, lead-based products, or polychlorinated biphenyls; and (viii) neither
Parent nor any of its Subsidiaries has engaged in any activities involving the
generation, use, handling or disposal of any Hazardous Substances.
6.16 Intangible Property. Parent and its Subsidiaries own or have
rights to use all material items of Intangible Property used by Parent or any
such Subsidiary solely in the conduct of the Parent Station Business. To the
knowledge of Parent, such use does not conflict with any rights of others with
respect thereto, except for such conflicts that have not had and would not have
a Parent Material Adverse Effect.
ARTICLE VII.
COVENANTS RELATING TO CONDUCT OF BUSINESS
7.01 Conduct of Business by Company. At all times from and after the
date hereof until the Effective Time, the Company covenants and agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or to the extent that Parent shall otherwise consent in
writing, which consent shall not be unreasonably withheld):
(a) The Company and its Subsidiaries shall conduct their respective
businesses only in, and the Company and such Subsidiaries shall not take any
action except in, the ordinary course consistent with past practice.
(b) Without limiting the generality of paragraph (a) of this Section,
(i) the Company and its Subsidiaries shall use all commercially reasonable
efforts to preserve intact in all material respects their present business
organizations and reputation, to keep available the services of their key
officers and employees, to maintain their assets and properties in good working
order and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve their relationships with
customers and suppliers and others having significant business dealings with
them and to comply in all material respects with all Laws and Orders of all
Governmental or Regulatory Authorities applicable to them, and (ii) neither the
Company nor any of its Subsidiaries shall:
(1) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter documents),
expect as contemplated by the Restated Charter;
(2) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, except for the
declaration and payment of dividends by a wholly-owned Subsidiary solely to
its parent corporation and except for the declaration and
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payment of regular cash dividends on the Existing Preferred Stock which are
required to be declared and paid pursuant to the Company's Certificate of
Incorporation as in effect on the date of this Agreement, (x) split,
combine, reclassify or take similar action with respect to any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, except for the issuance by the Company of shares of Existing
Series A Common Stock upon the conversion of the Existing Series B Common
Stock or Existing Series C Common Stock pursuant to the Company's
Certificate of Incorporation as in effect on the date of this Agreement,
(y) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization or
(z) directly or indirectly redeem, repurchase or otherwise acquire any
shares of its capital stock or any Option with respect thereto;
(3) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any Option with
respect thereto other than the issuance by a wholly-owned Subsidiary of its
capital stock to its parent corporation, or modify or amend any right of
any holder of outstanding shares of capital stock or Options with respect
thereto;
(4) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets other than in the ordinary course of
its business consistent with past practice which in each case involve an
amount not exceeding $1,000,000;
(5) other than dispositions in the ordinary course of its business
consistent with past practice of assets which are not, individually or in
the aggregate, material to the Company and its Subsidiaries taken as a
whole, sell, lease, grant any security interest in or otherwise dispose of
or encumber any of its assets or properties;
(6) except to the extent required by applicable law and except to
the extent necessary to cause the properties covered by the Gannett
Exchange Transactions to comply with the policies and practices of the
Company, (x) permit any material change in (A) any accounting or financial
reporting practice or policy or any material pricing, marketing,
purchasing, investment, inventory, credit, allowance or tax practice or
policy or (B) any method of calculating any bad debt, contingency or other
reserve for accounting, financial reporting or tax purposes or (y) make any
material tax election or settle or compromise any material income tax
liability with any Governmental or Regulatory Authority;
(7) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness other than borrowings in an aggregate principal amount
(net of repayments) not exceeding $10,000,000 (and an additional $8,000,000
to the extent necessary in respect of the Company's obligation to develop a
new facility for its KITV television station in Honolulu, Hawaii) pursuant
to the Company's existing revolving credit facility, issue or sell
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any debt securities or warrants other rights to acquire any debt securities
of the Company or any of its Subsidiaries, or guarantee any debt securities
of another person or enter into any arrangement having the economic effect
of any of the foregoing, or (y) voluntarily purchase, cancel, prepay or
otherwise provide for a complete or partial discharge in advance of a
scheduled repayment date with respect to, or waive any right under, any
indebtedness for borrowed money other than repayments pursuant to the
Company's existing revolving credit facility;
(8) (x) enter into, adopt, amend in any material respect (except as
may be required by applicable law) or terminate any Company Employee
Benefit Plan or other agreement, arrangement, plan or policy between the
Company or one of its Subsidiaries and one or more of its directors,
officers or employees, (y) except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company and its Subsidiaries taken as a whole, increase in any manner
the compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any plan or arrangement in effect as of the
date hereof, or (z) establish, adopt, enter into or amend in any material
respect or take action to accelerate any rights or benefits under any
collective bargaining agreement or any stock option, employee benefit plan,
agreement or policy except as contemplated by this Agreement;
(9) enter into any contract or amend or modify any existing
contract, or engage in any new transaction with any affiliate of the
Company or any of its Subsidiaries;
(10) make any capital expenditures or commitments for additions to
plant, property or equipment constituting capital assets (other than any
capital expenditures pursuant to commitments made prior to the date of this
Agreement) in an aggregate amount exceeding $4,000,000;
(11) make any change in the lines of business in which it
participates or is engaged; or
(12) enter into any contract, agreement, commitment or arrangement
to do or engage in any of the foregoing.
7.02 Conduct of Parent Station Business by Parent. At all times from
and after the date hereof until the Effective Time, Parent covenants and agrees
as to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or to the extent that the Company shall otherwise
consent in writing, which consent shall not be unreasonably withheld):
(a) Parent shall conduct the Parent Station Business only in, and
shall not take any action with respect to the Parent Station Business except in,
the ordinary course consistent with past practice.
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(b) Without limiting the generality of paragraph (a) of this Section,
and except as contemplated by Section 8.15, (i) Parent and its Subsidiaries
shall use all commercially reasonable efforts to preserve intact in all material
respects the Parent Station Business' present business organizations and
reputation, to keep available the services of the Parent Station Business' key
officers and employees, to maintain the Parent Station Assets in good working
order and condition, ordinary wear and tear excepted, to maintain insurance on
the Parent Station Business in such amounts and against such risks and losses as
are currently in effect, to preserve the Parent Station Business' relationships
with customers and suppliers and others having significant business dealings
with the Parent Station Business and to comply in all material respects with all
Laws and Orders of all Governmental or Regulatory Authorities applicable to the
Parent Station Business and (ii) Parent (but only insofar as it relates to
Parent's conduct of the Parent Station Business) and Merger Sub shall not:
(1) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of capital stock of Merger Sub (except as
contemplated herein) or any Option with respect thereto or modify or amend
any right of any holder of outstanding shares of capital stock or Options
with respect thereto;
(2) cause the Parent Station Business to acquire (by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner) any business
or any corporation, partnership, association or other business organization
or division thereof or otherwise acquire or agree to acquire any assets
other than in the ordinary course of the Parent Station Business consistent
with past practice which in each case involve an amount not exceeding
$1,000,000;
(3) other than dispositions in the ordinary course of its business
consistent with past practice of assets which are not, individually or in
the aggregate, material to the Parent Station Business, sell, lease, grant
any security interest in or otherwise dispose of or encumber any of the
Parent Station Assets, except in connection with the Bridge Debt, the
Private Placement Debt or the Refinancing (as hereinafter defined);
(4) except to the extent required by applicable law, (x) permit any
material change in (A) any accounting or financial reporting practice or
policy or any material pricing, marketing, purchasing, investment,
inventory, credit, allowance or tax practice or policy (excluding from the
foregoing the tax policies of Parent) or (B) any method of calculating any
bad debt, contingency or other reserve for accounting, financial reporting
or tax purposes (excluding from the foregoing the taxes of Parent) or (y)
make any material tax election or settle or compromise any material income
tax liability with any Governmental or Regulatory Authority (excluding from
the foregoing the taxes of Parent);
(5) cause Merger Sub to (x) incur any indebtedness for borrowed
money or guarantee any such indebtedness, issue or sell any debt securities
or warrants or other rights to acquire any debt securities, guarantee any
debt securities of another person or enter into any arrangement having the
economic effect of any of the foregoing; or (y) voluntarily purchase,
cancel, prepay or otherwise provide for a complete or partial discharge in
advance
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of a scheduled repayment date with respect to, or waive any right under,
any indebtedness for borrowed money; except, in the case of clauses (x) and
(y), in connection with the Bridge Debt, the Private Placement Debt or the
Refinancing;
(6) (x) with respect to Merger Sub, enter into, adopt, amend in any
material respect (except as may be required by applicable law) or terminate
any Parent Station Employee Benefit Plan or other agreement, arrangement,
plan or policy between such entities and one or more of its directors,
officers or employees, or (y) except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Parent Station Business, increase in any manner the compensation or
fringe benefits of any director, officer or employee of the Parent Station
Business or pay any benefit to such persons not required by any plan or
arrangement in effect as of the date hereof;
(7) with respect to the Parent Station Business, enter into any
contract or amend or modify any existing contract, or engage in a new
transaction with any other business unit or division of Parent, any
affiliate of Parent or any of its Subsidiaries;
(8) make any capital expenditures or commitments for additions to
plant, property or equipment constituting capital assets with respect to
the Parent Station Business in an aggregate amount exceeding $10,000,000;
(9) make any change in the lines of business in which the Parent
Station Business participates or is engaged; or
(10) enter into any contract, agreement, commitment or arrangement
to do or engage in any of the foregoing (except as contemplated herein).
ARTICLE VIII.
ADDITIONAL AGREEMENTS
8.01 No Solicitations. Prior to the Effective Time, the Company
agrees that neither it nor any of its Subsidiaries or their respective officers,
directors, employees, agents, counsel, accountants, financial advisors,
investment bankers, consultants and other representatives (collectively,
"Representatives"), directly or indirectly, shall initiate, solicit, encourage,
accept or take any other action knowingly to facilitate, any inquiries or the
making of, or participate in any discussions or negotiations regarding, any
proposal or offer with respect to any direct or indirect (i) acquisition or
purchase of fifteen per cent (15%) or more of any Existing Common Stock
outstanding, (ii) acquisition or purchase of any equity securities of any
Material Subsidiary of the Company, (iii) acquisition or purchase of all or any
significant portion of the assets of the Company or any Material Subsidiary or
(iv) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Material Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal");
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provided, however, that in response to an unsolicited Acquisition Proposal (x)
the Company or its Representatives may furnish or cause to be furnished
information concerning the Company and its Subsidiaries and their business,
properties or assets to a third party, (y) the Company or its Representatives
may engage in discussions or negotiations with a third party regarding such
Acquisition Proposal, and (z) the Company may take and disclose to its
stockholders a position contemplated by Rule 14e-2 under the Exchange Act or
otherwise make public disclosures to its stockholders that are required by law,
but in each case referred to in the foregoing clauses (x) and (y), only to the
extent that the Board of Directors of the Company shall determine in good faith
on the basis of written advice from outside counsel (who may be the Company's
regularly retained outside counsel) that such action is necessary in order for
the Board of Directors to act in a manner consistent with its fiduciary
obligations to stockholders under applicable law. In the event that the Company
or any of its Subsidiaries or its or their Representatives receive from any
Person an Acquisition Proposal, the Company shall promptly advise, orally and in
writing, such Person of the terms of this Section 8.01, and (except to the
extent that the Board of Directors shall determine in good faith on basis of
written advice from such outside counsel that to do otherwise is necessary in
order for the Board of Directors to act in a manner consistent with its
fiduciary obligations to stockholders under applicable law) shall promptly
advise Parent of such Acquisition Proposal and thereafter keep Parent reasonably
and promptly informed of all material facts and circumstances relating to said
Acquisition Proposal and the Company's actions relating thereto.
8.02 Advice of Changes.
(a) The Company shall confer on a regular and frequent basis with
Parent with respect to its business and operations and other matters relevant to
the Merger and the other transactions contemplated hereby, and shall promptly
advise Parent, orally and in writing, of any change or event, including, without
limitation, any complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be contemplated)
or the institution or threat of litigation, having, or which, insofar as can be
reasonably foreseen, could have, a Company Material Adverse Effect or a material
adverse effect on the ability of the Company to consummate the transactions
contemplated hereby.
(b) Parent shall confer on a regular and frequent basis with the
Company with respect to the Parent Station Business and other matters relevant
to the Merger and the other transactions contemplated hereby, and shall promptly
advise the Company, orally and in writing, of any change or event, including,
without limitation, any complaint, investigation or hearing by any Governmental
or Regulatory Authority (or communication indicating the same may be
contemplated) or the institution or threat of litigation, having, or which,
insofar as can be reasonably foreseen, could have, a Parent Material Adverse
Effect or a material adverse effect on the ability of Parent, Merger Sub and
Cash Sub to consummate the transactions contemplated hereby.
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8.03 Access to Information; Audited Financial Statements;
Confidentiality.
(a) Each of the Company and Parent shall, and shall cause each of its
respective Subsidiaries to, throughout the period from the date hereof to the
Effective Time, (i) provide the other party and its Representatives with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of the Company or Parent, as the
case may be, and its respective Subsidiaries and their respective assets,
properties, books and records (but in the case of Parent and its Subsidiaries,
limited to the Parent Station Business only), but only to the extent that such
access does not unreasonably interfere with the business and operations of the
Company or Parent, as the case may be, and its respective Subsidiaries, and (ii)
furnish promptly to such persons (x) a copy of each report, statement, schedule
and other document filed or received by the Company or Parent, as the case may
be, or any of its respective Subsidiaries pursuant to the requirements of
federal or state securities laws or filed with any other Governmental or
Regulatory Authority (but in the case of Parent, only to the extent related to
the Parent Station Business), (y) a copy of any monthly financial reports and
any "pacing" reports prepared by the Company or Parent, as the case may be (but
in the case of Parent, only to the extent related to the Parent Station
Business), and (z) all other information and data (including, without
limitation, copies of Contracts, Company Employee Benefit Plans, as the case may
be, and other books and records) concerning the business and operations of the
Company or Parent, as the case may be, and its respective Subsidiaries (but in
the case of Parent and its Subsidiaries, limited to the Parent Station Business
only), as the other party or any of such other persons reasonably may request.
No investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in this Agreement or any condition to the
obligations of the parties hereto.
(b) On or prior to May 1, 1997 or as soon thereafter as is reasonably
practicable, (i) the Company shall deliver to Parent true, correct and complete
copies of the audited consolidated balance sheet of the Company as of December
31, 1996 and the related audited consolidated statements of operations,
stockholder's equity and cash flows for the year then ended, which shall be
prepared in accordance with GAAP applied on a basis consistent with the Company
Financial Statements and pursuant to Regulation S-X under the Securities Act and
(ii) Parent shall deliver to the Company true, correct and complete copies of
the audited balance sheets of the Parent Station Business as of December 31,
1995 and December 31, 1996 and the related audited statements of operations,
stockholder's equity and cash flows of the Parent Station Business for the three
years ended December 31, 1996, which shall be prepared in accordance with GAAP
applied on a basis consistent with the Parent Station Financial Statements and
pursuant to Regulation S-X under the Securities Act.
(c) Each party and its respective Subsidiaries will hold, and will
use its best efforts to cause its and its Subsidiaries' Representatives to hold,
in strict confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of applicable Laws of Governmental or
Regulatory Authorities (including, without limitation, in connection with
obtaining the necessary approvals of this Agreement or the transactions
contemplated hereby of Governmental or Regulatory Authorities), all documents
and information concerning the other party and its Subsidiaries furnished to it
by such other party or its Representatives in connection with this
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Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (x) previously known by
the Company or Parent, as the case may be, or its respective Subsidiaries or its
or their Representatives, on a non-confidential basis, or (y) in the public
domain (either prior to or after the furnishing of such documents or information
hereunder) through no fault of the Company or Parent, as the case may be, its
respective Subsidiaries or its or their Representatives. In the event that this
Agreement is terminated without the transactions contemplated hereby having been
consummated, upon the request of the Company or Parent, as the case may be, the
other party will, and will cause its respective Subsidiaries or its or their
Representatives to, promptly (and in no event later than five (5) business days
after such request) redeliver or cause to be redelivered all copies of documents
and information furnished by the Company or Parent, as the case may be, its
respective Subsidiaries or its or their Representatives to such party and its
Representatives in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes, memoranda,
summaries, analyses, compilations and other writings related thereto or based
thereon prepared by the Company or Parent, as the case may be, its respective
Subsidiaries or its or their Representatives.
8.04 Registration Statement. The Company shall promptly prepare (and
Parent shall cooperate in the preparation of) and file with the SEC on or prior
to the forty-fifth day after the date of this Agreement or as soon thereafter as
is reasonably practicable a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, with respect to the Surviving Corporation Series A
Common Stock issuable in the Merger, a portion of which Registration Statement
shall also serve as the proxy statement with respect to the meeting of the
stockholders of the Company in connection with the Merger (as amended or
supplemented from time to time, the "Proxy Statement/Prospectus"). The Company
will cause the Proxy Statement/Prospectus and the Form S-4 to comply as to form
in all material respects with the applicable provisions of the Securities Act,
the Exchange Act and the rules and regulations thereunder. The Company shall
use commercially reasonable efforts, and Parent will cooperate with the Company,
to have the Form S-4 declared effective by the SEC as promptly as practicable
and to keep the Form S-4 effective as long as necessary to consummate the
Merger. The Company shall, as promptly as practicable, provide copies of any
written comments received from the SEC with respect to the Form S-4 to Parent
and advise Parent of any verbal comments with respect to the Form S-4 received
from the SEC. The Company shall use its best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by this
Agreement. Each of Parent and the Company shall use all reasonable efforts to
obtain "cold comfort" letters from their respective independent certified public
accountants, dated a date within two Business Days before the date on which the
Form S-4 shall become effective, in form reasonably acceptable to the other
party and customary in form and substance for letters delivered by independent
certified public accountants in connection with registration statements similar
to the Form S-4. The Company agrees that the Proxy Statement/Prospectus and
each amendment or supplement thereto at the time of mailing thereof and at the
time of the meeting of stockholders of the Company, or, in the case of the Form
S-4 and each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material
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fact or omission to state a material fact was made by the Company in reliance
upon and in conformity with written information concerning Parent or any of its
Subsidiaries furnished to the Company by Parent specifically for use in the
Proxy Statement/Prospectus. Parent agrees that the written information
concerning Parent and its Subsidiaries provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the meetings of stockholders of the Company,
or, in the case of written information concerning Parent and its Subsidiaries
provided by Parent for inclusion in the Form S-4 or any amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No amendment or
supplement to the Proxy Statement/Prospectus will be made by the Company without
the approval of Parent. The Company will advise Parent, promptly after receipt
of notice thereof, of the time when the Form S-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Surviving Corporation Series A Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
8.05 Approval of Stockholders and Board Recommendation. The Company
shall, through its Board of Directors, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders' Meeting") for the
purpose of voting on the adoption of the Restated Charter and the adoption of
this Agreement and the transactions contemplated hereby as soon as reasonably
practicable after the date hereof, subject to the requirements of Section 8.04
and applicable laws. The Company shall use its reasonable efforts to solicit
from its stockholders proxies, and, except as provided in the last sentence of
this Section 8.05, shall take all other action necessary and advisable, to
secure the vote of stockholders required by applicable law to obtain the
approval for this Agreement. Notwithstanding anything to the contrary contained
in this Agreement, the Company shall not, without the prior written consent of
Parent, establish or cause to be established a record date for the Company's
Stockholders' Meeting with respect to the Company Stockholder Approval that is
prior to the date that ATILP and TIP have converted all shares of Existing
Series C Common Stock held by them into shares of Existing Series A Common Stock
in order that ATILP and TIP may be eligible to vote for the purposes of
determining the Company Stockholder Approval, as contemplated by the Voting
Agreements. The Board of Directors of the Company shall recommend to its
stockholders the adoption of the Restated Charter and the adoption of this
Agreement; provided, however, that such recommendation may not be made or may be
withdrawn, modified, or amended after the receipt by the Company of an
Acquisition Proposal to the extent the Board of Directors of the Company shall
determine, in good faith, upon written advice of outside counsel (who may be the
Company's regularly retained outside counsel), that such action is necessary in
order for the Board of Directors of the Company to act in a manner which is
consistent with its fiduciary obligations to stockholders under applicable law.
8.06 Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement and without limiting the provisions of Sections
8.04 and 8.05, each of the Company and Parent will proceed diligently and in
good faith and will use all commercially
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reasonable efforts to do, or cause to be done, all things necessary, proper or
advisable to, as promptly as practicable, (a) obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other public or private third parties required of
Parent, the Company or any of their Subsidiaries to consummate the Contribution
and the Merger and the other transactions contemplated hereby, and (b) provide
such other information and communications to such Governmental or Regulatory
Authorities or other public or private third parties as the other party or such
Governmental or Regulatory Authorities or other public or private third parties
may reasonably request. In addition to and not in limitation of the foregoing,
(i) each of the parties will (w) take promptly all actions necessary to make the
filings required of Parent, the Company and their affiliates under the
Communications Act and the FCC Regulations and to receive FCC Approval, (x) take
promptly all actions necessary to make the filings required of Parent and the
Company or their affiliates under the HSR Act in respect of the Contribution,
the Merger and the transactions contemplated by the Voting Agreements, (y)
comply at the earliest practicable date with any request for additional
information received by such party or its affiliates from the FCC pursuant to
the Communications Act or the FCC Regulations, or from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate with the
other party (or ATILP and TIP, as the case may be) in connection with such
party's filings under the Communications Act and the HSR Act and in connection
with resolving any investigation or other inquiry in respect of the Merger and
the transactions contemplated by the Voting Agreements and this Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general. The parties hereto recognize and acknowledge that under applicable
rules and regulations of the FCC, certain assets currently held by, or
attributable to, Parent, the Company or their respective Subsidiaries cannot be
held by, or be attributable to, the Company (or the Surviving Corporation, as
the case may be) or its Subsidiaries after the Effective Time, unless
appropriate waivers of such rules and regulations are obtained. Subject to the
next sentence, the parties agree to seek temporary waivers consistent with
existing precedent (including commitments of the Company (or the Surviving
Corporation, as the case may be) and its Subsidiaries to divest such assets or
take such other actions as may be required) in order to obtain the FCC Approval
and to allow the consummation of the Merger. If necessary in order to obtain the
FCC's approval of the transactions contemplated hereby, the parties agree that
the Company (or the Surviving Corporation, as the case may be) and its
Subsidiaries will agree to divest of the following assets or take other
appropriate action with respect to such assets after the Effective Time: WNAC-TV
(Providence, Rhode Island) and WDTN-TV (Dayton, Ohio); provided, however, that
the agreement to divest of any other assets or at any other time will require
the prior approval of Parent and the Company (or the Surviving Corporation, as
the case may be). Anything contained herein to the contrary notwithstanding, in
no event shall Parent or any of its Subsidiaries be required to divest or take
any other action with respect to any assets, properties or businesses which are
not included in the Parent Station Assets or the Parent Station Business in
order to obtain the approvals of any Governmental or Regulatory Authorities or
any other public or private third parties for the Contribution, the Merger or
the other transactions contemplated thereby. The parties also recognize that
applications for renewal of one or more of the FCC Licenses have been filed and
may need to be filed prior to the Closing Date. Accordingly, each party hereby
agrees that it shall abide by the procedures established in Stockholders of CBS,
Inc., FCC 95-469 (rel. Nov. 22, 1995) (P)(P)31-35 (or such other procedures
established by the FCC), for processing applications for transfer of control of
a licensee during the pendency of an application for renewal of a station
license. The parties further
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agree that the pendency of any such renewal application or applications, or the
fact that the FCC grant of any renewal application shall not have become final
(i.e., no longer subject to administrative or judicial review or reconsideration
(a "Final Order")), shall not be a cause for delaying the Closing except as
provided in Section 9.01(d). Without limiting the generality of the foregoing,
the parties agree to use their respective commercially reasonable efforts to
prosecute any such application for renewal of a FCC License, and Parent and the
Company agree that any interest that may be acquired in such license at Closing
is subject to whatever action the FCC may ultimately take with respect to the
renewal application. Notwithstanding anything in this Agreement to the contrary,
this Section 8.06 shall survive the Closing until any order issued by the FCC
with respect to a renewal application pending, or granted but not yet final, as
of the Closing becomes a Final Order.
8.07 Tax Matters. Each of the parties hereto shall report the
Contribution as a transaction satisfying the requirements of Section 351 of the
Code and shall comply with the tax reporting and record keeping requirements of
Section 1.351-3 of the Treasury Regulations promulgated under the Code with
respect to such transaction. None of the parties hereto shall take any action
that would result in the Contribution failing to satisfy the requirements of
Section 351 of the Code. The Company (or the Surviving Corporation, as the case
may be) shall report the Merger as a redemption under the provisions of Section
302 of the Code with respect to those stockholders of the Company who receive
cash pursuant to the Merger. None of the parties hereto shall take any action
or position inconsistent with such treatment as a redemption.
8.08 Affiliate Letters; Resales. At least 30 days prior to the
Closing Date, the Company shall deliver to Parent a list of names and addresses
of those persons who were, in the Company's reasonable judgment, at the record
date for the Company Stockholders' Meeting, "affiliates" (each such person, an
"Affiliate") of the Company within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. The Company shall use all
reasonable efforts to deliver or cause to be delivered to Parent prior to the
Closing Date, from each of the Affiliates of the Company identified in the
foregoing list, an Affiliate Letter in the form attached hereto as Exhibit 8.08.
The Surviving Corporation shall be entitled to place legends as specified in
such Affiliate Letters on the certificates evidencing any Surviving Corporation
Series A Common Stock to be received by such Affiliates pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Surviving Corporation Series A Stock, consistent with the
terms of such Affiliate Letters.
As soon as practicable after the date of this Agreement, the Company
and Parent jointly shall prepare and submit to the SEC a request for a "no-
action letter" to the effect that the provisions of Rule 145(d) under the
Securities Act will not be applicable immediately after the Effective Time to
those persons who will receive shares of Existing Series A Common Stock and
Existing Series B Common Stock pursuant to the Liquidation Plans and who are not
otherwise Affiliates of the Company at the time of the Company Stockholders'
Meeting (the "Distributees"). In the event that a favorable no-action letter is
not given by the SEC, then as soon as practicable after the Effective Time, the
Surviving Corporation shall prepare and file with the SEC and use its best
efforts to keep effective a registration statement on Form S-3 covering the
resale of any shares of Surviving Corporation Series A Common Stock received by
the Distributees in the Merger until the
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earlier of the first anniversary of the Effective Time or until all such shares
have been resold pursuant thereto.
8.09 Governance. After the Effective Time, (i) Parent shall vote its
shares of Surviving Corporation Series B Common Stock and use its best efforts
to take such actions to cause each of Messrs. Bob Marbut and Blake Byrne to
continue to be elected as directors of the Board of Directors of the Surviving
Corporation for so long as Mr. Marbut or Mr. Byrne, as the case may be, are
employed by the Surviving Corporation or any of the Surviving Corporation's
Subsidiaries, and (ii) for as long as Parent holds any shares of Surviving
Corporation Series B Common Stock and to the extent that Parent during such time
also holds any shares of Surviving Corporation Series A Common Stock, Parent
shall vote its shares of Surviving Corporation Series A Common Stock with
respect to the election of directors only in the same proportion as the shares
of Surviving Corporation Series A Common Stock not held by Parent are so voted.
8.10 Directors' and Officers' Indemnification and Insurance.
(a) Except to the extent required by law, until the sixth anniversary
of the Effective Time, the Surviving Corporation will keep in effect provisions
in its Certificate of Incorporation and By-Laws providing for exculpation of
director and officer liability and its indemnification of directors, officers,
employees or agents of the Company or any of its Subsidiaries (the
"Indemnitees") which are no less favorable than such provisions as in effect in
the Company's Certificate of Incorporation and By-Laws on the date hereof.
(b) The Surviving Corporation shall, until the sixth anniversary of
the Effective Time, cause to be maintained in effect, to the extent available,
the policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries as of the date hereof (or policies of at least the
same coverage and amounts containing terms that are no less advantageous to the
insured parties) with respect to claims arising from facts or events that
occurred on or prior to the Effective Time; provided, however, that in no event
shall the Surviving Corporation be obligated to expend in order to maintain or
procure insurance coverage pursuant to this paragraph any amount per annum in
excess of 200% of the aggregate premiums currently paid by the Company and its
Subsidiaries in 1997 (on an annualized basis) for such purpose (the "Cap")
(which 1997 annual premium the Company represents and warrants to be
approximately $292,200); and provided further, that if equivalent coverage
cannot be obtained, or can be obtained only by paying an annual premium in
excess of the Cap, the Surviving Corporation shall only be required to obtain as
much coverage as can be obtained by paying an annual premium equal to the Cap.
(c) The provisions of this Section 8.10 are intended to be for the
benefit of, and shall be enforceable by, each Indemnitee.
8.11 Expenses. Except as set forth in Section 10.02, in the event
that the Merger is not consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such cost or expense except as expressly provided
herein and except that (a) the filing fee in connection with the HSR Act filing,
(b) the filing fee in connection with the filing of the Form S-4 or Proxy
Statement/Prospectus with
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the SEC, (c) the filing fees in connection with necessary applications to the
FCC and (d) the expenses incurred in connection with printing and mailing the
Form S-4 and the Proxy Statement/Prospectus, shall be shared equally by the
Company and Parent. In the event that the Merger is consummated, the Surviving
Corporation shall bear or reimburse Parent for all of the costs and expenses of
Parent incurred in connection with this Agreement and the transactions
contemplated hereby, including but not limited to Transfer Taxes, the fees and
disbursements of counsel for Parent, fees and disbursements for special
accounting services provided by Parent's independent outside accountants, fees
and expenses of J.P. Morgan & Co., Parent's financial advisor, and the costs and
expenses set forth in clauses (a) through (d) of the preceding sentence.
8.12 Brokers or Finders. Each of Parent and the Company
represents, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement except Merrill Lynch
& Co., and Credit Suisse First Boston whose fees and expenses will be paid by
the Company and J.P. Morgan & Co., whose fees and expenses, except to the extent
otherwise provided in Section 8.11 above, will be paid by Parent and each of
Parent and the Company shall indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to any other
such fee or commission or expenses related thereto asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliate.
8.13 Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, each of Parent and the Company will use all commercially
reasonable efforts to take or cause to be taken all steps necessary or desirable
and proceed diligently and in good faith to satisfy each condition to the
other's obligations contained in this Agreement and to consummate and make
effective the transactions contemplated by this Agreement, and neither Parent
nor the Company will, nor will it permit any of its Subsidiaries to, take or
fail to take any action that could be reasonably expected to result in the
nonfulfillment of any such condition.
8.14 Indemnification. If the Merger shall be consummated:
(a) Parent will indemnify, defend and hold harmless the Surviving
Corporation, its Subsidiaries and their affiliates and their respective
directors, officers and employees from and against all losses, liabilities
(including punitive or exemplary damages, fines or penalties and any interest
thereon), expenses (including fees and disbursements of counsel and expenses of
investigation and defense), claims or other obligations of any nature whatsoever
(collectively, "Losses") which directly or indirectly arise (i) out of any
Parent Station Excluded Liabilities, (ii) with respect to or otherwise in
connection with any pension, welfare or other benefit plan maintained or
contributed to by Parent or any of its Subsidiaries (other than the Company or
any of its Subsidiaries) which arise under ERISA or the Code, by virtue of the
Company and its Subsidiaries being aggregated with Parent or any of its other
Subsidiaries for purposes of ERISA or the Code (including, without limitation,
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA) at
any relevant time, or (iii) which result from any breach of, or inaccuracy in,
the representations and warranties contained in Section 6.13 (but only to the
extent such representations
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and warranties survive the Merger pursuant to Section 11.01). Notwithstanding
the preceding sentence, Parent shall not be liable pursuant to this Section 8.14
for any Losses which are recovered pursuant to any insurance policy.
(b) The Surviving Corporation will, and will cause each of its
Subsidiaries to, indemnify, defend and hold harmless Parent, its Subsidiaries
(other than the Surviving Corporation and its Subsidiaries) and their affiliates
and their respective directors, officers and employees from and against all
Losses which directly or indirectly arise (i) out of any Parent Station Assumed
Liabilities, the Bridge Debt or the Private Placement Debt, or (ii) with respect
to or otherwise in connection with any pension, welfare or other benefit plan
maintained or contributed to by the Company or any of its Subsidiaries which
arise under ERISA or the Code, by virtue of Parent and its other Subsidiaries
being aggregated with the Company and its Subsidiaries for purposes of ERISA or
the Code (including, without limitation, under Section 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA) at any relevant time.
8.15 Cross-Ownership. From and after the date hereof, if (i) Parent
or any of its respective Subsidiaries (other than the Company or any of its
Subsidiaries), on the one hand, or the Company or any of its Subsidiaries, on
the other hand (in each case a "Purchasing Party"), desires to acquire or
purchase (including any acquisition or purchase by way of merger or
consolidation) any television or radio broadcast stations, newspapers or any
other asset of any kind or nature and (ii) pursuant to any Law or Order, (x) the
party or any of such party's Subsidiaries not making such acquisition or
purchase (a "Non-Purchasing Party") would be required to divest or otherwise
dispose of any television or radio broadcast stations, newspapers or any other
assets of any kind or nature, or (y) divestiture of any of the Parent Stations
or Company Stations would be required prior to the Effective Time, then the
Purchasing Party shall not make such acquisition or purchase without the prior
written consent of the Non-Purchasing Party.
Notwithstanding the foregoing provisions of this Section 8.15, in the
event that Parent acquires or agrees to acquire any asset and reasonably
believes that, pursuant to any Law or Order, Parent or the Surviving
Corporation, as the case may be, would be required to divest of the KMBC (Kansas
City, Missouri) television station, Parent may elect to take such action and the
Company consents to such action and waives any rights or remedies it may have
under this Agreement; provided that (i) if such action is taken prior to the
Effective Time, Parent shall substitute consideration of Equivalent Value (as
defined below) for KMBC in the form of one (or a combination) of the following
at the election of Parent: (x) another television broadcasting station or
stations; (y) cash; or (z) a reduced number of Company Series B Common Stock or
(ii) if such action is taken after the Effective Time, Parent shall exchange a
Qualifying Property for KMBC with the Surviving Corporation in a like kind tax-
free exchange transaction and, to the extent that the estimated or actual 1997
broadcast cash flow of such Qualifying Property is greater or less than $21.7
million, then, in the case of an excess, the Surviving Corporation shall pay to
Parent and, in the case of a deficiency, Parent shall pay to the Surviving
Corporation, at Parent's election (x) cash; or (y) shares of Surviving
Corporation Series B Common Stock having a value equal to the Market Price on
the date such shares are paid (or a combination of the foregoing), equal to the
Appraised Value of such excess or deficiency, as the case may be. If such
substitution occurs before the Effective Time, each share of Company Series B
Common Stock which shall be used to reduce the
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number of shares to be received by Parent pursuant to Section 2.03 of this
Agreement in accordance with the preceding sentence shall be deemed to have a
value equal to $26.50 and any substitute television broadcasting station or
stations shall be deemed to have such value as mutually agreed upon by Parent
and the Company (it being agreed that unless such mutual agreement is reached,
Parent may not so substitute a television broadcasting station).
ARTICLE IX.
CONDITIONS
9.01 Conditions to Each Party's Obligation to Effect the Contribution
and the Merger. The respective obligation of each party to effect the
Contribution and the Merger is subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) Stockholder Approval. The Restated Charter, this Agreement and
transactions contemplated hereby shall have been approved and adopted by the
requisite vote of the stockholders of the Company under the DGCL, the Company's
Certificate of Incorporation and any other governing instruments.
(b) Form S-4. The Form S-4 shall have become effective and shall be
effective at the Effective Time, and no stop order suspending effectiveness of
the Form S-4 shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, or, to the knowledge of Parent or the Company,
threatened, and all necessary approvals under state securities laws relating to
the issuance or trading of the Surviving Corporation Series A Common Stock to be
issued in connection with the Merger shall have been received.
(c) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(d) FCC Approval. FCC Approval shall have been obtained,
notwithstanding that any such order or orders may not have yet become a Final
Order, except that if one or more pre-grant objections shall have been filed
with respect to the filings or applications required by Section 8.06 hereof, the
FCC Approval shall have become a Final Order. In either case the FCC Approval
shall have been obtained without the imposition of any condition or restriction
that (i) would require the divestiture of any Parent Stations or Company
Stations other than those expressly contemplated by Section 8.06 or (ii) would
reasonably be expected to have a Parent Material Adverse Effect, a material
adverse effect on Parent and its Subsidiaries, taken as a whole (it being
understood and agreed that the divestiture of any assets of Parent or any of its
Subsidiaries other than those expressly contemplated by Section 8.06 shall be
deemed to be such a material adverse effect), a Company Material Adverse Effect,
or a material adverse effect on the Surviving Corporation and its Subsidiaries,
taken as a whole, following the Effective Time.
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(e) No Injunctions or Restraints. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of the
Merger or the other transactions contemplated by this Agreement.
(f) Additional Governmental and Regulatory Consents and Approvals.
Other than FCC Approval and the filing of the Restated Charter and the
Certificate of Merger, all consents, approvals and actions of, filings with and
notices to any Governmental or Regulatory Authority of Parent, the Company or
any of their respective Subsidiaries to consummate the Contribution, the Merger
and the other transactions contemplated hereby, the failure of which to be
obtained or taken could be reasonably expected to have a material adverse effect
on Parent and its Subsidiaries, taken as a whole, or on the Company and its
Subsidiaries, taken as a whole, or on the Surviving Corporation and its
Subsidiaries, taken as a whole, following the Effective Time or on the ability
of Parent, Merger Sub, Cash Sub or the Company to consummate the transactions
contemplated hereby, shall have been obtained.
(g) NASDAQ Listing. The Surviving Corporation Series A Common Stock
to be issued in connection with the Merger shall have been approved for
quotation in the NASDAQ National Market System.
(h) Financing. The Company shall have obtained financing (the
"Refinancing") on terms reasonably satisfactory to each of Parent and the
Company in an amount sufficient for the following purposes: (i) to enable the
Company to refinance immediately after the Effective Time the Private Placement
Debt (to the extent such refinancing is required by the holders thereof); (ii)
to provide the Company with the funds required to refinance immediately after
the Effective Time the Bridge Debt (to the extent such refinancing is required
by the holders thereof); (iii) to enable the Company to redeem its 9-3/4% Senior
Subordinated Notes immediately after the Effective Time if required by the
holders thereof; and (iv) to enable the Company to refinance its $65,000,000
revolving credit facility under that certain Credit Agreement dated January 31,
1997 between the Company and the lenders named therein.
(i) Management and TV Option Contracts. Parent and the Company shall
have executed and delivered a management contract and a television station
option contract substantially on the terms attached hereto as Exhibit 9.01(i).
9.02 Conditions to Obligation of Parent, Merger Sub and Cash Sub to
Effect the Contribution and the Merger. The obligation of Parent, Merger Sub
and Cash Sub to effect the Contribution and the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Parent,
Merger Sub and Cash Sub in their sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and
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warranties made as of a specified date earlier than the Closing Date, on and as
of such earlier date, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed on behalf of the Company by its
Chairman of the Board, President or any Vice President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Company at
or prior to the Closing, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed on behalf of the Company by its
Chairman of the Board, President or any Vice President, to such effect.
(c) Dissenters' Rights. The period for execution and perfection of
statutory appraisal rights available in connection with the Merger described in
Section 3.06 shall have expired and such appraisal rights shall have been
exercised and perfected by the holders of shares of capital stock of any class
or series of the Company holding not more than 5% of the outstanding common
stock of any class or series of the Company (treating, for this purpose, each
share of the Company's Series A Preferred Stock, $.01 par value, and Series B
Preferred Stock, $.01 par value, as having been converted into a number of
shares of the Company's common stock equal to $1,000 divided by (x) the Cash
Consideration (in the case of the Series A Preferred Stock) or (y) $35 (in the
case of the Series B Preferred Stock).
(d) Opinions of Counsel. Parent shall have received the opinion of
Rogers & Wells, counsel to Parent, and the opinion of Locke Purnell Rain
Harrell, counsel to the Company, dated the date of the Proxy
Statement/Prospectus and the Closing Date, to the effect that the Contribution
will be treated as a transaction governed by Section 351 of the Code.
(e) Material Third Party Consents. All consents and approvals from
third parties to the contracts and agreements set forth in Section 9.02(e) of
the Company Disclosure Letter and Section 9.03(e) of the Parent Disclosure
Letter to consummate the Contribution, the Merger and the other transactions
contemplated hereby shall have been obtained.
(f) Tax Sharing Agreement. Parent and the Company shall have executed
and delivered a Tax Sharing Agreement substantially in the form attached hereto
as Exhibit 9.02(f).
(g) License Agreement. Parent and the Company shall have executed and
delivered a License Agreement substantially in the form attached hereto as
Exhibit 9.02(g).
(h) Affiliate Letters and Management Transfer Restriction Agreements.
Each of the Affiliates referred to in Section 8.08 shall have executed and
delivered to the Company an Affiliate Letter referred to therein, and each of
the persons listed on Exhibit 9.02(h)(A) shall have executed and delivered a
transfer restriction agreement substantially in the form attached hereto as
Exhibit 9.02(h)(B).
(i) Radio Facilities Lease. The Company or certain Broadcast
Subsidiaries, as the case may be, shall have executed and delivered to Parent,
on the terms attached hereto as Exhibit
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9.01(i) leases in respect of real property owned by the Surviving Corporation or
certain Broadcast Subsidiaries, as the case may be, pursuant to which Parent
shall lease premises for Parent's radio broadcast stations.
(j) Conveyancing Documents. The Company shall have executed and
delivered to Parent the Assignment and Assumption Agreement referred to in
Section 9.03(c) below.
(k) Financing. Cash Sub shall have obtained financing on terms
reasonably satisfactory to Parent for the Bridge Debt and shall have received
the proceeds thereof.
9.03 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Parent in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date, and Parent
shall have delivered to the Company a certificate, dated the Closing Date and
executed on its behalf by its Chairman of the Board, President or any Vice
President to such effect.
(b) Performance of Obligations. Parent, Merger Sub and Cash Sub shall
have performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Parent, Merger Sub and Cash Sub at or prior to the Closing, and
Parent, Merger Sub and Cash Sub shall each have delivered to the Company a
certificate, dated the Closing Date and executed on its behalf by its Chairman
of the Board, President or any Vice President to such effect.
(c) Conveyancing Documents. Parent shall have executed and delivered
to the Company an Assignment and Assumption Agreement and a Bill of Sale
effecting the transfer to the Company of the Parent Station Assets and the
assumption by the Company of the Parent Station Assumed Liabilities in form
reasonably satisfactory to the Company, and such further instruments of transfer
in forms customary for such transactions in the jurisdictions in which such
properties are located as may be reasonably requested by the Company in order to
complete the transfer of the Parent Station Assets to the Company.
(d) Services Agreement. Parent shall have executed and delivered to
the Company a services agreement on terms to be mutually agreed upon by the
parties thereto, pursuant to which Parent shall provide to the Surviving
Corporation, at fair market value, certain services currently provided by Parent
to the Parent Station Business.
(e) Material Third Party Consents. All consents and approvals from
third parties to the Material Parent Station Contracts set forth in Section
9.03(e) of the Parent Disclosure Letter
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to consummate the Contribution, the Merger and the other transactions
contemplated hereby shall have been obtained.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
10.01 Termination.
(a) This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time, before or after the adoption and
approval of this Agreement by the stockholders of the Company referred to in
Section 9.01(a), by the mutual consent of Parent and the Company.
(b) This Agreement may be terminated and the Merger may be abandoned
by action of the Board of Directors of either Parent or the Company if (i) the
Merger shall not have been consummated by December 31, 1997, or (ii) the
approval of the Company's stockholders required by Section 9.01(a) shall not
have been obtained at a meeting duly convened therefor or at any adjournment
thereof, or (iii) a Governmental or Regulatory Authority of competent
jurisdiction shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this clause (iii)
shall have used all reasonable efforts to remove such order, decree or ruling;
and provided further, in the case of a termination pursuant to clause (i) above,
that the terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Merger by December 31, 1997.
Notwithstanding the foregoing, the Company's ability to terminate this Agreement
pursuant to this Section 10.01(b) is conditioned upon the prior payment by the
Company of any amounts owed by it pursuant to Section 10.02.
(c) This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time before or after the adoption and
approval by the stockholders of the Company referred to in Section 9.01(a), by
action of the Board of Directors of the Company, if (i) in the exercise of its
good faith judgment as to fiduciary duties to its stockholders imposed by law,
on the basis of written advice given by outside counsel (who may be the
Company's regularly retained outside counsel), the Board of Directors of the
Company shall have approved an Acquisition Proposal or shall have recommended an
Acquisition Proposal to the Company's stockholders; provided, however, that the
Company shall notify Parent promptly of its intention to terminate this
Agreement or enter into a definitive agreement with respect to any Acquisition
Proposal, but in no event shall such notice be given less than 48 hours prior to
the public announcement of the Company's termination of this Agreement; or (ii)
there has been a breach by Parent of any representation or warranty contained in
this Agreement which would have or would be reasonably likely to have a Parent
Material Adverse Effect; or (iii) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of Parent,
Merger Sub or Cash
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Sub which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the Company to Parent.
Notwithstanding the foregoing, the Company's ability to terminate this Agreement
pursuant to this Section 10.01(c) is conditioned upon the prior payment by the
Company of any amounts owed by it pursuant to Section 10.02.
(d) This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time, by action of the Board of Directors of
Parent, if (i) the Board of Directors of the Company shall have withdrawn or
modified in a manner materially adverse to Parent its approval or recommendation
of this Agreement or the Merger or shall have approved an Acquisition Proposal
or shall have recommended an Acquisition Proposal to the Company's stockholders,
or (ii) there has been a breach by the Company of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Company Material Adverse Effect, or (iii) there has been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of the Company, which breach is not curable, or, if curable, is not cured
within 30 days after written notice of such breach is given by Parent to the
Company.
10.02 Effect of Termination and Abandonment.
(a) In the event that any person shall have made an Acquisition
Proposal and thereafter (i) this Agreement is terminated pursuant to Section
10.01(c)(i) or Section 10.01(d)(i) or (ii) this Agreement is terminated pursuant
to Sections 10.01(b)(i) (but in case of a termination pursuant to Section
10.01(b)(i), only if any of the conditions set forth in Sections 9.01(h),
9.01(i), 9.02(f), 9.02(g), 9.02(i), 9.03(d), and 9.03(e) shall have failed to be
satisfied and such failure shall have proximately contributed to the failure to
consummate the Merger by December 31, 1997), 10.01(b)(ii), 10.01(b)(iii) (except
if the Governmental or Regulatory Authority referred to in Section 10.01(b)(iii)
shall be the FCC, the FTC or the Antitrust Division), 10.01(d)(ii) or
10.01(d)(iii) and, in the case of this clause (ii) only, a definitive agreement
with respect to such Acquisition Proposal is executed, or the transaction
contemplated by such Acquisition Proposal is consummated, within eighteen (18)
months after such termination, then the Company shall pay Parent a fee of
Fifteen Million Eight Hundred Fifty Thousand Dollars ($15,850,000), which amount
shall be payable by wire transfer of same day funds either on the date
contemplated in the last sentence of Section 10.01(b) or (c) if applicable or,
otherwise, within two business days after such amount becomes due. The Company
acknowledges that the agreements contained in this Section 10.02 are an integral
part of the transactions contemplated in this Agreement, and that, without these
agreements, Parent would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 10.02,
and, in order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for the fee set forth in this Section 10.02, the
Company shall pay Parent its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the rate of 12% per annum.
(b) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to Section 10.01, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
10.02 and Sections 8.03(c) and 8.11 which shall survive such termination and
remain in effect. Moreover, in the event of termination of this
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Agreement pursuant to Section 10.01, nothing herein shall prejudice the ability
of the non-breaching party from seeking damages from any other party for any
willful breach of this Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity.
10.03 Amendment. This Agreement may be amended, supplemented or
modified at any time prior to the Effective Time, whether prior to or after
adoption of this Agreement at the Company Stockholders' Meeting, but after such
adoption only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
10.04 Waiver. At any time prior to the Effective Time any party hereto
may to the extent permitted by applicable law (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the covenants, agreements or conditions of
the other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE XI.
GENERAL PROVISIONS
11.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall not survive the Merger but shall terminate at the Effective Time, except
for (i) the covenants and agreements contained in Articles II, III and IV and in
Sections 8.06 (to the extent expressly set forth in Section 8.06), 8.07, 8.09,
8.10, 8.11, 8.12, 8.14 and 8.15 which shall survive the Merger, and (ii) the
representations and warranties contained in Section 6.13 which shall survive for
a period of eighteen (18) months after the Merger.
11.02 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
"Acquisition Proposal" has the meaning ascribed to it in Section
8.01.
"Affiliate" has the meaning ascribed to it in Section 8.08.
"Amendment Time" has the meaning ascribed to it in Section 2.01.
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"Antitrust Division" has the meaning ascribed to it in Section 8.06.
"Appraisal Procedure" means the following procedure for determining
the Appraised Value. The parties shall appoint an Appraiser (defined below)
mutually satisfactory to them who shall determine the Appraised Value, which
determination shall be final and binding on the parties. If the parties are
unable to agree on a mutually acceptable Appraiser within 10 days, the Appraised
Value shall be determined by a panel of three Appraisers, one of whom shall be
appointed by Parent, another by the Company (or the Surviving Corporation) and
the third of whom shall be appointed by the other two Appraisers, or, if such
two Appraisers are unable to agree on a third Appraiser within 15 days, by the
American Arbitration Association (or its successor); provided, however, that, if
either party shall not have appointed its Appraiser within 15 days, the
Appraised Value shall be determined solely by the Appraiser selected by the
other party. The Appraiser or Appraisers appointed pursuant to the foregoing
procedure shall be instructed to determine the Appraised Value within 30 days
after such appointment, and such determination shall be final and binding on the
parties. If three Appraisers are appointed, the valuation of the Appraiser that
shall differ most from the second highest determination of all three Appraisers
shall be excluded, the remaining two determinations shall be averaged and such
average shall constitute the determination of the Appraisers. In the event that
a single Appraiser is appointed, the fees and expenses of such Appraiser shall
be shared equally by the parties. In the event that three Appraisers are
appointed, each party shall pay the fees and expenses of its own Appraiser and
the fees and expenses of the third Appraiser shall be shared equally by the
parties.
"Appraised Value" shall mean fair market value, determined by
reference to the fair market value for television broadcast stations in private
market transactions as determined, (i) by mutual agreement between Parent and
the Surviving Corporation (by action of its independent directors) or (ii) if
Parent and the Surviving Corporation shall fail to so agree within thirty (30)
days after Parent's election to substitute Qualifying Property, by the Appraisal
Procedure.
"Appraiser" means an independent nationally recognized investment
banking firm or a firm having experience or specializing in valuations of
television broadcast businesses.
"ATILP" has the meaning ascribed to it in the recitals to this
Agreement.
"ATILP Liquidation Plan" has the meaning ascribed to it in the
recitals to this Agreement.
"ATP" has the meaning ascribed to it in the recitals to this
Agreement.
"Bridge Debt" means indebtedness of Cash Sub in the aggregate
principal amount of $200 million for the purposes of consummating the
transactions contemplated by this Agreement.
"Broadcast Subsidiaries" has the meaning ascribed to it in the
recitals to this Agreement.
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"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Cap" has the meaning ascribed to it in Section 8.10(b).
"Cash Consideration" has the meaning ascribed to it in Section
3.01(c)(ii).
"Cash Conversion Number" has the meaning ascribed to it in Section
3.03(a).
"Cash Election" has the meaning ascribed to it in Section
3.02(a)(i).
"Cash Election Shares" has the meaning ascribed to it in Section
3.03(b).
"Cash Proration Factor" has the meaning ascribed to it in Section
3.03(b)(i).
"Certificates" has the meaning ascribed to it in Section 3.04(c).
"Certificate of Merger" has the meaning ascribed to it in Section
1.02.
"Closing" has the meaning ascribed to it in Section 1.03.
"Closing Date" has the meaning ascribed to it in Section 1.03.
"Code" has the meaning ascribed to it in the recitals to this
Agreement.
"Communications Act" has the meaning ascribed to it in Section
5.04(b).
"Company Disclosure Letter" has the meaning ascribed to it in
Article V.
"Company Employee Benefit Plan" means any Plan entered into,
established, maintained, contributed to or required to be contributed to by the
Company or any Company ERISA Affiliate providing benefits to employees, former
employees, independent contractors, former independent contractors of the
Company or any Company ERISA Affiliate, or their dependents or beneficiaries.
"Company ERISA Affiliate" means an entity required (at any relevant
time) to be aggregated with the Company under Sections 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.
"Company Financial Statements" has the meaning ascribed to it in
Section 5.05(a).
"Company Material Adverse Effect" has the meaning ascribed to it in
Section 5.01.
"Company Option" has the meaning ascribed to it in Section 3.01(e).
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<PAGE>
"Company Permits" has the meaning ascribed to it in Section 5.09(a).
"Company Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock.
"Company SEC Reports" has the meaning ascribed to it in Section
5.05(a).
"Company Series A Common Stock" means the Series A Common Stock, $.01
par value, of the Company authorized pursuant to the Restated Charter.
"Company Series B Common Stock" means the Series B Common Stock, $.01
par value, of the Company authorized pursuant to the Restated Charter.
"Company Series A Preferred Stock" means the Series A Preferred Stock,
$.01 par value, of the Company authorized pursuant to the Restated Charter.
"Company Series B Preferred Stock" means the Series B Preferred Stock,
$.01 par value, of the Company authorized pursuant to the Restated Charter.
"Company Stockholder Approval" has the meaning ascribed to it in
Section 5.03.
"Company Stockholders' Meeting" has the meaning ascribed to it in
Section 8.05.
"Constituent Corporations" has the meaning ascribed to it in Section
1.01.
"Contracts" has the meaning ascribed to it in Section 5.04(a).
"Contributed Cash" has the meaning ascribed to it in Section
2.02(a).
"Contribution" has the meaning ascribed to it in Section 2.02(a).
"DGCL" has the meaning ascribed to it in Section 1.01.
"Dissenting Share" has the meaning ascribed to it in Section
3.06(i).
"Effective Time" has the meaning ascribed to it in Section 1.02.
"Electing Optionholders" means Bob Marbut, Blake Byrne, Ibra Morales
and Harry Hawks.
"Election" has the meaning ascribed to it in Section 3.02(a).
"Election Date" has the meaning ascribed to it in Section 3.02(e).
"Election Deadline" has the meaning ascribed to it in Section
3.02(f).
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"Environmental Law" means any federal, state, local or foreign law,
regulation, treaty, order, decree, permit, authorization, policy, opinion,
common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, health and safety, or natural resources; (B)
the handling, use, presence, disposal, release or threatened release of any
chemical substance or waste; or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
"Equivalent Value" shall mean consideration which equals Two Hundred
Twenty-Five Million Dollars ($225,000,000) in the aggregate.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" has the meaning ascribed to it in Section 5.04(b).
"Exchange Agent" has the meaning ascribed to it in Section 3.02(c).
"Excluded Cash" has the meaning ascribed to it in Section
2.02(b)(i).
"Existing Common Stock" means the Existing Series A Common Stock, the
Existing Series B Common Stock and the Existing Series C Common Stock.
"Existing Preferred Stock" means the Existing Series A Preferred
Stock and the Existing Series B Preferred Stock.
"Existing Series A Common Stock" has the meaning ascribed to it in
the recitals to this Agreement.
"Existing Series B Common Stock" has the meaning ascribed to it in
the recitals to this Agreement.
"Existing Series C Common Stock" has the meaning ascribed to it in
the recitals to this Agreement.
"Existing Series A Preferred Stock" means the Series A Preferred
Stock, par value $.01 per share, of the Company as of the date of this
Agreement.
"Existing Series B Preferred Stock" has the meaning ascribed to it
in the recitals to this Agreement.
"FCC" means the Federal Communications Commission.
"FCC Approval" has the meaning ascribed to it in Section 5.04(b).
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"FCC Licenses" means, with respect to any person, all licenses,
permits and other authorizations of the FCC that such person is required to hold
in connection with the operation of its business.
"FCC Regulations" has the meaning ascribed to it in Section 5.04(b).
"Final Order" has the meaning ascribed to it in Section 8.06.
"Florida Station Assets" has the meaning ascribed to it in Section
2.02(b)(v).
"Form of Election" has the meaning ascribed to it in Section
3.02(d).
"Form S-4" has the meaning ascribed to it in Section 8.04.
"FTC" has the meaning ascribed to it in Section 8.06.
"GAAP" has the meaning ascribed to it in Section 4.01(a).
"Gannett Exchange Transactions" means the transactions set forth in
that certain Asset Exchange Agreement dated November 20, 1996 among certain
Subsidiaries of Gannett Co., Inc. and certain Subsidiaries of the Company, as
such agreement is in effect on the date hereof.
"Governmental or Regulatory Authority" has the meaning ascribed to
it in Section 5.04(a).
"Hazardous Substance" means any substance that is: (A) listed,
classified or regulated in any concentration pursuant to any Environmental Law;
(B) any petroleum product or by-product, asbestos-containing material, lead-
containing paint or plumbing, polychlorinated biphenyls, radioactive materials
or radon; or (C) any other substance which may be the subject of regulatory
action by any Governmental or Regulatory Authority pursuant to any Environmental
Law.
"Hearst Broadcasting Productions" means a unit of Parent's WCVB
division engaged in the production of programming for cable networks and
broadcast stations.
"Holder Representatives" has the meaning ascribed to it in Section
3.02(g).
"HSR Act" has the meaning ascribed to it in Section 5.04(b).
"Indemnities" has the meaning ascribed to it in Section 8.11(a).
"Intangible Property" has the meaning ascribed to it in Section
2.02(a)(ix).
"IRS" means the United States Internal Revenue Service.
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"knowledge" means, with respect to the Company or Parent (or any of
their respective Subsidiaries), to the knowledge of the executive officers and
directors of the Company or Parent, as the case may be.
"Laws" has the meaning ascribed to it in Section 5.04(a).
"Lien" has the meaning ascribed to it in Section 5.02(b).
"Liquidation Plans" means, collectively, the ATILP Liquidation Plan,
the TIP Liquidation Plan, the ATP Liquidation Plan and the ATIGP Liquidation
Plan.
"Losses" has the meaning ascribed to it in Section 8.14.
"Market Price" means as of the date of determination the average of
the closing sales prices of the Surviving Corporation Series A Common Stock as
reported by NASDAQ for the 15 consecutive trading days preceding the fifth
trading day prior to such determination date.
"Material Parent Station Contracts" has the meaning ascribed to it
in Section 6.10.
"Material Subsidiary" means any direct or indirect "Significant
Subsidiary" of the Company as that term is defined in Rule 405 of the rules and
regulations promulgated under the Securities Act, or any Subsidiary of the
Company that either owns or operates a Company Station or holds an FCC License.
"Merger" has the meaning ascribed to it in the recitals to this
Agreement.
"Merger Sub Common Stock" has the meaning ascribed to it in Section
3.01(a).
"Missouri LMA" has the meaning ascribed to it in Section
2.02(b)(vi).
"Mixed Consideration" has the meaning ascribed to it in Section
3.01(c)(iii).
"Mixed Election" has the meaning ascribed to it in Section
3.02(a)(iii).
"Mixed Election Cash Shares" has the meaning ascribed to it in
Section 3.03(b).
"Mixed Election Shares" has the meaning ascribed to it in Section
3.03(b).
"Mixed Election Stock Shares" has the meaning ascribed to it in
Section 3.03(c).
"Mixed Option Cash Shares" has the meaning ascribed to it in Section
3.03(b).
"Mixed Option Stock Shares" has the meaning ascribed to it in
Section 3.03(c).
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"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Non-Electing Company Common Shares" has the meaning ascribed to it
in Section 3.03(h).
"Non-Purchasing Party" has the meaning ascribed to it in Section
8.15.
"Option Cash" has the meaning ascribed to it in Section
3.01(e)(iii).
"Option Cash Difference" has the meaning ascribed to it in Section
3.07.
"Option Cash Election" has the meaning ascribed to it in Section
3.02(b)(ii).
"Option Cash Shares" has the meaning ascribed to it in Section
3.03(b).
"Option Election" has the meaning ascribed to it in Section 3.02(b).
"Option Election Form" has the meaning ascribed to it in Section
3.02(d).
"Option Mixed Consideration" has the meaning ascribed to it in
Section 3.01(e)(iv).
"Option Mixed Election" has the meaning ascribed to it in Section
3.02(b)(iv).
"Option Rollover" has the meaning ascribed to it in Section
3.01(e)(i).
"Option Stock" has the meaning ascribed to it in Section
3.01(e)(ii).
"Option Stock Shares" has the meaning ascribed to it in Section
3.03(c).
"Options" has the meaning ascribed to it in Section 5.02(a).
"Orders" has the meaning ascribed to it in Section 5.04(a).
"Parent Adjustment Amount" has the meaning ascribed to it in Section
4.01(b).
"Parent Disclosure Letter" has the meaning ascribed to it in Article
VI.
"Parent ERISA Affiliate" means an entity required to be aggregated
(at any relevant time) with Parent under Sections 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
"Parent Material Adverse Effect" has the meaning ascribed to it in
Section 6.01.
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"Parent Permits" has the meaning ascribed to it in Section 6.09(a).
"Parent Station Assets" has the meaning ascribed to it in Section
2.02(a).
"Parent Station Assumed Liabilities" has the meaning ascribed to it
in Section 2.02(c).
"Parent Station Balance Sheet" has the meaning ascribed to it in
Section 4.01(a).
"Parent Station Business" has the meaning ascribed to it in Section
2.02(a).
"Parent Station Contracts" has the meaning ascribed to it in Section
2.02(a)(iv).
"Parent Station Employees" has the meaning ascribed to it in Section
2.02(f).
"Parent Station Employee Benefit Plan" means any Plan entered into,
established, maintained, contributed to or required to be contributed to by
Parent or any Parent ERISA Affiliate providing benefits to employees, former
employees, independent contractors, former independent contractors of the Parent
Station Business or their dependents or beneficiaries.
"Parent Station Excluded Assets" has the meaning ascribed to it in
Section 2.02(b).
"Parent Station Excluded Liabilities" has the meaning ascribed to it
in Section 2.02(d).
"Parent Station Financial Statements" has the meaning ascribed to it
in Section 6.05.
"Parent Station Leases" has the meaning ascribed to it in Section
2.02(a)(iii).
"Parent Station Net Assets" means an amount equal to (i) the total
current assets of the Parent Station Business, but only to the extent included
in the Parent Station Assets, less (ii) the total current liabilities of the
Parent Station Business, but only to the extent included in the Parent Station
Assumed Liabilities.
"Parent Station Permits" has the meaning ascribed to it in Section
2.02(a)(v).
"Parent Station Statement of Net Assets" has the meaning ascribed to
it in Section 4.01(a).
"Parent Station Tangible Property" has the meaning ascribed to it in
Section 2.02(a)(i).
"Per Share Amount" has the meaning ascribed to it in Section
3.01(f).
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"Permitted Liens" means, with respect to any asset or property, (i)
statutory liens for current taxes or assessments (A) not yet due and payable or
delinquent or (B) being contested in good faith and, in respect of which
adequate reserves have been established in accordance with GAAP; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations not yet due
and payable; (iii) exceptions that would be shown by surveys or personal
inspection of such property that do not individually or in the aggregate
materially adversely affect the ability to use the particular property involved
as currently used; (iv) terms and conditions of any leases with respect to such
asset or property; (v) such easements, restrictions, encumbrances or other
matters which are due to zoning and subdivision laws and regulations that do not
individually or in the aggregate materially adversely affect the ability to use
the particular property as currently used; (vi) such defects in title,
easements, restrictions, encumbrances or other matters which do not have a
Company Material Adverse Effect or a Parent Material Adverse Effect, as the case
may be.
"Plan" means any employment, bonus, incentive compensation, collective
bargaining, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, accident, disability, workmen's
compensation or other insurance, severance, separation, termination, change of
control or other benefit plan, agreement, practice, policy or arrangement of any
kind, whether written or oral, including, but not limited to any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
"Private Placement Debt" means the indebtedness of Parent under
Parent's 7.87% Series A Senior Notes due 2001, 8.01% Series B Senior Notes due
2002, and Series C Senior Notes due 2003, which indebtedness shall not exceed in
the aggregate Two Hundred Seventy-Five Million Dollars ($275,000,000).
"Pro Forma Financial Statements" has the meaning ascribed to it in
Section 5.05(b).
"Proxy Statement/Prospectus" has the meaning ascribed to it in
Section 8.04.
"Purchasing Party" has the meaning ascribed to it in Section 8.15.
"Qualifying Property" shall mean one or more television broadcast
stations having estimated or actual 1997 broadcast cash flow equal to at least
Nineteen Million Five Hundred Thousand Dollars ($19,500,000) and not more than
Thirty-Two Million Five Hundred Thousand Dollars ($32,500,000).
"Radio Assets" has the meaning ascribed to it in Section
2.02(b)(iii).
"Refinancing" has the meaning ascribed to it in Section 9.01(h).
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"Registration Rights Agreement" has the meaning ascribed to it in
the recitals to this Agreement.
"Representatives" has the meaning ascribed to it in Section 8.01.
"Restated Charter" has the meaning ascribed to it in the recitals to
this Agreement.
"SEC" has the meaning ascribed to it in Section 5.04(b).
"Secretary of State" has the meaning ascribed to it in Section 1.02.
"Securities Act" has the meaning ascribed to it in Section 5.04(b).
"Series A Common Stock" has the meaning ascribed to it in the
recitals to this Agreement.
"Series A Preferred Stock means the Series A Preferred Stock, par
value $.01 per share, of the Company.
"Series B Common Stock" means the Series B Common Stock, par value
$.01 per share, of the Company.
"Series B Preferred Stock" means the Series B Preferred Stock, par
value $.01 per share, of the Company.
"Series C Common Stock" has the meaning ascribed to it in the
recitals to this Agreement.
"Stock Conversion Number" has the meaning ascribed to it in Section
3.03(a).
"Stock Contribution" has the meaning ascribed to it in Section
3.01(c)(i).
"Stock Election" has the meaning ascribed to it in Section
3.02(a)(ii).
"Stock Election Shares" has the meaning ascribed to it in Section
3.03(c).
"Stock Proration Factor" has the meaning ascribed to it in Section
3.03(c)(i).
"Subsidiary" has the meaning ascribed to it in Section 5.01.
"Surviving Corporation" has the meaning ascribed to it in Section
1.01.
"Surviving Corporation Options" has the meaning ascribed to it in
Section 3.01(e)(i).
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<PAGE>
"Surviving Corporation Series A Common Stock" has the meaning
ascribed to it in Section 3.01(c)(i).
"Surviving Corporation Series A Preferred Stock" has the meaning
ascribed to it in Section 3.01(d).
"Surviving Corporation Series B Common Stock" has the meaning
ascribed to it in Section 3.01(a).
"Surviving Corporation Series B Preferred Stock" has the meaning
ascribed to it in Section 3.01(d).
"Taxes" has the meaning ascribed to it in Section 2.02(b)(iv).
"Tax Refund" has the meaning ascribed to it in Section 2.02(b)(iv).
"TIP" has the meaning ascribed to it in the recitals to this
Agreement.
"TIP Liquidation Plan" has the meaning ascribed to it in the
recitals to this Agreement.
"Transfer Taxes" means all sales, use, transfer, real property
transfer, recording, gains and other similar taxes and fees arising out of or in
connection with the transactions effected pursuant to this Agreement.
"Unaudited 1996 Financial Statements" has the meaning ascribed to it
in Section 5.05(a).
"Voting Agreements" has the meaning ascribed to it in the recitals
to this Agreement.
11.03 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Parent or Merger Sub, to:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10010
Telephone No.: (212) 649-2000
Facsimile No.: (212) 649-2035
Attn: Victor F. Ganzi
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with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Telephone No.: (212) 878-8000
Facsimile No.: (212) 878-8375
Attn: Steven A. Hobbs, Esq.
If to the Company, to:
Argyle Television, Inc.
200 Concord Plaza, Suite 700
San Antonio, Texas 78216
Telephone No.: (210) 828-1700
Facsimile No.: (210) 828-7300
Attn: Dean H. Blythe
with a copy to:
Locke Purnell Rain Harrell
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telephone No.: (214) 740-8000
Facsimile No.: (214) 740-8800
Attn: Guy Kerr, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other parties hereto.
11.04 Entire Agreement. This Agreement, including the
exhibits, schedules and any other documents referenced herein, supersedes all
prior discussions and agreements among the parties hereto with respect to the
subject matter hereof and, together with the Parent Disclosure Letter and the
Company Disclosure Letter, contains the sole and entire agreement among the
parties hereto with respect to the subject matter hereof.
11.05 Public Announcements. Except as otherwise required by
law or the rules of any applicable securities exchange or national market
system, so long as this Agreement is
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in effect, Parent and the Company will not, and will not permit any of their
respective Subsidiaries and their Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Parent and
the Company will cooperate with each other in the development and distribution
of all press releases and other public announcements with respect to this
Agreement and the transactions contemplated hereby, and will furnish the other
with drafts of any such releases and announcements as far in advance as
practicable.
11.06 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Section
8.09, 8.10 and 8.14 (which are intended to be for the benefit of the persons
entitled to therein, and may be enforced by any of such persons), it is not the
intention of the parties to confer third-party beneficiary rights upon any other
person.
11.07 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void.
11.08 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.09 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the legal, invalid or unenforceable provision
or by its severance herefrom and (iv) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
THE HEARST CORPORATION
By: /s/ Victor F. Ganzi
---------------------------------
Name: Victor F. Ganzi
Title: Executive Vice President
HAT MERGER SUB, INC.
By: /s/ illegible
---------------------------------
Name:
Title: President
HAT CONTRIBUTION SUB, INC.
By: /s/ illegible
---------------------------------
Name:
Title: President
ARGYLE TELEVISION, INC.
By: /s/ Bob Marbut
---------------------------------
Name: Bob Marbut
Title: Chairman and C.E.O.
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Exhibit A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARGYLE TELEVISION, INC.
Under Sections 242 and 245
of the
Delaware General Corporation Law
Argyle Television, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
First: The name of the Corporation is Argyle Television, Inc.
Second: The Corporation was originally incorporated under the name of
Argyle Television Holding II, Inc., and its original Certificate of
Incorporation was filed with the Secretary of State of Delaware on the
fifth day of August, 1994.
Third: Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law, this Amended and Restated Certificate of Incorporation
restates, integrates, and further amends the provisions of the current
Amended and Restated Certificate of Incorporation of the Corporation.
Fourth: The further amendment and restatement of the Amended and
Restated Certificate of Incorporation have been approved by the
Corporation's Board of Directors and have been duly adopted by its
stockholders in accordance with the provisions of Sections 242 and 245 of
the Delaware General Corporation Law.
Fifth: The text of the Amended and Restated Certificate of
Incorporation of the Corporation is further amended and restated to read in
its entirety as follows:
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARGYLE TELEVISION, INC.
ARTICLE ONE
NAME
The name of the Corporation is Argyle Television, Inc.
ARTICLE TWO
REGISTERED AGENT
The address of the Corporation's registered office in Delaware is
1209 Orange Street, City of Wilmington, County of New Castle, Delaware
19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
ARTICLE THREE
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware
General Corporation Law.
ARTICLE FOUR
CAPITAL STOCK
The aggregate number of shares of stock that the Corporation
shall have authority to issue is 201 million. Two hundred million of
such shares shall be of the par value of $.01 per share, shall be of
the same class and shall be designated as "Common Stock," and one
million of such shares shall be of the par value of $.01 per share,
shall be of the same class and shall be designated as "Preferred
Stock."
Section 1. Common Stock
A. Authorized Shares
1. Of the 200 million authorized shares of Common Stock,
100 million shares shall be designated as Series A Common Stock
(the
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<PAGE>
"Series A Common Stock") and 100 million shares shall be
designated as Series B Common Stock (the "Series B Common
Stock").
2. At the time at which this Amended and Restated
Certificate of Incorporation shall become effective, all shares
of Common Stock previously designated as "Series B Common Stock"
or "Series C Common Stock" which are then issued or outstanding
automatically shall be reclassified as and changed into an equal
number of shares of Series A Common Stock without any action by
the holders thereof. Any such holder of a certificate
representing shares of Series B Common Stock or Series C Common
Stock which are so changed and reclassified may surrender such
certificate to the Corporation and receive in exchange therefor a
new certificate representing an equal number of shares of Series
A Common Stock. Any such certificates that formerly represented
shares of Series B Common Stock or Series C Common Stock and that
have not been so exchanged shall be deemed to represent the same
number of shares of Series A Common Stock.
B. Voting Rights
1. Each share of the Series A Common Stock and the Series B
Common Stock issued and outstanding shall entitle the holder
thereof to one vote on all matters submitted to a vote of
stockholders.
2. Except as otherwise provided below, the issued and
outstanding shares of Series A Common Stock and Series B Common
Stock shall vote together as a single class on all matters
submitted to a vote of stockholders, with each such issued and
outstanding share of Series A Common Stock and Series B Common
Stock entitling the holder thereof to one vote on all such
matters. With respect to any election of directors by the
stockholders, subject to the provisions of ARTICLE FIVE below,
(i) the holders of the shares of Series A Common Stock shall be
entitled to vote separately as a class in order to elect two
directors (the "Series A Directors") and (ii) the holders of the
shares of Series B Common Stock shall be entitled to vote
separately as a class in order to elect the number of directors
that represents the balance of the Board of Directors; provided,
however, that such number shall not be less than the number of
directors that will constitute a majority of the Board of
Directors (the "Series B Directors"). For example, if the Board
of Directors consists of seven members, then the holders of the
shares of Series B Common Stock shall be entitled to vote
separately as a class in order to elect five directors, and the
holders of the shares of Series A Common Stock
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<PAGE>
shall be entitled to vote separately as a class in order to elect
the remaining two directors. The designation of directors as the
initial Series A Directors and Series B Directors, respectively,
as of the time this Amended and Restated Certificate of
Incorporation shall become effective shall be as set forth in
that certain Agreement and Plan of Merger dated March 26, 1997
(the "Merger Agreement"), among The Hearst Corporation, HAT
Merger Sub, Inc., HAT Contributor Sub, Inc. and the Corporation.
The directors may only be removed for cause by the holders of all
Common Stock voting together as a class. If no shares of Series
A Common Stock are issued and outstanding at any given time,
then, upon any election of directors by the stockholders, the
holders of shares of Series B Common Stock shall elect all of the
Corporation's directors. Conversely, if no shares of Series B
Common Stock are issued and outstanding at any given time, then,
assuming the FCC Approvals required under Subsection I below have
been obtained, upon any election of directors by the
stockholders, the holders of shares of Series A Common Stock will
elect all of the Corporation's directors.
3. Except as provided in Subsection B.2 above, each series
of Common Stock issued and outstanding shall entitle the holders
thereof to vote separately as a class only with respect to (i)
amendments to this Amended and Restated Certificate of
Incorporation that alter or change the powers, preferences, or
special rights of their respective series so as to affect them
adversely, and (ii) such other matters as require class votes
under the Delaware General Corporation Law.
C. Dividends
1. If and when dividends on the Series A or Series B Common
Stock are declared and payable from time to time by the Board of
Directors, whether payable in cash, in property, or in shares of
stock of the Corporation, the holders of Series A or Series B
Common Stock shall be entitled to share equally, on a per share
basis, in such dividends, subject to the limitations described in
this Subsection C.1 below. If dividends are declared that are
payable in shares of Series A or Series B Common Stock, such
dividends shall be payable at the same rate on all series of
Common Stock and (i) the dividends payable on shares of Series A
Common Stock shall be payable only in Series A Common Stock; and
(ii) the dividends payable on shares of Series B Common Stock
shall be payable only in Series B Common Stock. If the
Corporation shall in any manner split, divide, or combine the
outstanding shares of Series A or Series B Common Stock, the
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outstanding shares of the other such series of Common Stock shall
be proportionally split, divided, or combined in the same manner
and on the same basis as the outstanding shares of Series A or
Series B Common Stock, as the case may be, that have been split,
divided, or combined.
2. Subject to provisions of law and the preferences of any
Preferred Stock and of any other stock ranking prior to the
Series A or Series B Common Stock as to dividends, the holders of
shares of the Series A or Series B Common Stock shall be entitled
to receive dividends at such times and in such amounts as may be
determined by the Board of Directors and declared out of any
funds lawfully available therefor, and shares of Preferred Stock
of any class or series shall not be entitled to share therein
except as otherwise expressly provided in the resolution or
resolutions of the Board of Directors providing for the issuance
of such class or series.
D. Conversion of the Series B Common Stock
1. Each holder of shares of the Series B Common Stock shall
have the right, at any time, to convert all or a portion of such
shares into fully paid and nonassessable shares of the Series A
Common Stock, on a share-for-share basis, subject to the terms
and conditions hereinafter set forth.
2. In order to obtain a certificate representing shares of
Series A Common Stock, the holder of any shares of Series B
Common Stock shall present and surrender the certificate or
certificates representing such shares during usual business hours
at any office or agency of the Corporation maintained for the
transfer of Series B Common Stock and shall deliver a written
notice of the election of the holder to convert the shares
represented by such certificate or any portion thereof specified
in such notice. Such notice shall state the names and addresses
in which the certificate or certificates for shares of Series A
Common Stock issuable on such conversion shall be registered. If
required by the Corporation, any certificate for shares
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed
by the holder of such shares or its duly authorized
representative. Each conversion of shares of Series B Common
Stock shall be deemed to have been effected on the date (the
"Conversion Date") on which the certificate or certificates
representing such shares shall have been surrendered and such
notice and any required instruments of transfer shall have been
received as aforesaid, and the persons in whose names
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any certificates for shares of Series A Common Stock shall be
issuable on such conversion shall be, for the purpose of
receiving dividends and for all other corporate purposes
whatsoever, deemed to have become the holder or holders of record
of the shares of Series A Common Stock represented thereby on
such Conversion Date.
3. As promptly as practicable after the presentation and
surrender for conversion, as herein provided, of any certificate
for shares of Series B Common Stock, the Corporation shall issue
and deliver at such office or agency, to or upon the written
order of the holder thereof, certificates for the number of
shares of Series A Common Stock issuable upon such conversion.
The issuance of certificates for shares of Series A Common Stock
issuable upon the conversion of shares of Series B Common Stock
by the registered holder thereof shall be made without charge to
the converting holder except for any tax that may be payable with
respect to any transfer involved in the issue and delivery of any
certificate in a name other than that of the registered holder of
the shares being converted, and the Corporation shall not be
required to issue or deliver any such certificate unless and
until the person requesting the issue thereof shall have paid to
the Corporation the amount of such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
4. Upon any conversion of shares of Series B Common Stock
into shares of Series A Common Stock pursuant to this Subsection
D, no adjustment with respect to dividends shall be made; only
those dividends as have been declared and are payable to holders
of record of shares of Series B Common Stock on a date prior to
the Conversion Date shall be payable on the shares so converted;
and only those dividends as have been declared and are payable to
holders of record of shares of Series A Common Stock on or after
such Conversion Date shall be payable on shares of Series A
Common Stock issued upon such conversion.
5. Shares of the Series B Common Stock converted into
Series A Common Stock shall be retired and shall resume the
status of authorized but unissued shares of Series B Common
Stock.
6. Such number of shares of Series A Common Stock as may
from time to time be required for such purpose shall be reserved
for issuance upon conversion of (i) outstanding shares of Series
B Common Stock and (ii) shares of Series B Common Stock issuable
upon exercise of outstanding options.
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7. Notwithstanding any of the foregoing, subject to
obtaining any FCC Approvals required under Subsection I below, at
the time at which all Permitted Transferees (as defined in
Subsection E.1 below) first hold less than 20% of all shares of
Common Stock which are then issued and outstanding, all shares of
Series B Common Stock which are issued and outstanding shall
automatically be converted into fully paid and nonassessable
shares of the Series A Common Stock, on a share-for-share basis,
and the Corporation shall not be authorized to issue any
additional shares of Series B Common Stock. Any holder of a
certificate representing shares of Series B Common Stock which
are so converted may surrender such certificate to the
Corporation and receive in exchange therefor a new certificate
representing an equal number of shares of Series A Common Stock.
Any such certificates that formerly represented shares of Series
B Common Stock and that have not been so exchanged shall be
deemed to represent the same number of shares of Series A Common
Stock.
E. Limitations on Transfer of Series B Common Stock
1. No holder of shares of Series B Common Stock may
transfer, and the Corporation shall not register the transfer of,
such shares of Series B Common Stock, whether by sale,
assignment, gift, bequest, appointment, or otherwise, unless (a)
all FCC Approvals required under Subsection I below have been
obtained and (b) the transfer is to a "Permitted Transferee" as
provided herein. Permitted Transferees shall include the
following:
(i) The Hearst Corporation, which is a Delaware
corporation, or any other corporation into which The Hearst
Corporation shall be merged or consolidated or to which all
or substantially all of the assets of The Hearst Corporation
shall be transferred (collectively, "Hearst"); and
(ii) any corporation, partnership, trust, limited
liability company or other entity a majority of the equity
securities of which are owned or controlled, directly or
indirectly, by Hearst.
2. Any purported transfer of shares of Series B Common
Stock not permitted hereunder shall result in the conversion of
the transferee's shares of Series B Common Stock into shares of
Series A Common Stock, effective on the date on which
certificates representing such shares are presented for transfer
on the stock transfer record books of the Corporation; provided,
however, that if the Corporation determines that such shares were
not so presented for transfer within
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20 days after the date of such sale, transfer, assignment, or
other disposition, the transfer date shall be the actual date of
such sale, transfer, assignment, or other disposition as
determined in good faith by the Board of Directors or its
appointed agent. The Corporation may, as a condition to the
transfer or the registration of transfer of shares of Series B
Common Stock to a purported Permitted Transferee, require the
furnishing of such affidavits or other proof as it deems
necessary to establish that such transferee is a Permitted
Transferee. If no indication to the contrary is supplied at or
within 10 days of the date shares of Series B Common Stock are
presented for transfer, the transfer shall be presumed by the
Corporation to be a transfer to a person other than a Permitted
Transferee.
3. If shares of Series B Common Stock are transferred to a
party who was a Permitted Transferee at the time of such transfer
but subsequent thereto no longer qualifies as a Permitted
Transferee, then such transferee's shares of Series B Common
Stock shall be automatically converted into Series A Common
Stock, effective on the date that such transferee first failed to
qualify as a Permitted Transferee.
F. Priority of Preferred Stock
All of the Common Stock is subject to all the powers,
rights, privileges, preferences, and priorities of the Preferred
Stock as stated herein and as may be stated and expressed in any
resolution or resolutions adopted by the Board of Directors
providing for the issuance of any additional class or series of
Preferred Stock, pursuant to authority expressly granted to and
vested in it by the provisions of this ARTICLE FOUR.
G. Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary (sometimes
referred to as "Liquidation"), after payment or provision for
payment of the debts and other liabilities of the Corporation and
the preferential amounts to which the holders of any stock
ranking prior to the Common Stock in the distribution of assets
shall be entitled upon Liquidation, the holders of the issued and
outstanding Common Stock and the holders of any other stock
issued and outstanding that ranks on a parity with the Common
Stock shall be entitled to share pro rata in the remaining assets
of the Corporation according to their respective interests.
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H. Merger or Consolidation
In case of any consolidation or merger of the Corporation as
a result of which the holders of Common Stock shall be entitled
to receive cash, stock, other securities, or other property with
respect to or in exchange for shares of Common Stock or in case
of any sale or conveyance of all or substantially all of the
property or business of the Corporation as an entirety, each
holder of a share of any series of Common Stock shall have the
right to convert such share into the same kind and amount of
cash, shares or stock, and other securities and properties
receivable upon such consolidation, merger, sale, or conveyance
as any other holder of one share of Common Stock (regardless of
series) and shall have no other conversion rights with regard to
such share. Notwithstanding the foregoing, any holder of one
share of Common Stock that does not elect to exercise its right
to receive such consideration (the "elective consideration") for
such share shall only be entitled to such other consideration
therefor (if any) that any other holder of one share of Common
Stock would be entitled to receive if such holder did not elect
to receive the elective consideration. The provisions of this
Subsection H shall similarly apply to successive consolidations,
mergers, sales, or conveyances.
I. FCC Approvals for Certain Actions by Holders of Series B
Common Stock
Notwithstanding any provision of this Amended and Restated
Certificate of Incorporation to the contrary, no holder of Series
B Common Stock shall (i) transfer any shares of Series B Common
Stock; (ii) convert any shares of Series B Common Stock; or,
(iii) be entitled to receive any cash, stock, other securities,
or other property with respect to or in exchange for any shares
of Series B Common Stock in connection with any merger or
consolidation of the Corporation or sale or conveyance of all or
substantially all of the property or business of the Corporation
as an entirety, unless all necessary approvals ("FCC Approvals")
of the Federal Communications Commission (the "FCC") as required
by the Communications Act of 1934, as amended from time to time
and the rules, regulations and policies promulgated thereunder,
as amended from time to time (collectively, the "Communications
Act") shall have been obtained or waived.
Section 2. Power to Designate Preferred Stock
The Board of Directors is hereby empowered to authorize, from
time to time by resolution or resolutions, the issuance of one or more
classes or
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series of Preferred Stock and to fix the designations, powers,
preferences and relative, participating, optional, voting or other
rights, if any, and the qualifications, limitations, or restrictions
thereof, if any, with respect to each such class or series of
Preferred Stock and the number of shares constituting each such class
or series, and to increase or decrease the number of shares of any
such class or series to the extent permitted by the Delaware General
Corporation Law, as amended from time to time. Any classes or series
so designated shall be in addition to the Series A Preferred Stock and
Series B Preferred Stock designated in Sections 3 and 4 below.
Section 3. Series A Preferred Stock
A. Designation. 12,500 shares of the preferred stock, par
value $.01 per share, of the Corporation are hereby constituted
as a series of the preferred stock designated as "Series A
Preferred Stock" (the "Series A Preferred Stock").
B. Dividends.
1. Dividends on Series A Preferred Stock. An annual,
cumulative cash dividend of $65 accruing from and after June 1,
1996 shall be declared and paid on each share of the Series A
Preferred Stock, payable at the end of each calendar quarter in
equal quarterly amounts, provided that at such times (i) there
are assets of the Corporation legally available for the payment
of such dividends and (ii) the payment of such dividends is
permitted under the terms of the governing documents for the
Corporation's then existing borrowing arrangements with third-
party lenders. Any such dividend that cannot be paid when due
shall be paid to the extent permissible at the time that the
payment of such dividend becomes permissible.
2. Limitation on Dividends, Repurchases and Redemptions.
So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare or pay or set
apart for payment any dividends or make any other distributions
on any Junior Securities (as defined below), whether in cash,
property or otherwise (other than dividends or distributions
payable in shares of the class or series upon which such
dividends or distributions are declared or paid), nor shall the
Corporation or any of its subsidiaries purchase, redeem or
otherwise acquire for any consideration or make payment on
account of the purchase, redemption, or other retirement of any
Parity Securities (as defined below) or Junior Securities, nor
shall any monies be paid or made available for a sinking fund for
the purchase or redemption of any Parity Securities or Junior
Securities, unless with
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respect to all of the foregoing all dividends or other
distributions to which the holders of Series A Preferred Stock
shall have been entitled, pursuant to Subsection B.1 above, shall
have been paid or declared and a sum of money has been set apart
for the full payment thereof.
3. Pro Rata Payments. In the event that full dividends are
not paid or made available to the holders of all outstanding
shares of Series A Preferred Stock and of any Parity Securities
and funds available for a payment of dividends shall be
insufficient to permit payment in full to holders of all such
stock of the full preferential amounts to which they are then
entitled, then the entire amount available for payment of
dividends shall be distributed ratably among all such holders of
Series A Preferred Stock and of any Parity Securities in
proportion to the full amount to which they would otherwise be
respectively entitled.
C. Preference on Liquidation.
1. Liquidation Preference for Series A Preferred Stock. In
the event that the Corporation shall commence a voluntary case
under the federal bankruptcy laws or any other applicable federal
or state bankruptcy, insolvency or similar law, or consent to the
entry of an order for relief in an involuntary case under such
law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of the
Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the federal bankruptcy
laws or any other applicable federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar
official of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and on account of any such event the Corporation shall
liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up, no distribution of the
assets of the Corporation shall be made to the holders of shares
of Common Stock or other Junior Securities (and no monies shall
be set apart for such purpose) unless prior thereto, the holders
of shares of Series A Preferred Stock shall have received from
the assets of the Corporation an amount per share equal to the
sum of (x) $1,000, plus (y) all accrued but unpaid dividends
thereon through the date of
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distribution, whether or not earned or declared (collectively,
the "Series A Liquidation Preference").
2. Pro Rata Payments. If, upon any such liquidation,
dissolution or other winding up of the affairs of the
Corporation, the assets of the Corporation shall be insufficient
to permit the payment in full of the Series A Liquidation
Preference for each share of Series A Preferred Stock then
outstanding and the full liquidating payments on all Parity
Securities, then the assets of the Corporation remaining after
the distribution to holders of any Senior Securities (as defined
below) of the full amounts to which they may be entitled shall be
ratably distributed among the holders of Series A Preferred Stock
and of any Parity Securities in proportion to the full amounts to
which they would otherwise be respectively entitled if all
amounts thereon were paid in full. The Corporation shall not
issue any Senior Securities without the written consent of the
holders of a majority of the Series A Preferred Stock issued and
outstanding.
3. Sale Not a Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all
the property or assets of the Corporation nor the consolidation,
merger or other business combination of the Corporation with or
into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary,
of the Corporation.
4. Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation,
stating the payment date or dates when and the place or places
where amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not
less than 30 days prior to any payment date specified therein, to
the holders of record of the Series A Preferred Stock at their
respective addresses as shall appear on the records of the
Corporation.
D. Voting.
1. General. Notwithstanding any provision of this Amended
Restated Certificate of Incorporation to the contrary, each
issued and outstanding share of Series A Preferred Stock shall
entitle the holder thereof to the number of votes determined
under the following sentence on all matters submitted to a vote
of holders of the Series A Common Stock, with such shares of
Series A Preferred Stock voting together as a single class with
such shares of Series A Common Stock.
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Each share of Series A Preferred Stock shall entitle the holder
thereof to the number of votes (rounded up to the next whole
number) equal to the number of shares of Series A Common Stock
into which one share of Series A Preferred Stock would be
convertible under Subsection F below as of the record date for
the stockholder meeting at which such votes are to be cast.
Except as set forth in Subsection D.2 below or as otherwise
provided by applicable law, the shares of Series A Preferred
Stock shall not entitle the holders thereof to vote separately as
a class.
2. Class Vote. At any time when shares of Series A
Preferred Stock are outstanding, without the approval of the
holders representing at least a majority of the shares of Series
A Preferred Stock then outstanding, given in writing or by vote
at a meeting, consenting or voting (as the case may be)
separately as a class, the Corporation shall not amend or repeal
any provision of, or add any provision to, this Amended and
Restated Certificate of Incorporation if such action would alter,
change or affect adversely the rights, preferences, privileges or
powers of, or the restrictions provided for the benefit of, the
Series A Preferred Stock.
E. Redemption
1. Redemption Price. Any redemption of the Series A
Preferred Stock pursuant to this Subsection E shall be at a price
equal to $1,000 per share, plus in each case an amount equal to
accrued and unpaid dividends, if any, to (and including) the
redemption date, whether or not earned or declared (the "Series A
Redemption Price").
2. Redemption at Corporation's Option. At any time after
June 11, 2001 (the "First Redemption Date"), the Corporation may,
at its option (subject to the other provisions of this Subsection
E), redeem all, or any portion of the outstanding shares of
Series A Preferred Stock.
3. Procedures for Redemption. In the event the Corporation
shall elect to redeem shares of Series A Preferred Stock pursuant
to Subsection E.2 above, the Corporation shall give written
notice of such redemption by facsimile, hand delivery, overnight
courier, or first class mail, postage prepaid, mailed or
transmitted not less than 30 nor more than 90 days prior to the
redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the
stock records of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number
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of shares of Series A Preferred Stock to be redeemed and, if less
than all the shares held by such holder are to be redeemed, the
number of such shares to be redeemed from such holder; (iii) the
Series A Redemption Price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of
the Series A Redemption Price; (v) that payment will be made upon
presentation and surrender of such Series A Preferred Stock; (vi)
that dividends on the shares to be redeemed shall cease to accrue
following such redemption date; (vii) that such redemption is
mandatory; and, (viii) that dividends accrued to and including
the date fixed for redemption will be paid as specified in such
notice. Notice having been mailed as aforesaid, from and after
the redemption date, unless the Corporation shall be in default
in the payment of the Series A Redemption Price (including any
accrued and unpaid dividends to (and including) the date fixed
for redemption, (A) dividends on the shares of the Series A
Preferred Stock so called for redemption shall cease to accrue;
(B) such shares shall be deemed no longer outstanding; and, (C)
all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation any
moneys payable upon redemption without interest thereon) shall
cease. Notwithstanding the foregoing, if the average of the
closing price for the Corporation's Series A Common Stock as
reported by NASDAQ (or such other principal exchange on which the
Series A Common Stock is then listed) for the 10 trading days
prior to the date of the redemption notice equals or exceeds the
Series A Conversion Price (defined in Subsection F.1 below) on
such date, any holder that has received such a redemption notice
shall have the right to convert the shares of Series A Preferred
Stock subject to redemption by complying with the conversion
procedures set forth in Subsection F below at any time prior to
20 days after the date of receipt of such redemption notice.
Notwithstanding the foregoing, any holder that has received
such a redemption notice shall have the right by providing
written notification to the Corporation not less than 20 days
after receipt of the redemption notice from the Corporation, to
specify up to three redemption dates, the latest of which shall
be January 1 of the second year following the date the
Corporation specified for redemption, on which the redemption
shall occur. Such notice shall specify the date or dates on
which the redemption shall occur, and, if more than one
redemption date is specified, the number of shares to be redeemed
on each such date; provided, however, that the total of the
number of shares specified by such holder to be redeemed must
equal the number of shares originally specified by the
Corporation for redemption. In the event the holder exercises
the right outlined above to specify a
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different date or dates for redemption than stated in the
redemption notice from the Corporation, dividends shall continue
to accrue and be paid as provided herein until such time as the
shares are redeemed.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state), such shares shall be
redeemed by the Corporation at the applicable Series A Redemption
Price. If fewer than all the outstanding shares of Series A
Preferred Stock are to be redeemed, shares to be redeemed shall
be selected by the Corporation from holders of outstanding shares
of Series A Preferred Stock not previously called for redemption
in proportion to the respective number of shares held by each
holder. If fewer than all the shares represented by a
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder
thereof.
4. Repurchases of Series A Preferred Stock by the
Corporation. Neither the Corporation nor any of its subsidiaries
shall repurchase any outstanding shares of Series A Preferred
Stock unless the Corporation on the same terms either (i) offers
to purchase all of the then outstanding shares of Series A
Preferred Stock or (ii) offers to purchase shares of Series A
Preferred Stock from the holders in proportion to the respective
number of shares of Series A Preferred Stock held by each holder.
In any such repurchase by the Corporation, if all shares of
Series A Preferred Stock are not being repurchased, then the
number of shares of Series A Preferred Stock to be repurchased
shall be allocated among all shares of Series A Preferred Stock
held by holders that accept the Corporation's repurchase offer so
that the shares of Series A Preferred Stock are repurchased from
such holders in proportion to the respective number of shares of
Series A Preferred Stock held by each such holder that accepts
the Corporation's offer (or in such other proportion as agreed by
all such holders who accept the Corporation's offer). Nothing in
this Subsection E.4 shall (i) obligate a holder of shares of
Series A Preferred Stock to accept the Corporation's repurchase
offer or (ii) prevent the Corporation from redeeming shares of
Series A Preferred Stock in accordance with the terms of
Subsections E.1 through E.3 above.
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F. Conversion.
1. Right to Convert. The holder of each share of Series A
Preferred Stock shall have the right at any time, or from time to
time, at such holder's option, to convert such share into a
number of shares of fully paid and nonassessable shares of Series
A Common Stock equal to a quotient determined by dividing $1,000
by the "Series A Conversion Price" (defined below), on and
subject to the terms and conditions hereinafter set forth.
The "Series A Conversion Price" shall be (i) on or before
December 31, 2000, $35; and (ii) during each calendar year after
December 31, 2000, the product of 1.1 times the Series A
Conversion Price for the immediately preceding calendar year.
(For example, during 2001, the Series A Conversion Price shall be
$38.50; during 2002 the Series A Conversion Price shall be
$42.35; etc.) Notwithstanding the foregoing, if after the First
Redemption Date a holder elects to exercise its conversion right
under this Subsection F.1, and, (i) the Corporation has not given
written notice of redemption and (ii) the average of the closing
price for the Corporation's Series A Common Stock as reported by
NASDAQ (or such other principal exchange on which the Series A
Common Stock is then listed) for the 10 trading days prior to the
Series A Conversion Date (defined in Subsection F.2 below) (the
"10 Day Average Price") is less than the Series A Conversion
Price on the Series A Conversion Date, then the Series A
Conversion Price shall be equal to the 10 Day Average Price.
a. If the Series A Common Stock issuable upon the
conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification or otherwise, then and in each such event
the holder of each share of Series A Preferred Stock shall
have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and
property receivable upon such reorganization,
reclassification or other change by holders of the number of
shares of Series A Common Stock into which such shares of
Series A Preferred Stock might have been converted
immediately prior to such reorganization, reclassification
or change.
b. If at any time or from time to time there shall be
a merger or consolidation of the Corporation with or into
another corporation, or the sale of substantially all of the
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Corporation's properties and assets to any other person,
then, as a part of such merger, consolidation or sale,
provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock, the number of
shares of stock or other securities or properties of the
Corporation, or of the successor corporation resulting from
such merger, consolidation or sale, to which such holder
would have been entitled if such holder had converted its
shares of Series A Preferred Stock immediately prior to such
capital reorganization, merger, consolidation or sale. In
any such case, appropriate adjustment shall be made in the
application of the provisions of this Subsection F with
respect to the rights of the holders of the Series A
Preferred Stock after the merger, consolidation or sale to
the end that the provisions of this Subsection F shall be
applicable after that event in as nearly equivalent a manner
as may be practicable.
2. Method of Conversion. In order to exercise the
conversion privilege, the holder of any shares of Series A
Preferred Stock to be converted shall present and surrender the
certificate or certificates representing such shares during usual
business hours at any office or agency of the Corporation
maintained for the transfer of Series A Preferred Stock and shall
deliver a written notice of the election of the holder to convert
the shares represented by such certificate or any portion thereof
specified in such notice. Such notice shall also state the name
or names (with address) in which the certificate or certificates
for shares of Series A Common Stock issuable on such conversion
shall be registered. If required by the Corporation, any
certificate for shares surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the holder of such shares or
its duly authorized representative. Each conversion of shares of
Series A Preferred Stock shall be deemed to have been effected on
the date (the "Series A Conversion Date") on which the
certificate or certificates representing such shares shall have
been surrendered and such notice and any required instruments of
transfer shall have been received as aforesaid, and the person or
persons in whose name or names any certificate or certificates
for shares of Series A Common Stock shall be issuable on such
conversion shall be, for the purpose of receiving dividends and
for all other corporate purposes whatsoever, deemed to have
become the holder or holders of record of the shares of Series A
Common Stock represented thereby on the Series A Conversion Date.
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3. Issuance of Certificates Upon Conversion. As promptly as
practicable after the presentation and surrender for conversion,
as herein provided, of any certificate for shares of Series A
Preferred Stock, the Corporation shall issue and deliver at such
office or agency, to or upon the written order of the holder
thereof, certificates for the number of whole shares of Series A
Common Stock issuable upon such conversion and cash for any
fractional shares. In case any certificate for shares of Series
A Preferred Stock shall be surrendered for conversion of only a
part of the shares represented thereby, the Corporation shall
deliver at such office or agency, to or upon the written order of
the holder thereof, a certificate or certificates for the number
of shares of Series A Preferred Stock represented by such
surrendered certificate that are not being converted. The
issuance of certificates for shares of Series A Common Stock
issuable upon the conversion of shares of Series A Preferred
Stock by the registered holder thereof shall be made without
charge to the converting holder for any tax imposed on the
Corporation in respect of the issue thereof. The Corporation
shall not, however, be required to pay any tax that may be
payable with respect to any transfer involved in the issue and
delivery of any certificate in a name other than that of the
registered holder of the shares being converted, and the
Corporation shall not be required to issue or deliver any such
certificate unless and until the person requesting the issue
thereof shall have paid to the Corporation the amount of such tax
or has established to the satisfaction of the Corporation that
such tax has been paid.
4. Payment of Dividends on Converted Shares. Upon any
conversion of shares of Series A Preferred Stock into shares of
Series A Common Stock pursuant hereto, no adjustment with respect
to dividends shall be made; only those dividends shall be payable
on the shares so converted as have been declared and are payable
to holders of record of shares of Series A Preferred Stock on a
date prior to the Series A Conversion Date with respect to the
shares so converted; and only those dividends shall be payable on
shares of Series A Common Stock issued upon such conversion as
have been declared and are payable to holders of record of shares
of Series A Common Stock on or after such Series A Conversion
Date.
5. Reservation of Shares. Such number of shares of Series
A Common Stock as may from time to time be required for such
purpose shall be reserved for issuance upon conversion of
outstanding shares of Series A Preferred Stock.
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G. Shares to be Retired. Any share of Series A Preferred
Stock redeemed, repurchased, converted or otherwise acquired by
the Corporation shall be retired and canceled and shall upon
cancellation be restored to the status of authorized but unissued
shares of Preferred Stock, subject to reissuance by the Board of
Directors as shares of Preferred Stock of one or more other
series but not as shares of Series A Preferred Stock.
H. Definitions. As used in this Section 3 (and with
respect to the definitions of "Business Day," "Common Stock" and
"Person," as also used in Section 4 below), the following terms
shall have the respective meanings set forth below:
"Business Day" means any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be
closed in the State of Delaware, the State of Texas or the State
of New York.
"Common Stock" means the Series A Common Stock, $.01 par
value per share, of the Corporation.
"Junior Securities" means the Common Stock and any other
class of capital stock or series of preferred stock created by
the Corporation that does not expressly provide that it ranks
senior to or pari passu with the Series A Preferred Stock as to
dividends, other distributions, liquidation preference or
otherwise.
"Parity Securities" means the Corporation's Series B
Preferred Stock, $.01 par value per share, and any other class of
capital stock or series or preferred stock created by the
Corporation which expressly provides that it ranks pari passu
with the Series A Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Person" or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture or
any other entity of any kind.
"Senior Securities" means any class or series of capital
stock of the Corporation other than Parity Securities or Junior
Securities.
I. Notices. Except as may otherwise be provided for in
this Amended and Restated Certificate of Incorporation, all
notices referred to in this Section 3 shall be in writing, and
all notices hereunder shall be deemed to have been given upon the
earlier of (i) receipt of such notice; (ii) three Business Days
after the mailing of
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such notice; or, (iii) the Business Day following sending of such
notice by overnight courier, in any case with postage or delivery
charges prepaid, addressed: if to the Corporation, to its
offices at 200 Concord Plaza, Suite 700, San Antonio, Texas
78216, Attention: Secretary, or to an agent of the Corporation
designated as permitted by this Amended and Restated Certificate
of Incorporation, or, if to any holder of the Series A Preferred
Stock, to such holder at the address of such holder of the Series
A Preferred Stock as listed in the stock record books of the
Corporation; or to such other address as the Corporation or
holder, as the case may be, shall have designated by notice
similarly given.
Section 4. Series B Preferred Stock
A. Designation. 12,500 shares of the preferred stock, par
value $.01 per share, of the Corporation are hereby constituted
as a series of the preferred stock designated as "Series B
Preferred Stock" (the "Series B Preferred Stock").
B. Dividends.
1. Dividends on Series B Preferred Stock. An annual,
cumulative cash dividend of $65 accruing and after from June 1,
1996 shall be declared and paid on each share of the Series B
Preferred Stock, payable at the end of each calendar quarter in
equal quarterly amounts, provided that at such times (i) there
are assets of the Corporation legally available for the payment
of such dividends and (ii) the payment of such dividends is
permitted under the terms of the governing documents for the
Corporation's then existing borrowing arrangements with third-
party lenders. Any such dividend that cannot be paid when due
shall be paid to the extent permissible at the time that the
payment of such dividend becomes permissible.
2. Limitation on Dividends, Repurchases and Redemptions.
So long as any shares of Series B Preferred Stock shall be
outstanding, the Corporation shall not declare or pay or set
apart for payment any dividends or make any other distributions
on any Junior Securities (as defined below), whether in cash,
property or otherwise (other than dividends or distributions
payable in shares of the class or series upon which such
dividends or distributions are declared or paid), nor shall the
Corporation or any of its subsidiaries purchase, redeem or
otherwise acquire for any consideration or make payment on
account of the purchase, redemption, or other retirement of any
Parity Securities or Junior Securities, nor shall any monies be
paid or made
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available for a sinking fund for the purchase or redemption of
any Parity Securities (as defined above) or Junior Securities,
unless with respect to all of the foregoing all dividends or
other distributions to which the holders of Series B Preferred
Stock shall have been entitled, pursuant to Subsection B.1 above,
shall have been paid or declared and a sum of money has been set
apart for the full payment thereof.
3. Pro Rata Payments. In the event that full dividends are
not paid or made available to the holders of all outstanding
shares of Series B Preferred Stock and of any Parity Securities
and funds available for a payment of dividends shall be
insufficient to permit payment in full to holders of all such
stock of the full preferential amounts to which they are then
entitled, then the entire amount available for payment of
dividends shall be distributed ratably among all such holders of
Series B Preferred Stock and of any Parity Securities in
proportion to the full amount to which they would otherwise be
respectively entitled.
C. Preference on Liquidation.
1. Liquidation Preference for Series B Preferred Stock. In
the event that the Corporation shall commence a voluntary case
under the federal bankruptcy laws or any other applicable federal
or state bankruptcy, insolvency or similar law, or consent to the
entry of an order for relief in an involuntary case under such
law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of
the Corporation or of any substantial part of its property, or
make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become
due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the federal bankruptcy
laws or any other applicable federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or other similar
official of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, and on account of any such event the Corporation shall
liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up, no distribution of the
assets of the Corporation shall be made to the holders of shares
of Common Stock or other Junior Securities (and no monies shall
be set apart for such purpose) unless prior thereto, the holders
of shares of Series B Preferred Stock shall have received from
the assets of the Corporation an amount per share equal to the
sum of (x) $1,000, plus
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(y) all accrued but unpaid dividends thereon through the date of
distribution, whether or not earned or declared (collectively,
the "Series B Liquidation Preference").
2. Pro Rata Payments. If, upon any such liquidation,
dissolution or other winding up of the affairs of the
Corporation, the assets of the Corporation shall be insufficient
to permit the payment in full of the Series B Liquidation
Preference for each share of Series B Preferred Stock then
outstanding and the full liquidating payments on all Parity
Securities, then the assets of the Corporation remaining after
the distribution to holders of any Senior Securities (as defined
below) of the full amounts to which they may be entitled shall be
ratably distributed among the holders of Series B Preferred Stock
and of any Parity Securities in proportion to the full amounts to
which they would otherwise be respectively entitled if all
amounts thereon were paid in full. The Corporation shall not
issue any Senior Securities without the written consent of the
holders of a majority of the Series A Preferred Stock issued and
outstanding.
3. Sale Not a Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all
the property or assets of the Corporation nor the consolidation,
merger or other business combination of the Corporation with or
into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary,
of the Corporation.
4. Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation,
stating the payment date or dates when and the place or places
where amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not
less than 30 days prior to any payment date specified therein, to
the holders of record of the Series B Preferred Stock at their
respective addresses as shall appear on the records of the
Corporation.
D. Voting.
1. General. Notwithstanding any provision of this Amended
and Restated Certificate of Incorporation to the contrary, each
issued and outstanding share of Series B Preferred Stock shall
entitle the holder thereof to the number of votes determined
under the following sentence on all matters submitted to a vote
of holders of the Series A Common Stock, with such shares of
Series B Preferred Stock voting
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together as a single class with such shares of Series A Common
Stock. Each share of Series B Preferred Stock shall entitle the
holder thereof to (i) 29 votes, if the record date for the
stockholder meeting at which such votes are to be cast is before
July 11, 2001 and (ii) to the number of votes (rounded up to the
next whole number) equal to the number of shares of Series A
Common Stock into which one share of Series B Preferred Stock
would be convertible under Subsection F below as of the last day
of the month immediately preceding the record date for the
stockholder meeting at which such votes are to be cast (i.e.,
using such last day of the month as the "Conversion Date" when
applying the method of conversion described in Subsection F.1
below), if such record date is on or after July 11, 2001. Except
as set forth in Subsection D.2 below or as otherwise provided by
law, the shares of Series B Preferred Stock shall not entitle the
holders thereof to vote separately as a class.
2. Class Vote. At any time when shares of Series B
Preferred Stock are outstanding, without the approval of the
holders representing at least a majority of the shares of Series
B Preferred Stock then outstanding, given in writing or by vote
at a meeting, consenting or voting (as the case may be)
separately as a class, the Corporation shall not amend or repeal
any provision of, or add any provision to, this Amended and
Restated Certificate of Incorporation if such action would alter,
change or affect adversely the rights, preferences, privileges or
powers of, or the restrictions provided for the benefit of, the
Series B Preferred Stock.
E. Redemption
1. Redemption Price. Any redemption of the Series B
Preferred Stock pursuant to this Subsection E shall be at a price
equal to $1,000 per share, plus in each case an amount equal to
accrued and unpaid dividends, if any, to (and including) the
redemption date, whether or not earned or declared (the "Series B
Redemption Price").
2. Redemption at Corporation's Option. At any time after
June 11, 2001, the Corporation may, at its option (subject to the
other provisions of this Subsection E), redeem all, or any
portion of the outstanding shares of Series B Preferred Stock.
3. Procedures for Redemption. In the event the Corporation
shall elect to redeem shares of Series B Preferred Stock pursuant
to Subsection E.2 above, the Corporation shall give written
notice of such redemption by facsimile, hand delivery, overnight
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courier, or first class mail, postage prepaid, mailed or
transmitted not less than 30 nor more than 90 days prior to the
redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the
stock records of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares of Series B
Preferred Stock to be redeemed and, if less than all the shares
held by such holder are to be redeemed, the number of such shares
to be redeemed from such holder; (iii) the Series B Redemption
Price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the Series B
Redemption Price; (v) that payment will be made upon presentation
and surrender of such Series B Preferred Stock; (vi) that
dividends on the shares to be redeemed shall cease to accrue
following such redemption date; (vii) that such redemption is
mandatory; and, (viii) that dividends accrued to and including
the date fixed for redemption will be paid as specified in such
notice. Notice having been mailed as aforesaid, from and after
the redemption date, unless the Corporation shall be in default
in the payment of the Series B Redemption Price (including any
accrued and unpaid dividends to (and including) the date fixed
for redemption, (A) dividends on the shares of the Series B
Preferred Stock so called for redemption shall cease to accrue;
(B) such shares shall be deemed no longer outstanding; and, (C)
all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation any
moneys payable upon redemption without interest thereon) shall
cease. Notwithstanding the foregoing, any holder that has
received such a redemption notice shall have the right by
providing written notification to the Corporation not less than
20 days after receipt of the redemption notice from the
Corporation, to specify up to three redemption dates, the latest
of which shall be January 1 of the second year following the date
the Corporation specified for redemption, on which the redemption
shall occur. Such notice shall specify the date or dates on
which the redemption shall occur, and, if more than one
redemption date is specified, the number of shares to be redeemed
on each such date; provided, however, that the total of the
number of shares specified by such holder to be redeemed must
equal the number of shares originally specified by the
Corporation for redemption. In the event the holder exercises
the right outlined above to specify a different date or dates for
redemption than stated in the redemption notice from the
Corporation, dividends shall continue to accrue and be paid as
provided herein until such time as the shares are redeemed.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed
or
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assigned for transfer, if the Board of Directors shall so require
and the notice shall so state), such shares shall be redeemed by
the Corporation at the applicable Series B Redemption Price. If
fewer than all the outstanding shares of Series B Preferred Stock
are to be redeemed, shares to be redeemed shall be selected by
the Corporation from holders of outstanding shares of Series B
Preferred Stock not previously called for redemption in
proportion to the respective number of shares held by each
holder. If fewer than all the shares represented by a
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder
thereof.
4. Repurchases of Series B Preferred Stock by the
Corporation. Neither the Corporation nor any of its subsidiaries
shall repurchase any outstanding shares of Series B Preferred
Stock unless the Corporation on the same terms either (i) offers
to purchase all of the then outstanding shares of Series B
Preferred Stock or (ii) offers to purchase shares of Series B
Preferred Stock from the holders in proportion to the respective
number of shares of Series B Preferred Stock held by each holder.
In any such repurchase by the Corporation, if all shares of
Series B Preferred Stock are not being repurchased, then the
number of shares of Series B Preferred Stock to be repurchased
shall be allocated among all shares of Series B Preferred Stock
held by holders that accept the Corporation's repurchase offer so
that the shares of Series B Preferred Stock are repurchased from
such holders in proportion to the respective number of shares of
Series B Preferred Stock held by each such holder that accepts
the Corporation's offer (or in such other proportion as agreed by
all such holders who accept the Corporation's offer). Nothing in
this Subsection E.4 shall (i) obligate a holder of shares of
Series B Preferred Stock to accept the Corporation's repurchase
offer or (ii) prevent the Corporation from redeeming shares of
Series B Preferred Stock in accordance with the terms of
Subsections E.1 through E.3 above.
F. Conversion.
1. Right to Convert. At any time on or after July 11,
2001, the holder of each share of Series B Preferred Stock shall
have the right at any time, or from time to time, at such
holder's option, to convert such share into the number of fully
paid and nonassessable shares of Series A Common Stock equal to a
quotient determined by dividing (i) $1,000 by (ii) the average of
the closing prices for the Series A Common Stock as reported by
the NASDAQ National
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Market System (or such other principal exchange on which the
Series A Common Stock is then listed or traded) for each of the
10 trading days prior to the Conversion Date, on and subject to
the terms and conditions hereinafter set forth.
a. If the Series A Common Stock issuable upon the
conversion of the Series B Preferred Stock shall be changed
into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization,
reclassification or otherwise, then and in each such event
the holder of each share of Series B Preferred Stock shall
have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and
property receivable upon such reorganization,
reclassification or other change by holders of the number of
shares of Series A Common Stock into which such shares of
Series B Preferred Stock might have been converted
immediately prior to such reorganization, reclassification
or change.
b. If at any time or from time to time there shall be
a merger or consolidation of the Corporation with or into
another corporation, or the sale of substantially all of the
Corporation's properties and assets to any other person,
then, as a part of such merger, consolidation or sale,
provision shall be made so that the holders of the Series B
Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series B Preferred Stock, the number of
shares of stock or other securities or properties of the
Corporation, or of the successor corporation resulting from
such merger, consolidation or sale, to which such holder
would have been entitled if such holder had converted its
shares of Series B Preferred Stock immediately prior to such
capital reorganization, merger, consolidation or sale. In
any such case, appropriate adjustment shall be made in the
application of the provisions of this Subsection F with
respect to the rights of the holders of the Series B
Preferred Stock after the merger, consolidation or sale to
the end that the provisions of this Subsection F shall be
applicable after that event in as nearly equivalent a manner
as may be practicable.
2. Method of Conversion. In order to exercise the
conversion privilege, the holder of any shares of Series B
Preferred Stock to be converted shall present and surrender the
certificate or certificates representing such shares during usual
business hours at any
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office or agency of the Corporation maintained for the transfer
of Series B Preferred Stock and shall deliver a written notice of
the election of the holder to convert the shares represented by
such certificate or any portion thereof specified in such notice.
Such notice shall also state the name or names (with address) in
which the certificate or certificates for shares of Series A
Common Stock issuable on such conversion shall be registered. If
required by the Corporation, any certificate for shares
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed
by the holder of such shares or its duly authorized
representative. Each conversion of shares of Series B Preferred
Stock shall be deemed to have been effected on the date (the
"Series B Conversion Date") on which the certificate or
certificates representing such shares shall have been surrendered
and such notice and any required instruments of transfer shall
have been received as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of
Series A Common Stock shall be issuable on such conversion shall
be, for the purpose of receiving dividends and for all other
corporate purposes whatsoever, deemed to have become the holder
or holders of record of the shares of Series A Common Stock
represented thereby on the Series B Conversion Date.
3. Issuance of Certificates Upon Conversion. As promptly
as practicable after the presentation and surrender for
conversion, as herein provided, of any certificate for shares of
Series B Preferred Stock, the Corporation shall issue and deliver
at such office or agency, to or upon the written order of the
holder thereof, certificates for the number of whole shares of
Series A Common Stock issuable upon such conversion and cash for
any fractional shares. In case any certificate for shares of
Series B Preferred Stock shall be surrendered for conversion of
only a part of the shares represented thereby, the Corporation
shall deliver at such office or agency, to or upon the written
order of the holder thereof, a certificate or certificates for
the number of shares of Series B Preferred Stock represented by
such surrendered certificate that are not being converted. The
issuance of certificates for shares of Series A Common Stock
issuable upon the conversion of shares of Series B Preferred
Stock by the registered holder thereof shall be made without
charge to the converting holder for any tax imposed on the
Corporation in respect of the issue thereof. The Corporation
shall not, however, be required to pay any tax that may be
payable with respect to any transfer involved in the issue and
delivery of any certificate in a name other than that of the
registered holder of the shares being converted, and the
Corporation shall not be required to issue or deliver any such
certificate unless and until the
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person requesting the issue thereof shall have paid to the
Corporation the amount of such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
4. Payment of Dividends on Converted Shares. Upon any
conversion of shares of Series B Preferred Stock into shares of
Series A Common Stock pursuant hereto, no adjustment with respect
to dividends shall be made; only those dividends shall be payable
on the shares so converted as have been declared and are payable
to holders of record of shares of Series B Preferred Stock on a
date prior to the Series B Conversion Date with respect to the
shares so converted; and only those dividends shall be payable on
shares of Series A Common Stock issued upon such conversion as
have been declared and are payable to holders of record of shares
of Series A Common Stock on or after such Series B Conversion
Date.
5. Reservation of Shares. Such number of shares of Series
A Common Stock as may from time to time be required for such
purpose shall be reserved for issuance upon conversion of
outstanding shares of Series B Preferred Stock.
G. Shares to be Retired. Any share of Series B Preferred
Stock redeemed, repurchased, converted or otherwise acquired by
the Corporation shall be retired and canceled and shall upon
cancellation be restored to the status of authorized but unissued
shares of Preferred Stock, subject to reissuance by the Board of
Directors as shares of Preferred Stock of one or more other
series but not as shares of Series B Preferred Stock.
H. Definitions. As used in this Section 4, the following
terms shall have the respective meanings set forth below:
"Junior Securities" means the Common Stock and any other
class of capital stock or series of preferred stock created by
the Corporation that does not expressly provide that it ranks
senior to or pari passu with the Series B Preferred Stock as to
dividends, other distributions, liquidation preference or
otherwise.
"Parity Securities" means the Corporation's Series A
Preferred Stock, $.01 par value per share, and any other class of
capital stock or series or preferred stock created by the
Corporation which expressly provides that it ranks pari passu
with the Series B Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
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"Senior Securities" means any class or series of capital
stock of the Corporation other than Parity Securities or Junior
Securities.
I. Notices. Except as may otherwise be provided for in
this Amended and Restated Certificate of Incorporation, all
notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of
(i) receipt of such notice; (ii) three Business Days after the
mailing of such notice; or, (iii) the Business Day following
sending of such notice by overnight courier, in any case with
postage or delivery charges prepaid, addressed: if to the
Corporation, to its offices at 200 Concord Plaza, Suite 700, San
Antonio, Texas 78216, Attention: Secretary, or to an agent of the
Corporation designated as permitted by this Amended and Restated
Certificate of Incorporation, or, if to any holder of the Series
B Preferred Stock, to such holder at the address of such holder
of the Series B Preferred Stock as listed in the stock record
books of the Corporation; or to such other address as the
Corporation or holder, as the case may be, shall have designated
by notice similarly given.
ARTICLE FIVE
DIRECTORS
The number of directors of the Corporation shall be no fewer than
seven and shall be fixed and may be altered from time to time as may
be provided in the bylaws now or hereafter in effect. The Board of
Directors shall be classified as follows:
(a) For as long as there are no more than two Series A
Directors, the Board of Directors shall be divided into two
classes, Class I and Class II. The Series A Directors and shall
be divided between Class I and Class II as equally as possible
and the Series B Directors shall be divided between Class I and
Class II as equally as possible. Each director shall serve for a
term ending on the second annual meeting date following the
annual meeting at which such director was elected; provided
however that each director initially in Class I shall hold office
until the annual meeting of stockholders in 1998 and each
director initially in Class II shall hold office until the annual
meeting of stockholders in 1999.
(b) For as long as there are three or more Series A
Directors, the Board of Directors shall be divided into three
classes, Class I, Class II and Class III. The Series A Directors
shall be divided among the three classes as equally as possible
and the Series B
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Directors likewise shall be divided among the three classes as
equally as possible. Each director shall serve for a three-year
term, provided that for the two years following the first
designation of Class III directors, the Class I and Class II
directors shall continue to be elected at the same annual
meetings at which such directors would have been elected if the
size of the Board of Directors had not been increased so as to
require the designation of the Class III directors.
Notwithstanding the preceding sentence, if necessary in order to
ensure that the Series B Directors are divided among the classes
as equally as possible, a Class II Series B Director shall be
redesignated as a Class III director upon the first designation
of Class III directors. The first election of the Class III
directors following the initial designation of the Class III
directors shall take place at the third annual meeting of
stockholders following such designation.
(c) Upon each increase or decrease in the authorized number
of directors, (i) each director then serving as such shall
continue as a director in the class of which he or she is a
member until the expiration of his or her current term or until
such director's earlier death, resignation or removal and (ii)
the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of
Directors among the classes as equally as possible.
(d) The designation of directors as Class I directors and
Class II directors, respectively, as of the time this Amended and
Restated Certificate of Incorporation shall become effective and
shall be as set forth in the Merger Agreement. Thereafter, the
Board of Directors shall be authorized to determine how the
directors shall be divided among Class I, Class II and, if
applicable, Class III, consistent with the terms of this ARTICLE
FIVE.
(e) Notwithstanding any of the foregoing provisions of this
ARTICLE FIVE, each director shall serve until his or her
successor is elected and qualified or until his or her earlier
death, resignation or removal. Should a vacancy occur or be
created with respect to a Series A Director's directorship,
whether arising through death, resignation or removal of a Series
A Director or through an increase in the number of Series A
Directors, such vacancy shall be filled by the affirmative vote
of a majority of the Series A Directors then in office or by the
sole remaining Series A Director. If there are no remaining
Series A Directors then in office, then the vacancy or vacancies
shall be filled by the holders of Series A Common Stock as
described in ARTICLE FOUR. Similarly, should a vacancy occur or
be created with respect to
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a Series B Director's directorship, whether arising through
death, resignation or removal of a Series B Director or through
an increase in the number of Series B Directors, such vacancy
shall be filled by the affirmative vote of a majority of the
Series B Directors then in office or by the sole remaining Series
B Director. If there are no remaining Series B Directors then in
office, then the vacancy or vacancies shall be filled by the
holders of Series B Common Stock as described in ARTICLE FOUR. A
director so elected to fill a vacancy shall serve for the
remainder of the then present term of office for the class to
which such director was elected.
ARTICLE SIX
BYLAWS
The initial bylaws of the Corporation shall be adopted by the
Board of Directors. The power to alter, amend or repeal the bylaws or
adopt new bylaws, subject to the right of the stockholders to adopt,
amend or repeal the bylaws, is vested in the Board of Directors.
ARTICLE SEVEN
INDEMNIFICATION
To the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time, the Corporation shall
indemnify any and all of its directors and officers, or former
directors and officers, or any person who may have served at the
Corporation's request as a director or officer of another corporation,
partnership, limited liability company, joint venture, trust, or other
entity or enterprise.
ARTICLE EIGHT
DIRECTOR LIABILITY
To the fullest extent permitted by the Delaware General
Corporation Law, as amended from time to time, a director or former
director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. No repeal, amendment, or modification
of this ARTICLE EIGHT, whether direct or indirect, shall eliminate or
reduce its effect with respect to any act or omission of a director or
former director of the Corporation prior to such repeal, amendment, or
modification.
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ARTICLE NINE
AMENDMENTS
The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
In addition to any other stockholder approvals that may be
required under this Amended and Restated Certificate of Incorporation
or the Delaware General Corporation Law, an amendment, alteration or
repeal of any provision of Subsections B and E of Section 1. of
ARTICLE FOUR or of ARTICLE FIVE shall require the approval of the
holders of the shares representing at least two-thirds of the shares
then entitled to vote.
ARTICLE TEN
PARTICIPATION OF NON-CITIZENS
The following provisions are included for the purpose of ensuring
that control and management of the Corporation remains with citizens
of the United States or entities formed under the laws of the United
States or any of the states of the United States, as required by the
Communications Act:
(a) The Corporation shall not issue to: (i) a person who is
a citizen of a country other than the United States; (ii) any
entity organized under the laws of a government other than the
government of the United States or any state, territory, or
possession of the United States; (iii) a government other than
the government of the United States or of any state, territory,
or possession of the United States; (iv) a representative of, or
an individual or entity controlled by, any of the foregoing; or
(v) any other person or entity whose alien status would be
cognizable under the Communications Act (individually, an
"Alien"; collectively, "Aliens") any shares of capital stock of
the Corporation if such issuance would result in the total number
of shares of such capital stock held or voted by Aliens exceeding
25% of (i) the capital stock outstanding at any time and from
time to time, or (ii) the total voting power of all shares of
such capital stock outstanding and entitled to vote at any time
and from time to time, and shall not permit the transfer on the
books of the Corporation of any capital stock to any Alien that
would result in the total number of shares of such capital stock
held or voted by Aliens exceeding such 25% limits as such limits
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greater or lesser than 25% may subsequently be imposed by statute
or regulation.
(b) No Alien or Aliens, individually or collectively, shall
be entitled to vote or direct or control the vote of more than
25% of (i) the total number of all shares of capital stock of the
Corporation outstanding at any time and from time to time, or
(ii) the total voting power of all shares of capital stock of the
Corporation outstanding and entitled to vote at any time and from
time to time as such limits greater or lesser than 25% may
subsequently be imposed by statute or regulation.
(c) No Alien shall be qualified to act as an officer of the
Corporation and no more than one-fourth of the total number of
directors of the Corporation at any time may be Aliens except as
may be permitted by law or regulation.
(d) The Board of Directors shall have all powers necessary
to implement the provisions of this ARTICLE TEN and to ensure
compliance with the alien ownership restrictions (the "Alien
Ownership Restrictions") of the Communications Act, including,
without limitation, the power to prohibit the transfer of any
shares of capital stock of the Corporation to any Alien and to
take or cause to be taken such action as it deems appropriate to
implement such prohibition.
(e) Without limiting the generality of the foregoing and
notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation to the contrary, any shares of
capital stock of the Corporation determined by the Board of
Directors to be owned beneficially by an Alien or Aliens shall
always be subject to redemption by the Corporation by action of
the Board of Directors, pursuant to the Delaware General
Corporation Law, or any other applicable provision of law, to the
extent necessary in the judgment of the Board of Directors to
comply with the Alien Ownership Restrictions. The terms and
conditions of such redemption shall be as follows:
(i) the redemption price of the shares to be redeemed
pursuant to this ARTICLE TEN shall be equal to the fair
market value of the shares to be redeemed, as determined by
reference to the closing price of such shares on the last
business day before the date of redemption if the shares are
traded on a national securities market, or as determined by
the Board of Directors in good faith if the shares are not
then being traded on a national securities market;
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(ii) the redemption price of such shares may be paid in
cash, securities or any combination thereof;
(iii) if fewer than all of the shares held by Aliens
are to be redeemed, the shares to be redeemed shall be
selected in any manner determined by the Board of Directors
to be fair and equitable;
(iv) at least 10 days (or such shorter period as may be
required by any applicable regulatory authority) written
notice of the redemption date shall be given to the record
holders of the shares selected to be redeemed (unless waived
in writing by any such holder), provided that the redemption
date may be the date on which written notice shall be given
to record holders if the cash or securities necessary to
effect the redemption shall have been deposited in trust for
the benefit of such record holders and subject to immediate
withdrawal by them upon surrender of the stock certificates
for their shares to be redeemed;
(v) from and after the redemption date, the shares to
be redeemed shall cease to be regarded as outstanding, and
any and all rights of the holders with respect to the shares
to be redeemed or attaching to such shares of whatever
nature (including, without limitation, any rights to vote or
participate in dividends declared on stock of the same class
or series as such shares) shall cease and terminate, and the
holders thereof thenceforth shall be entitled only to
receive the cash or securities payable upon redemption; and
(vi) such other terms and conditions as the Board of
Directors shall determine.
For purposes of this ARTICLE TEN, the determination of
beneficial ownership of shares of capital stock of the
Corporation shall be made pursuant to Rule 13d-3, 17 C.F.R. (S)
240.13d-3, as amended from time to time, promulgated under the
Securities Exchange Act of 1934, as amended, unless the
Communications Act shall provide for a different method of
determination, in which case such determination shall be made in
accordance with the Communications Act.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this _____ day of _____________________, 1997.
ARGYLE TELEVISION, INC.
By:
-------------------------------------
Name:
Title:
Attest:
By:
-----------------------------
Name:
Title:
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EXHIBIT B
TO MERGER AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of __________ ___, 1997, among
Hearst/Argyle Television, Inc., a Delaware corporation (the "Company"), and the
Holders (as defined below).
WHEREAS, in connection with the Agreement and Plan of Merger, dated as
of March 26, 1997 (the "Merger Agreement"), among The Hearst Corporation, a
Delaware corporation, the Company, HAT Merger Sub, Inc., a Delaware corporation,
HAT Contribution Sub, Inc., a Delaware corporation and Argyle Television, Inc.,
a Delaware corporation, each initial Holder may receive shares of Common Stock
(as defined below); and
WHEREAS, the Company has agreed to provide each Holder with the
registration rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 5 hereof.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of this
definition, "control" when used with respect to any specified person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day that is not a Saturday, a Sunday or a
legal holiday on which banking institutions in the State of New York are not
required to be open.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock issued by such person, including each class of common stock and preferred
stock of such person.
"Common Stock" means the Series A Common Stock, par value $.01 per
share, of the Company or any other shares of capital stock or other securities
of the Company into which such shares of Common Stock shall be reclassified or
changed, including, by reason of a merger,
<PAGE>
consolidation, reorganization or recapitalization. If the Common Stock has been
so reclassified or changed, or if the Company pays a dividend or makes a
distribution on the Common Stock in shares of capital stock, or subdivides (or
combines) its outstanding shares of Common Stock into a greater (or smaller)
number of shares of Common Stock, a share of Common Stock shall be deemed to be
such number of shares of stock and amount of other securities to which a holder
of a share of Common Stock outstanding immediately prior to such change,
reclassification, exchange, dividend, distribution, subdivision or combination
would be entitled.
"Company" shall have the meaning set forth in the introductory
clauses hereof.
"Company Common Stock" shall have the meaning specified in the
Merger Agreement.
"Delay Period" shall have the meaning set forth in Section 2(e)
hereof.
"Demand Notice" shall have the meaning set forth in Section 2(a)
hereof.
"Demand Registration" shall have the meaning set forth in Section
2(b) hereof.
"Effectiveness Period" shall have the meaning set forth in Section
2(e) hereof.
"Effective Time" shall have the meaning specified in the Merger
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Hold Back Period" shall have the meaning set forth in Section 4
hereof.
"Holder" means a person who owns Registrable Shares and is named on
the signature pages hereof as a Holder.
"Interruption Period" shall have the meaning set forth in Section 5
hereof.
"Merger Agreement" shall have the meaning set forth in the
introductory clauses hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in Section
3 hereof.
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"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Shares covered by such Registration Statement and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"Registrable Shares" means the shares of Common Stock issued to each
Holder in the Merger, other than shares of Common Stock issued in respect of
shares of Company Common Stock that prior to the Merger (i) were registered
under Section 5 of the Securities Act and disposed of pursuant to an effective
Registration Statement or (ii) were transferred pursuant to Rule 144 under the
Securities Act .
"Registration" means registration under the Securities Act of an
offering of Registrable Shares pursuant to a Demand Registration or a Piggyback
Registration.
"Registration Period" shall have the meaning set forth in Section
2(a) hereof.
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"underwritten registration or underwritten offering" means a
registration under the Securities Act in which securities of the Company are
sold to an underwriter for reoffering to the public.
SECTION 2. DEMAND REGISTRATION. (a) The Holders of at least 330,000
of the Registrable Shares held by all Holders shall have the right, during the
period (the "Registration Period") commencing on the date which is one hundred
and eighty (180) days after the Effective Time and ending on the date which is
five hundred and forty (540) days after the Effective Time (except as provided
in the last sentence of this Section 2), by written notice (the "Demand Notice")
given to the Company, to request the Company to register under and in accordance
with the provisions of the Securities Act for distribution by means of a firm
commitment underwritten public offering all or any portion of the Registrable
Shares designated by such Holders; provided, however, that the right of the
Holders hereunder to request a registration pursuant to this Section 2 shall
terminate and be of no further force and effect in the event that at least 90%
of the Registrable Shares requested by Holders to be included in a Piggyback
Registration pursuant to Section 3 are sold.
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Upon receipt of any such Demand Notice, the Company shall promptly notify all
other Holders of the receipt of such Demand Notice and allow them the
opportunity to include Registrable Shares held by them in the proposed
registration by submitting their own Demand Notice. In connection with any
Demand Registration in which more than one Holder participates, in the event
that the managing underwriter or underwriters participating in such offering
advise in writing the Holders of Registrable Shares to be included in such
offering that the total number of Registrable Shares to be included in such
offering exceeds the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of the Registrable Shares to be sold), then the
amount of Registrable Shares to be offered for the account of such Holders shall
be reduced pro rata on the basis of the number of Registrable Shares to be
registered by each such Holder. The Holders as a group shall be entitled to one
Demand Registration pursuant to this Section 2 unless any Demand Registration
does not become effective or is not maintained for a period (whether or not
continuous) of at least one hundred and twenty (120) days (or such shorter
period as shall terminate when all the Registrable Shares covered by such Demand
Registration have been sold pursuant thereto), in which case the Holders will be
entitled within thirty (30) days thereafter to request an additional Demand
Registration pursuant hereto.
(b) The Company, within ninety (90) days of the date on which the
Company receives a Demand Notice given by Holders in accordance with Section
2(a) hereof, shall file with the SEC, and the Company shall thereafter use its
best efforts to cause to be declared effective, a Registration Statement on the
appropriate form for the registration and sale, in accordance with the intended
method or methods of distribution, of the total number of Registrable Shares
specified by the Holders in such Demand Notice (a "Demand Registration").
(c) Notwithstanding the foregoing, the Company shall not have any
obligation to effect a Demand Registration pursuant to this Section 2 unless (i)
the gross proceeds from the sale of the Registrable Shares included in the
Demand Registration are expected to be at least $45 million , and (ii) at the
date of the Demand Notice, the average daily trading volume of the Common Stock
for the prior sixty (60) trading days as reported by the national securities
exchange or automated interdealer quotation system on which the Common Stock is
so listed or quoted is less than 150,000 shares.
(d) The Company shall use commercially reasonable efforts to keep each
Registration Statement filed pursuant to this Section 2 continuously effective
and usable for the resale of the Registrable Shares covered thereby until the
earlier of (i) one hundred and twenty (120) days from the date on which the SEC
declares such Registration Statement effective and (ii) until all the
Registrable Shares covered by such Registration Statement have been sold
pursuant to such Registration Statement.
(e) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of time,
but not in excess of ninety (90) days (a "Delay Period"), if the Board of the
Company determines that in its reasonable judgment and good faith the
registration and distribution of the Registrable Shares covered or to be covered
by such Registration Statement would materially
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<PAGE>
impede, delay or interfere with any pending material financing, acquisition or
corporate reorganization or other material corporate development involving the
Company or any of its subsidiaries or would require premature disclosure thereof
and promptly gives the Holders written notice of such determination, containing
a general statement of the reasons for such postponement and an approximation of
the period of the anticipated delay; provided, however, that (i) the aggregate
number of days included in all Delay Periods during any consecutive 12 months
shall not exceed the aggregate of (x) one hundred and eighty (180) days minus
(y) the number of days occurring during all Hold Back Periods and Interruption
Periods during such consecutive 12 months and (ii) a period of at least sixty
(60) days shall elapse between the termination of any Delay Period, Hold Back
Period or Interruption Period and the commencement of the immediately succeeding
Delay Period. If the Company shall so postpone the filing of a Registration
Statement, the Holders of Registrable Shares to be registered shall have the
right to withdraw the request for registration by giving written notice from the
Holders of a majority of the Registrable Shares that were to be registered to
the Company within forty-five (45) days after receipt of the notice of
postponement or, if earlier, the termination of such Delay Period (and, in the
event of such withdrawal, such request shall not be counted for purposes of
determining the number of requests for registration to which the Holders of
Registrable Shares are entitled pursuant to this Section 2). The time period
for which the Company is required to maintain the effectiveness of any
Registration Statement shall be extended by the aggregate number of days of all
Delay Periods, all Hold Back Periods and all Interruption Periods occurring
during such Registration and such period and any extension thereof is
hereinafter referred to as the "Effectiveness Period." The Company shall not be
entitled to initiate a Delay Period unless it shall (A) to the extent permitted
by agreements with other security holders of the Company, concurrently prohibit
sales by such other security holders under registration statements covering
securities held by such other security holders and (B) in accordance with the
Company's policies from time to time in effect, forbid purchases and sales in
the open market by senior executives of the Company.
(f) The Company shall have the right in its sole discretion to include
any securities that are not Registrable Shares ("Non-Registrable Securities") in
any Registration Statement filed pursuant to this Section 2; provided, however,
that in the event the managing underwriter or underwriters participating in such
offering advises the Company in writing that the total number of Non-Registrable
Securities to be included in such offering exceeds the amount that can be sold
in (or during the time of) such offering without delaying or jeopardizing the
success of such offering (including the price per share of the Registrable
Shares to be sold), then the amount of Non-Registrable Securities to be offered
for the account of the Company shall be reduced to an amount that the managing
underwriter or underwriters participating in the offering reasonably determine
can be sold in such offering without materially delaying or jeopardizing the
success of such offering.
(g) Holders of a majority in number of the Registrable Shares to be
included in a Registration Statement pursuant to this Section 2 may, at any time
prior to the effective date of the Registration Statement relating to such
Registration, revoke such request by providing a written notice to the Company
revoking such request. The Holders of Registrable Shares who revoke such
request shall reimburse the Company for all of its out-of-pocket expenses
incurred in the preparation, filing and processing of the Registration
Statement; provided, however, that, if such revocation was
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based on the Company's failure to comply in any material respect with its
obligations hereunder, such reimbursement shall not be required.
SECTION 3. PIGGYBACK REGISTRATION. (a) Right to Piggyback. If at
any time during the period commencing on the date of this Agreement and ending
on the date which is five hundred and forty (540) days after the Effective Time
the Company proposes to file a registration statement under the Securities Act
with respect to a public offering of securities of the same type as the
Registrable Shares pursuant to a firm commitment underwritten public offering
solely for cash for its own account (other than a registration statement (i) on
Form S-8 or any successor forms thereto, or (ii) filed solely in connection with
a dividend reinvestment plan or employee benefit plan covering officers or
directors of the Company or its Affiliates) or for the account of any holder of
securities of the same type as the Registrable Shares (to the extent that the
Company has the right to include Registrable Shares in any registration
statement to be filed by the Company on behalf of such holder but excluding a
Demand Registration), then the Company shall give written notice of such
proposed filing to the Holders at least fifteen (15) days before the anticipated
filing date. Such notice shall offer the Holders the opportunity to register
such amount of Registrable Shares as they may request (a "Piggyback
Registration"). Subject to Section 3(b) hereof, the Company shall include in
each such Piggyback Registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein within ten (10)
days after notice has been given to the Holders. Each Holder shall be permitted
to withdraw all or any portion of the Registrable Shares of such Holder from a
Piggyback Registration at any time prior to the effective date of such Piggyback
Registration; provided, however, that if such withdrawal occurs after the filing
of the Registration Statement with respect to such Piggyback Registration, the
withdrawing Holders shall reimburse the Company for the portion of the
registration expenses payable with respect to the Registrable Shares so
withdrawn.
(b) Priority on Piggyback Registrations. The Company shall use
commercially reasonable efforts to cause the managing underwriter of an
underwritten public offering to permit the Holders to include all such
Registrable Shares on the same terms and conditions as any similar securities,
if any, of the Company included therein. Notwithstanding the foregoing, if the
Company or the managing underwriter or underwriters participating in such
offering advise the Holders in writing that the total amount of securities
requested to be included in such Piggyback Registration exceeds the amount which
can be sold in (or during the time of) such offering without delaying,
jeopardizing or otherwise adversely affecting the success of the offering
(including the price per share of the securities to be sold), then the amount of
securities to be offered for the account of the Holders and other holders of
securities who have piggyback registration rights with respect thereto shall be
reduced (to zero if necessary) pro rata on the basis of the number of common
stock equivalents requested to be registered by each such Holder or holder
participating in such offering.
(c) Right To Abandon. Nothing in this Section 3 shall create any
liability on the part of the Company to the Holders if the Company in its sole
discretion should decide not to file a registration statement proposed to be
filed pursuant to Section 3(a) hereof or to withdraw such registration statement
subsequent to its filing, regardless of any action whatsoever that a Holder may
have taken, whether as a result of the issuance by the Company of any notice
hereunder or otherwise.
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SECTION 4. HOLDBACK AGREEMENT. If (i) the Company shall file a
registration statement (other than in connection with the registration of
securities issuable pursuant to an employee stock option, stock purchase or
similar plan or pursuant to a merger, exchange offer or a transaction of the
type specified in Rule 145(a) under the Securities Act) with respect to the
Common Stock or similar securities or securities convertible into, or
exchangeable or exercisable for, such securities and (ii) with reasonable prior
notice, the Company (in the case of a nonunderwritten public offering by the
Company pursuant to such registration statement) advises the Holders in writing
that a public sale or distribution of such Registrable Shares would materially
adversely affect such offering or the managing underwriter or underwriters (in
the case of an underwritten public offering by the Company pursuant to such
registration statement) advises the Company in writing (in which case the
Company shall notify the Holders) that a public sale or distribution of
Registrable Shares would materially adversely impact such offering, then each
Holder shall, to the extent not inconsistent with applicable law, refrain from
effecting any public sale or distribution of Registrable Shares during the ten
days prior to the effective date of such registration statement and until the
earliest of (A) the abandonment of such offering, (B) one hundred and twenty
(120) days from the effective date of such registration statement and (C) if
such offering is an underwritten offering, the termination in whole or in part
of any "hold back" period obtained by the underwriter or underwriters in such
offering from the Company in connection therewith (each such period, a "Hold
Back Period").
SECTION 5. REGISTRATION PROCEDURES. In connection with the
registration obligations of the Company pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), the Company
shall use commercially reasonable efforts to effect such registration to permit
the sale of such Registrable Shares in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company shall as
expeditiously as practicable (but subject to Sections 2 and 3 hereof):
(a) prepare and file with the SEC a Registration Statement for
the sale of the Registrable Shares on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate in
accordance with such Holders' intended method or methods of distribution
thereof, subject to Section 2(b) hereof, and, subject to the Company's
right to terminate or abandon a registration pursuant to Section 3(c)
hereof, use commercially reasonable efforts to cause such Registration
Statement to become effective and remain effective as provided herein;
(b) prepare and file with the SEC such amendments (including post-
effective amendments) to such Registration Statement, and such supplements
to the related Prospectus, as may be required by the rules, regulations or
instructions applicable to the Securities Act during the applicable period
in accordance with the intended methods of disposition specified by the
Holders of the Registrable Shares covered by such Registration Statement,
make generally available earnings statements satisfying the provisions of
Section 11(a) of the Securities Act (provided that the Company shall be
deemed to have complied with this clause if it has complied with Rule 158
under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
provided, however, that before filing a Registration Statement or
Prospectus, or any
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amendments or supplements thereto (other than reports required to be filed
by it under the Exchange Act), the Company shall furnish to the Holders of
Registrable Shares covered by such Registration Statement and their counsel
for review and comment, copies of all documents required to be filed;
(c) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to such Registration
Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC for amendments or supplements to
such Registration Statement or the related Prospectus or for additional
information regarding such Holders, (iii) of the issuance by the SEC of any
stop order suspending the effectiveness of such Registration Statement or
the initiation of any proceedings for that purpose, (iv) of the receipt by
the Company of any notifications with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event that
requires the making of any changes in such Registration Statement,
Prospectus or documents incorporated or deemed to be incorporated therein
by reference so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(d) use commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such Registration Statement,
or the lifting of any suspension of the qualification or exemption from
qualification of any Registrable Shares for sale in any jurisdiction in the
United States;
(e) furnish to the Holder of any Registrable Shares covered by
such Registration Statement, each counsel for such Holders and each
managing underwriter, if any, without charge, one conformed copy of such
Registration Statement, as declared effective by the SEC, and of each post-
effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and deliver, without charge, such number
of copies of the preliminary prospectus, any amended preliminary
prospectus, each final Prospectus and any post-effective amendment or
supplement thereto, as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Shares of such Holder covered
by such Registration Statement in conformity with the requirements of the
Securities Act;
(f) prior to any public offering of Registrable Shares covered by
such Registration Statement, use commercially reasonable efforts to
register or qualify such Registrable Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Holders of such
Registrable Shares shall reasonably request in writing; provided, however,
that the Company shall in no event be required to qualify generally to do
business as a foreign corporation or as a dealer in any jurisdiction where
it is not at the time so qualified or to execute or file a general consent
to service of process in any such
8
<PAGE>
jurisdiction where it has not theretofore done so or to take any action
that would subject it to general service of process or taxation in any such
jurisdiction where it is not then subject;
(g) upon the occurrence of any event contemplated by paragraph
5(c)(v) above, prepare a supplement or post-effective amendment to such
Registration Statement or the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference and file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Shares being sold thereunder (including upon the
termination of any Delay Period), such Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(h) use commercially reasonable efforts to cause all Registrable
Shares covered by such Registration Statement to be listed on each
securities exchange or automated interdealer quotation system, if any, on
which similar securities issued by the Company are then listed or quoted;
(i) on or before the effective date of such Registration
Statement, provide the transfer agent of the Company for the Registrable
Shares with printed certificates for the Registrable Shares covered by such
Registration Statement, which are in a form eligible for deposit with The
Depository Trust Company;
(j) make available for inspection by any Holder of Registrable
Shares included in such Registration Statement, any underwriter
participating in any offering pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such Holder or
underwriter (collectively, the "Inspectors"), all financial and other
records and other information, pertinent corporate documents and properties
of any of the Company and its subsidiaries and affiliates (collectively,
the "Records"), as shall be reasonably necessary to enable them to exercise
their due diligence responsibilities; provided, however, that the Records
that the Company determines, in good faith, to be confidential and which it
notifies the Inspectors in writing are confidential shall not be disclosed
to any Inspector unless such Inspector signs a confidentiality agreement
reasonably satisfactory to the Company but in any event permitting
disclosure by an Inspector if either (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction; provided further, however, that (A) any decision regarding
the disclosure of information pursuant to subclause (i) shall be made only
after consultation with counsel for the applicable Inspectors and the
Company and (B) with respect to any release of Records pursuant to
subclause (ii), each Holder of Registrable Shares agrees that it shall,
promptly after learning that disclosure of such Records is sought in a
court having jurisdiction, give notice to the Company so that the Company,
at the Company's expense, may undertake appropriate action to prevent
disclosure of such Records; and
9
<PAGE>
(k) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other appropriate and reasonable actions
requested by the Holders of a majority of the Registrable Shares being sold
in connection therewith (including those reasonably requested by the
managing underwriters) in order to expedite or facilitate the disposition
of such Registrable Shares, and in such connection (i) use commercially
reasonable efforts to obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters and counsel to the
Holders of the Registrable Shares being sold), addressed to each selling
Holder of Registrable Shares covered by such Registration Statement and
each of the underwriters as to the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such counsel and underwriters, (ii) use
commercially reasonable efforts to obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to each
selling Holder of Registrable Shares covered by the Registration Statement
(unless such accountants shall be prohibited from so addressing such
letters by applicable standards of the accounting profession) and each of
the underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings, (iii) if requested and if an underwriting
agreement is entered into, provide indemnification provisions and
procedures substantially to the effect set forth in Section 8 hereof with
respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting or similar
agreement, or as and to the extent required thereunder.
The Company may require each Holder of Registrable Shares covered by a
Registration Statement to furnish such information regarding such Holder and
such Holder's intended method of disposition of such Registrable Shares as it
may from time to time reasonably request in writing. If any such information is
not furnished within a reasonable period of time after receipt of such request,
the Company may exclude such Holder's Registrable Shares from such Registration
Statement.
Each Holder of Registrable Shares covered by a Registration Statement
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v)
hereof, that such Holder shall forthwith discontinue disposition of any
Registrable Shares covered by such Registration Statement or the related
Prospectus until receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(g) hereof, or until such Holder is advised in writing
(the "Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amended or supplemented Prospectus or
any additional or supplemental filings which are incorporated, or deemed to be
incorporated, by reference in such Prospectus (such period during which
disposition is discontinued being an "Interruption Period") and, if requested by
the Company, the Holder shall deliver to the Company (at the expense of the
Company) all copies then in its possession, other than
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<PAGE>
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Shares at the time of receipt of such request.
Each Holder of Registrable Shares covered by a Registration Statement
further agrees not to utilize any material other than the applicable current
preliminary prospectus or Prospectus in connection with the offering of such
Registrable Shares.
SECTION 6. REGISTRATION EXPENSES. Whether or not any Registration
Statement is filed or becomes effective, the Company shall pay all costs, fees
and expenses incident to the Company's performance of or compliance with this
Agreement, including (i) all registration and filing fees, including NASD filing
fees, (ii) all fees and expenses of compliance with securities or blue sky laws,
including reasonable fees and disbursements of counsel in connection therewith,
(iii) printing expenses (including expenses of printing certificates for
Registrable Shares and of printing prospectuses if the printing of prospectuses
is requested by the Holders or the managing underwriter, if any), (iv)
messenger, telephone and delivery expenses, (v) fees and disbursements of
counsel for the Company, (vi) fees and disbursements of all independent
certified public accountants of the Company (including expenses of any "cold
comfort" letters required in connection with this Agreement) and all other
persons retained by the Company in connection with such Registration Statement,
(vii) reasonable fees and disbursements of one counsel, other than the Company's
counsel, selected by Holders of a majority of the Registrable Shares being
registered, to represent all such Holders, (viii) fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities and (ix)
all other costs, fees and expenses incident to the Company's performance or
compliance with this Agreement. Notwithstanding the foregoing, the fees and
expenses of any persons retained by any Holder, other than one counsel for all
such Holders, and any discounts, commissions or brokers' fees or fees of similar
securities industry professionals and any transfer taxes relating to the
disposition of the Registrable Shares by a Holder, will be payable by such
Holder and the Company will have no obligation to pay any such amounts.
SECTION 7. UNDERWRITING REQUIREMENTS. In the case of any
underwritten offering pursuant to either a Demand Registration or a Piggyback
Registration, the Company shall select the institution or institutions that
shall manage or lead such offering. No Holder shall be entitled to participate
in an underwritten offering unless and until such Holder has entered into an
underwriting or other agreement with such institution or institutions for such
offering in such form as the Company and such institution or institutions shall
determine and has completed and executed all questionnaires, powers of attorney,
indemnities and other documents reasonably required under the terms of such
underwriting arrangements.
SECTION 8. INDEMNIFICATION. (a) Indemnification by the Company. The
Company shall, without limitation as to time, indemnify and hold harmless, to
the full extent permitted by law, each Holder of Registrable Shares whose
Registrable Shares are covered by a Registration Statement or Prospectus, the
officers, directors and agents and employees of each of them, each Person who
controls each such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling person, to the fullest extent lawful, from
and against any and all losses, claims, damages, liabilities, judgment, costs
(including, without limitation, costs of preparation and
11
<PAGE>
reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in such Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon information furnished in writing to
the Company by or on behalf of such Holder expressly for use therein; provided,
however, that the Company shall not be liable to any such Holder to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if (i) having previously been furnished by or on behalf of the
Company with copies of the Prospectus, such Holder failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale of Registrable Shares by such Holder to the person asserting the claim
from which such Losses arise and (ii) the Prospectus would have corrected in all
material respects such untrue statement or alleged untrue statement or such
omission or alleged omission; and provided further, however, that the Company
shall not be liable in any such case to the extent that any such Losses arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission in the Prospectus, if (x) such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in all
material respects in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of Registrable Shares.
(b) Indemnification by Holder of Registrable Shares. In connection
with any Registration Statement in which a Holder is participating, such Holder
shall furnish to the Company in writing such information as the Company
reasonably requests for use in connection with such Registration Statement or
the related Prospectus and agrees to indemnify, to the full extent permitted by
law, the Company, its directors, officers, agents or employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act) and the directors, officers, agents or employees
of such controlling Persons, from and against all Losses arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue or alleged untrue statement or omission or
alleged omission is based upon any information so furnished in writing by or on
behalf of such Holder to the Company expressly for use in such Registration
Statement or Prospectus.
(c) Conduct of Indemnification Proceedings. If any Person shall be
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnify is sought (the
"indemnifying party") of any claim or of the commencement of any proceeding with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the delay or failure to so notify the
indemnifying party shall not relieve the indemnifying party from any obligation
or liability except to the extent that the indemnifying party has been
prejudiced by such delay or failure. The
12
<PAGE>
indemnifying party shall have the right, exercisable by giving written notice to
an indemnified party promptly after the receipt of written notice from such
indemnified party of such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that (i)
an indemnified party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (1) the indemnifying party agrees to pay such fees and expenses; (2) the
indemnifying party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it that are inconsistent with
those available to the indemnifying party or that a conflict of interest is
likely to exist among such indemnified party and any other indemnified parties
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party); and (ii) subject to
clause (3) above, the indemnifying party shall not, in connection with any one
such claim or proceeding or separate but substantially similar or related claims
or proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the indemnifying party,
such indemnified party shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such claim or litigation
for which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any Losses (other than in
accordance with its terms), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying party, on
the one hand, and such indemnified party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party, on the one hand, and indemnified party, on the other hand,
shall be determined by reference to, among other things, whether any action in
question, including any untrue statement of a material fact or omission or
alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an
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<PAGE>
indemnifying party that is a Holder shall not be required to contribute any
amount which is in excess of the amount by which the total proceeds received by
such Holder from the sale of the Registrable Shares sold by such Holder (net of
all underwriting discounts and commissions) exceeds the amount of any damages
that such indemnifying party has otherwise been required by pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
SECTION 9. REPORTS UNDER THE EXCHANGE ACT. The Company agrees to:
(a) file with the SEC in a timely manner all reports and other
documents required to be filed by the Company under the Exchange Act; and
(b) furnish to any Holder, during the term of this Agreement, as
promptly as practicable upon request (i) a written statement by the Company that
it has complied with the current public information and reporting requirements
of Rule 144 under the Securities Act and the Exchange Act and (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company with the SEC.
SECTION 10. MISCELLANEOUS. (a) Termination. This Agreement and the
obligations of the Company and the Holders hereunder (other than Sections 6 and
8 hereof) shall terminate on the first date on which no Registrable Shares
remain outstanding.
(b) Notices. All notices or communications hereunder shall be in
writing (including telecopy or similar writing), addressed as follows:
To the Company:
Hearst/Argyle Television, Inc.
[Address]
Attention: Dean H. Blythe
Telephone:
Telecopier:
With copies to:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10009
Telephone: (212) 649-2000
Telecopier: (212) 649-2035
Rogers & Wells
200 Park Avenue
14
<PAGE>
New York, New York 10166
Attention: Steven A. Hobbs, Esq.
Telephone: (212) 878-8005
Telecopier: (212) 878-8375
To a Holder of Registrable Shares, at the address of such Holder below
such Holder's name on the signature pages hereof or, if not a party hereto or on
the date hereof, such other address as such Holder may designate to the Company
in writing.
Any such notice or communication shall be deemed given (i) when made,
if made by hand delivery, (ii) upon transmission, if sent by confirmed
telecopier, (iii) one business day after being deposited with a next-day
courier, postage prepaid, or (iv) three business days after being sent certified
or registered mail, return receipt requested, postage prepaid, in each case
addressed as above (or to such other address or to such other telecopier number
as such party may designate in writing from time to time).
(c) Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
(d) Assignment. No Holder may assign its rights or obligations
hereunder without the prior written consent of the Company and any purported
assignment in violation hereof shall be null and void. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, devisees, legatees, legal representatives, successors and permitted
assigns.
(e) Entire Agreement. This Agreement represents the entire agreement
of the parties and shall supersede any and all previous contracts, arrangements
or understandings between the parties hereto with respect to the subject matter
hereof.
(f) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of at least a
majority in number of the Registrable Shares then outstanding.
(g) Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties, except to the extent that such party is advised by
counsel that such release or announcement is necessary or advisable under
applicable law or the rules or regulations of any securities exchange or similar
authority, in which case the party required to make the release or announcement
shall to the extent practicable provide the other party with an opportunity to
review and comment on such release or announcement in advance of its issuance.
(h) Expenses. Whether or not the transactions contemplated hereby are
consummated, except as otherwise provided herein, all costs and expenses
incurred in connection
15
<PAGE>
with the execution of this Agreement shall be paid by the party incurring such
costs or expenses, except as otherwise set forth herein.
(i) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be one and the same agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to each other party.
(k) Governing Law. This Agreement shall be construed, interpreted,
and governed in accordance with the internal laws of Delaware.
(l) Calculation of Time Periods. Except as otherwise indicated, all
periods of time referred to herein shall include all Saturdays, Sundays and
holidays; provided, however, that if the date to perform the act or give any
notice with respect to this Agreement shall fall on a day other than a Business
Day, such act or notice may be timely performed or given if performed or given
on the next succeeding Business Day.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first written above.
HEARST/ARGYLE TELEVISION, INC.
By
---------------------------------------
Name:
Title:
HOLDERS:
ALAWAD LIMITED
By
---------------------------------------
Name:
Title:
ATP
By
---------------------------------------
Name:
Title:
BMO FINANCIAL
By
---------------------------------------
Name:
Title:
BANK ONE CAPITAL
By
---------------------------------------
Name:
Title:
___________________________________
SAM BARSHOP
17
<PAGE>
BEAR STEARNS
By
---------------------------------------
Name:
Title:
CMIHI
By
---------------------------------------
Name:
Title:
CORNERSTONE CAPITAL
By
---------------------------------------
Name:
Title:
CRESCENT CAPITAL
By
---------------------------------------
Name:
Title:
FOUNDATION PARTNERS FUND, G.P.
By
---------------------------------------
Name:
Title:
GALP-FOREST ASSOCIATES
By
---------------------------------------
Name:
Title:
18
<PAGE>
TEXTRON COLLECTIVE INVESTMENT TRUST B
By
---------------------------------------
Name:
Title:
___________________________________
PAUL SCHUPF
TAMPSCO PARTNERSHIP VI
By
---------------------------------------
Name:
Title:
___________________________________
DAVID YARLAN
CS FIRST BOSTON FUND
By
---------------------------------------
Name:
Title:
CS FIRST BOSTON MERCHANT BANK
By
---------------------------------------
Name:
Title:
19
<PAGE>
EXHIBIT 1.05
TO MERGER AGREEMENT
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
DIRECTORS*
Elected By
Name Class Holders Of:
- ---- ----- -----------
Bob Marbut I Series B Common Stock
Blake Byrne II Series B Common Stock
David Pulver II Series A Common Stock
Caroline Williams I Series A Common Stock
* Eight additional Directors to be designated by Parent pursuant to written
notice delivered to the Company prior to the Effective Time.
OFFICERS
Name Title
- ---- -----
Bob Marbut Chairman and Co-Chief Executive Officer
John G. Conomikes President and Co-Chief Executive Officer
David Barrett Executive Vice President and Chief Operating
Officer
Blake Byrne Executive Vice President
<PAGE>
EXHIBIT 8.08
TO MERGER AGREEMENT
FORM OF AFFILIATE LETTER
Argyle Television, Inc.
200 Concord Plaza, Suite 700
San Antonio, Texas 78216
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Argyle Television, Inc., a Delaware corporation (the
Company"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), or (ii) used in and for purposes
of Accounting Series, Releases 130 and 135, as amended, of the Commission.
Pursuant to the terms of the Agreement and Plan of Merger dated as of March 26,
1997 (the "Agreement"), by and among the Company, The Hearst Corporation
("Parent"), HAT Contribution Sub, Inc. and HAT Merger Sub, Inc. ("Merger Sub"),
Merger Sub will be merged with and into the Company, as a result of which the
Company will be the surviving corporation (the "Merger").
As a result of the Merger, I may receive shares of Surviving
Corporation Series A Common Stock (as defined in the Agreement) in exchange for
shares owned by me of Company Series A Common Stock (as defined in the
Agreement).
I represent, warrant and covenant to Parent that in the event I
receive any Surviving Corporation Series A Common Stock as a result of the
Merger:
(m) I shall not make any sale, transfer or other disposition of the
Surviving Corporation Series A Common Stock in violation of the Act or the Rules
and Regulations.
(n) I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Surviving Corporation
Series A Common Stock to the extent I felt necessary, with my counsel or counsel
for the Company.
(o) I have been advised that the issuance of Surviving Corporation
Series A Common Stock to me pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However, I
have also been advised that, since at the time the Merger was submitted for a
vote of the stockholders of the Company, I may be deemed to have been an
affiliate of the Company and the distribution by me of the Surviving Corporation
Series A Common Stock has not been registered under the Act, I may not sell,
transfer or otherwise dispose
<PAGE>
of the Surviving Corporation Series A Common Stock issued to me in the Merger
unless (i) such sale, transfer or other disposition has been registered under
the Act, (ii) such sale, transfer or other disposition is made in conformity
with Rule 145 promulgated by the Commission under the Act, or (iii) in the
opinion of counsel reasonably acceptable to the Surviving Corporation (as
defined in the Merger Agreement), or pursuant to a "no action" letter obtained
by the undersigned from the staff of the Commission, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
(p) I understand that, except as may be provided in any registration
rights agreement entered into by the Surviving Corporation and the undersigned,
the Surviving Corporation is under no obligation to register the sale, transfer
or other disposition of the Surviving Corporation Series A Common Stock by me or
on my behalf under the Act or to take any other action necessary in order to
make compliance with an exemption from such registration available.
(q) I also understand that stop transfer instructions will be given to
the Surviving Corporation's transfer agents with respect to the Surviving
Corporation Series A Common Stock and that there will be placed on the
certificates for the Surviving Corporation Series A Common Stock issued to me,
or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE
TERMS OF AN AGREEMENT DATED , BETWEEN THE REGISTERED HOLDER HEREOF AND
, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES
OF ."
(r) I also understand that unless the transfer by me of my Surviving
Corporation Series A Common Stock has been registered under the Act or is a sale
made in conformity with the provisions of Rule 145, the Surviving Corporation
reserves the right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and
2
<PAGE>
the stop orders referred to above will be removed if (i) one year shall have
elapsed from the date the undersigned acquired the Surviving Corporation Series
A Common Stock received in the Merger and the provisions of Rule 145(d)(2) are
then available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Surviving Corporation Series A Common Stock
received in the Merger and the provisions of Rule 145(d)(3) are then available
to the undersigned, or (iii) the Surviving Corporation has received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Surviving Corporation, or a "no action" letter obtained by the
undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
___________________________
Name:
Accepted this day of
, 1997 by
ARGYLE TELEVISION, INC.
By: ____________________________
Name:
Title:
3
<PAGE>
EXHIBIT 9.01(I)
TO MERGER AGREEMENT
TERMS OF MANAGEMENT AGREEMENT
1. Scope: The Management Agreement would cover WWWB-TV 32, Tampa, FL and
Parent's Missouri LMA television stations, Parent's Baltimore AM/FM radio
stations and all other television stations which may be acquired by Parent or
any subsidiary or Affiliate thereof subsequent to the execution and prior to the
Effective Time of the Merger Agreement (including WPBF-TV, West Palm Beach, if
acquired). However, the management agreement would be subject to any
contractual consents which may be required with respect to the Missouri LMA.
2. Term: The term of the Management Agreement would commence at the Effective
Time and would continue for each station respectively until the earlier of: (i)
Parent's divestiture of the station to a third party; (ii) if applicable, the
exercise of the option granted to the Surviving Corporation following the Merger
(referred to herein as the "Company") to acquire the station, or (iii) five (5)
years following the closing of the Merger Agreement, provided that, Parent would
have the right to terminate the Management Agreement at any time upon 90 days
prior written notice if the option period or right of first refusal period, as
applicable, has expired without having been exercised.
3. Services: Subject to applicable laws, rules and regulations (including
those of the FCC), the management services provided would be substantially
similar to those management services Parent's Broadcasting Division management
has provided the Parent Stations, and would include, without limitation,
management services with respect to: sales; news; programming (subject to the
rights of each station's licensee to retain sole responsibility for and control
of the station's programming, including the right to pre-empt programming
provided for under the management agreement); compliance with FCC and EEO laws,
rules and regulations; preparation of operating and capital budgets and
financial statements in accordance with GAAP; engineering; promotion; and
accounting services.
4. Management Fee: The management fee with respect to the managed stations
would be the reimbursement of the Company's costs and expenses with respect to
the managed television stations on an allocated basis to be determined in the
formal Management Agreement, plus an amount equal to the greater of (i) (x)
$50,000 for Parent's radio stations (counted as a single property) and $50,000
for the Missouri LMA, or (y) for all others, $100,000 per station, and (ii) a
percentage of the positive broadcast cash flow from each such property listed
below:
. Year 1 - 20%
. Year 2 - 30%
. Year 3 - 40%
. Year 4 and thereafter - 50%
<PAGE>
5. Other Terms. The Management Agreement also will contain such other terms
and provisions that are customary for such management agreements, including
provisions with respect to the Communications Act and the rules and regulations
of the FCC.
TERMS OF TV OPTION AGREEMENT
1. Applicability - Acquisition options would be granted to the Company
following the Merger and would apply to WWWB-32, Tampa, FL and the Missouri LMA.
Parent would also grant a right of first refusal to the Company for a period of
36 months following the closing of the Merger Agreement with respect to WPBF-TV,
West Palm Beach, FL, if such station is acquired by Parent or a subsidiary or
Affiliate of Parent and such station is proposed to be sold to a third party.
Exercise of the right of first refusal would be by the Company's independent
directors.
2. Option Terms - For each applicable property, the option period would be 18
to 36 months following the Effective Time. The purchase price would be the fair
market value of the respective station based upon an appraised value (provided
that, in the case of the Missouri LMA, in no event would the purchase price be
less than the Accumulated Costs as defined in the Option Agreement, plus
interest thereon). If Parent elects to sell a station before the commencement
of, or during, the option period, the Company would be granted a right of first
refusal to acquire the station. Exercise of the right of first refusal would be
by the Company's independent directors. Parent would be entitled to elect to
receive the purchase price in either cash or Company stock. With respect to the
Missouri LMA, if the option were exercised Parent would assign to the Company
its rights and obligations under the applicable LMA documents and agreements
(including the Option Agreement and the Programming Services and Time Brokerage
Agreement) and the assignment would be subject to contractual consents.
The exercise of the option for the applicable property would be
triggered by action of the independent directors of the Company, and may be
withdrawn by the Company after receipt of the appraisal, as described below.
The appraiser shall be independent and selected by mutual agreement of the
Company and Parent. If the Company and Parent cannot agree as to the selection
of the appraiser, then each of them would select an appraiser and the two
appraisers would select a third appraiser. The appraisal would take into
account both the structure of the proposed transaction and the tax basis of the
assets to be acquired by the Company. If three appraisers are used, the
appraised value would be the average of the three appraisals. If the option is
exercised and not withdrawn, the fees for the appraisal shall be paid as
follows: (i) if a single appraiser is used, equally by the Company and Parent;
and (ii) if three appraisers are used, each party pays the fees of its appraiser
and the Company and Parent shall pay the fees of the third appraiser equally. If
the option is exercised and withdrawn, then the Company shall pay the fees of
all appraisers. If the option is not exercised the first refusal right would
terminate.
3. Other Terms. The Option Agreement also will contain such other terms and
provisions that are customary for such option agreements, including provisions
with respect to the Communications Act and the rules and regulations of the FCC.
2
<PAGE>
TERMS OF RADIO FACILITIES LEASE
1. Term: The term of the lease would commence at the Effective Time and
continue for each radio station respectively until the earlier of: (i) Parent's
divestiture of a radio station to a third party, in which case either party
(i.e., the Company or the buyer of the station), would be entitled to terminate
the lease with respect to that station upon 90 days prior written notice, or
(ii) 36 months following the Effective Time.
2. Other Terms and Conditions: The leased premises would be the premises
occupied by each radio station as of the Effective Time and all other terms and
conditions under which the stations occupy their respective premises would
remain in effect (including allocations and adjustments to allocations as
consistent with past practice on a historical basis). The lease also will
contain such other terms and provisions that are customary for such leases,
including provisions with respect to the Communications Act and the rules and
regulations of the FCC.
3
<PAGE>
EXHIBIT 9.02(F)
TO MERGER AGREEMENT
TAX SHARING AGREEMENT
Agreement made this ___ day of ___, 1997, by The Hearst Corporation
("Hearst"), and Argyle Television, Inc. ("Argyle TV"), both of which are
Delaware corporations, to establish the sharing of the federal, state and local
income and franchise taxes after Argyle TV Group (as hereinafter defined)
becomes a member of Group (as hereinafter defined).
1. Definitions
(a) Group - Parent, Argyle TV Group and all other corporations (whether now
existing or hereinafter formed or acquired) that at the relevant time would
be entitled or required to join with Parent (or any successor common parent
corporation) in filing a consolidated federal income tax return.
(b) Parent - Hearst, or any successor common parent corporation of the Group.
(c) Argyle TV Group - Argyle TV and any other corporation which would be
included in the affiliated group of corporations as defined in Section
1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), of
which Argyle TV would be the common parent, but for the inclusion of Argyle
TV in another affiliated group.
(d) Argyle TV Group Tax Liability -
(1) The hypothetical consolidated federal income tax liability for the
Argyle TV Group for a taxable year determined as if the Argyle TV Group had
filed its own consolidated federal income tax return for such taxable year and
all prior taxable years ending after the date hereof. Such hypothetical
consolidated federal income tax liability shall be determined at the end of the
taxable year and shall reflect any tax elections, conventions, treatments, or
methods which (i) are actually utilized by the Group in filing its federal
consolidated tax return, and (ii) are applied on a consistent basis from year to
year (as so far is consistent with clause (i)). The hypothetical tax liability
of the Argyle TV Group shall be computed by taking into account net operating
loss, capital loss and investment tax credit carryforwards of the Argyle TV
Group generated in taxable years during which Argyle TV Group was a member of
the Group, and carryforwards from prior separate return years to the extent they
are actually utilized by the Argyle Group.
(2) For the years in which Argyle TV Group joins or leaves the Group, an
election under Treasury Regulation Section 1.1502-76(b)(2)(ii) to ratably
allocate Argyle TV Group's items of income, gain, deductions, losses and credits
will be made by the required parties.
<PAGE>
(3) The Argyle TV Group Tax Liability shall be determined each year by
Parent and shall be reviewed by Deloitte and Touche or such other nationally
recognized firm of independent public accountants as may be regularly employed
by the Group at the time of the determination.
(e) Argyle TV Group Estimated Tax Liability - The hypothetical estimated
consolidated federal income tax liability for the Argyle TV Group
determined in accordance with the definition in Section 1, paragraph (d) as
of the end of each quarter of the taxable year.
2. Allocations of Consolidated Federal Income Tax Liability
(a) Filing of Consolidated Returns
So long as Parent and the Argyle TV Group are members of the Group, Parent
shall file consolidated federal income tax returns for each taxable year ending
after the date hereof, which shall include Argyle TV Group as a member of the
Group.
(b) Payment of Tax Liability
For each taxable year (or portion thereof) during which the Argyle TV Group
is included in a consolidated Federal income tax return with Parent, Argyle TV
shall pay to Parent an amount equal to the Argyle TV Group Tax Liability. To
the extent that the obligation to pay such amount has not been fully satisfied
pursuant to paragraph 2(c), Argyle TV shall pay any such remaining amount to
Parent by the date on which Parent is required to make its final payment of
federal income taxes for the taxable year without the occurrence of penalties or
additions to tax.
(c) Estimated Quarterly Payments
At the end of each quarter of each taxable year (or portion thereof) during
which the Argyle TV Group is included in a consolidated Federal income tax
return with Parent, Argyle TV shall make estimated payments to Parent, within
five (5) days of receiving a request therefore, in an amount equal to the Argyle
TV Group Estimated Tax Liability for the quarter. If the total of such estimated
quarterly payments made by Argyle TV to Parent with respect to a given taxable
year are in excess of the liability of Argyle TV to Parent pursuant to paragraph
2(b) for such taxable year, Parent shall pay the amount of such excess to Argyle
TV no later than the date on which Parent files the consolidated federal income
tax return for the Group.
(d) Changes in Tax Liability
(i) If the Argyle TV Group Tax Liability is changed as the result of any
administrative settlement or final determination which is not litigated by Group
or in a final judicial determination, then the amount of payment required from
Argyle TV to Parent pursuant to paragraph 2(a) shall be recomputed by
substituting the amount of the Argyle TV Group Tax Liability after the
adjustments described above in place of the Argyle TV Group Tax Liability as
previously computed. Not later than ten days after such final determination,
Argyle TV shall pay to Parent or Parent shall pay to Argyle TV, as the case may
be, the difference between the new Argyle TV Group Tax Liability,
2
<PAGE>
including any interest or penalties imposed in respect of the new Argyle TV
Group tax liabilities and the amounts previously paid. The parties recognize
that such new liability is not necessarily Argyle TV's final liability for that
year and may be recomputed more than once.
(f) Indemnity
Parent agrees to indemnify, defend, and hold harmless Argyle TV and each
member of the Argyle TV Group from and against any and all liabilities to the
Internal Revenue Service for Federal income tax (including interest and
penalties thereon) with respect to any taxable year to which this Agreement
applies, including, without limitation, any such liabilities of Argyle TV and
each member of the Argyle TV Group pursuant to Treasury Regulation Section
1.1502-6.
(g) State and Local Taxes
In the event Parent actually files consolidated, combined or unitary income
or franchise tax returns or reports in any state or local jurisdiction on behalf
of and pays such taxes owed by all or part of the Group, the principles and
procedures stated in this Agreement shall apply for purposes of allocating such
state or local tax liability, including interest or penalties thereon, among the
Parent and the Argyle TV Group.
(h) Effects of Agreement
As between Parent and the Argyle TV Group, the provisions of this Agreement
shall fix the liability of each to the other as to the matters covered
hereunder, even if such provisions are not controlling for tax or other purposes
(including, but not limited to, the computation of deductions or earnings and
profits for federal tax purposes), and even if Hearst and other corporations
which now are, or which from time to time may become, members of the Group enter
into other arrangements for the allocation of the portion of the total tax
liability of the Group which is allocable to them.
3. Miscellaneous Provisions
(a) Scope of the Agreement
This Agreement contains the entire understanding of the parties hereto with
respect to the subject matter contained herein. No alteration, amendment or
modification of any of the terms of this Agreement shall be valid unless made by
an instrument signed in writing by an authorized officer of each party.
(b) Choice of Law
This Agreement has been made in and shall be construed and enforced in
accordance with the laws of the State of New York.
3
<PAGE>
(c) Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of each party
hereto and its respective successors and assigns.
(d) Termination
This Agreement shall terminate if (i) the parties agree in writing to such
a termination, (ii) the Argyle TV Group ceases to be a member of the Group,
including, without limitation, upon the effective date, if ever, of Parent's S
election, or (iii) Parent fails to file a consolidated return in any taxable
year. The terms of the Agreement will remain in effect for any taxable year or
part of a taxable year for which the income of Argyle TV or any member of Argyle
TV Group must be included in Parent's consolidated return.
(e) Information
Parent, Argyle TV and all members of the Argyle TV Group agree to cooperate
in supplying information reasonably requested by the other party in order to
make any computations required under this Agreement and for the purpose of
defending tax examinations, including appeals and litigation.
(f) Effective Date
This Agreement shall be effective the date upon which Argyle TV Group
becomes a member of the Group.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE HEARST CORPORATION
By:_______________________________________
ARGYLE TELEVISION, INC.
By:_______________________________________
4
<PAGE>
EXHIBIT 9.02(G)
TO MERGER AGREEMENT
LICENSE AGREEMENT (the "Agreement") dated as of ______ ___, 1997, is
by and between The Hearst Corporation, a Delaware corporation ("THC"), and
Hearst/Argyle Television, Inc., a Delaware corporation (the "Company").
WHEREAS, Hearst is the sole and exclusive owner of all right, title and
interest in and to and has the right to grant the license pursuant to the terms
set forth herein with respect to the company and trade name "Hearst";
WHEREAS, this Agreement is being executed and delivered simultaneously with
the closing of the transactions contemplated by the Agreement and Plan of Merger
dated as of March 26, 1997 among THC, the Company, Hearst Merger Sub, Inc. and
Hearst Contribution Sub, Inc. pursuant to which THC will become a controlling
shareholder of the Company;
WHEREAS, the Company desires to enter into this Agreement for the right and
license to use the Hearst name in connection with the operation of its business;
and
WHEREAS, THC is willing to formally grant a license to the Company to use
the Hearst Name in connection with the operation of the Company's business;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein, the parties hereto agree as follows:
1. DEFINITIONS.
The following terms, as used herein, shall have the following
meanings:
1.1 "Hearst Name" shall mean that portion of any company and trade
name consisting of "Hearst". Expressly excluded from the Hearst Name are the
words "Hearst Corporation" or any company name substantially identical thereto
and any corporate logos used by THC.
1.2 "License Term" shall mean the term commencing as of the date
hereof and continuing until the License granted pursuant to Section 2.1 shall be
terminated by THC as provided in Section 6.
1.3 "Permitted Manner of Use" shall mean use of the Hearst Name in
accordance with all legal requirements and also with THC's policy and style
standards as currently existing and as may be reasonably amended from time to
time by THC (including such other requirements or conditions with regard to the
use of the Hearst Name as may be established by THC in accordance with good
trademark practice.)
<PAGE>
2. GRANT OF LICENSE TO USE THE HEARST NAME.
2.1 License. THC hereby grants to the Company, during the License
Term, a personal, royalty-free, non-exclusive, non-transferrable, non-
assignable, license to use in the United States only, without the right to grant
sublicenses, the Hearst Name solely in the Company's name as follows:
"Hearst/Argyle Television, Inc."; provided that such use shall be in accordance
with the Permitted Manner of Use.
2.2 Inspections. The form of using the Hearst Name in the
name of the Company shall be subject to THC's approval, which approval shall not
be unreasonably withheld. In the event that THC objects to any such form of
using the Hearst Name, it shall give written notice of its objections to and
consult with the Company in a good faith effort to resolve any such objections.
2.3 Absence of Interest in Hearst Name. Nothing herein shall give
the Company any right, title or interest in the Hearst Name apart from the
rights to use specified in Section 2.1, all such right, title and interest,
including but not limited to rights of registration, maintenance and
enforcement, being solely with THC. The Hearst Name is the sole property of THC
and any and all uses by the Company shall inure to the sole benefit of THC,
including goodwill in respect thereof. To the extent that any jurisdiction
shall find for any reason as a matter of law or otherwise that such use has
vested in the Company any right, title or interest in or to the Hearst Name, the
Company, upon the request of THC, shall execute and deliver to THC, without
charge, appropriate assignments to vest such rights, title and interest in THC.
At THC's request and expense, the Company agrees to assist THC in the
procurement or maintenance of any filings or registrations for the Hearst Name
in any jurisdiction by providing any information available from the Company and
executing any documents necessary therefor.
2.4 Filing, Registration or Use of Hearst Name. The Company and its
subsidiaries will not:
(i) raise or cause to be raised any questions concerning or
objections to the validity of the Hearst Name in any jurisdiction, or
to any registrations thereof or applications therefor, or to the sole
proprietary rights of THC thereto, on any grounds whatsoever;
(ii) alter or amend in any way the Hearst Name and will not, during
the term of this Agreement or thereafter adopt or use any name that is
confusingly similar thereto;
(iii) file, apply to register or register the Hearst Name, alone or
in combination with any other word or device or symbol or any name,
mark, term, script or device colorably similar thereto, except if, as,
when, and to the extent as may be expressly consented to in writing in
advance by THC in specific instances; or
(iv) use the Hearst Name in conjunction or in combination with any
other name, mark, term, script or device
2
<PAGE>
whatsoever, except as provided in Section 2.1 or to the extent
approved otherwise in writing in advance by THC.
3. INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to
indemnify, defend and hold harmless, THC, its subsidiaries (other than the
Company and its subsidiaries) and their affiliates and their respective
employees, officers, directors, and agents and shall hold each of them harmless
from and against any and all claims, demands, suits, actions, damages, and
judgments brought or obtained by a third party ("Claims"), of whatever type or
kind arising out of (i) any use of the Hearst Name by the Company, including,
without limitation, product liability or personal injury Claims; or (ii) any
breach by the Company of any of the terms and conditions of this Agreement.
4. DEFENSE OF INFRINGEMENT CLAIMS. THC agrees to indemnify and defend
the Company, its Affiliates and their employees, officers, directors and agents
and shall hold each of them harmless to the extent that any Claims arise out of
an assertion or claim that the use of the Hearst Name by the Company pursuant to
the terms of this Agreement infringes the trade names, trademarks or service
marks of a third party.
5. INFRINGEMENT BY THIRD PARTIES. Upon discovery by the Company, it
shall notify THC of any adverse uses confusingly similar or otherwise damaging
to the Hearst Name, but shall take no other action of any kind with respect
thereto except by the express prior written authorization of THC. The
determination of whether or not legal action shall be taken in any case shall
lie exclusively with and at the sole discretion of THC. In the event that THC
institutes legal action pursuant to this section, the costs of any such legal
action shall be borne by THC. THC may bring suit in its own name with choice of
counsel and control of the legal action by THC. The Company shall cooperate
with and assist THC in any such suit by promptly providing any reasonably
requested documents in the Company's possession, custody or control, and by
making its personnel familiar with the facts available to THC and otherwise,
without charge. In the event that threatened or actual legal action by THC
results in a settlement or resolution that provides damages or other monies to
THC, such monies shall be retained by THC.
6. TERMINATION. THC may terminate the license granted pursuant to
Section 2.1, at any time, for any reason, on written notice given to the Company
at least six (6) months prior to the proposed termination date. Upon the
termination of such license, the Company shall terminate forthwith all uses of
the Hearst Name and, to the extent necessary, shall take all steps necessary to
amend the Company's certificate of incorporation to eliminate the Hearst Name
from the Company's name as soon as practicable.
7. REPRESENTATIONS AND WARRANTIES. THC makes no representations or
warranties with respect to the validity, status, enforceability or coverage of
the Hearst Name.
8. ASSIGNABILITY. This Agreement shall not be assignable, in whole or
part, directly or indirectly, by the Company without notice to and the prior
written consent of THC, and any attempt to assign any rights or obligations
arising under this Agreement without such consent in violation hereof shall be
null and void.
3
<PAGE>
9. GENERAL PROVISIONS.
9.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing (including telefax or similar writing)
and shall be given:
(i) If to THC, to:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10019
Attention: Victor F. Ganzi
Telefax No.: (212) 649-2035
(ii) If to the Company to:
Hearst/Argyle Television, Inc.
[ADDRESS]
Attention:
Telefax:
or (iii) in either case, to such other person or to such other address or
telefax number as the party to whom notice is to be given may have furnished the
other parties in writing by like notice. If mailed, any such communication
shall be deemed to have been given on the third business day following the day
on which the communication is posted by registered or certified mail (return
receipt requested). If given by any other means it shall be deemed to have been
given when delivered to the address specified in this Section 9.1.
9.2 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.3 MISCELLANEOUS. This Agreement constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and shall be
governed in all respects by the laws of the State of New York without regard to
its laws or regulations relating to choice of law.
9.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 SPECIFIC PERFORMANCE. The Company agrees that money damages
would not be a sufficient remedy for any breach of any provision of this
Agreement by the Company, and that in addition to all other remedies which THC
may have, THC will be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach. No failure or delay by THC in
exercising any right, power or privilege hereunder will operate as a waiver
thereof,
4
<PAGE>
nor will any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege hereunder.
9.6 SURVIVAL. The following provision shall survive any termination
of the license granted pursuant to this Agreement: Sections 2.3, 2.4, 3, 4, 5
and 9.5.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
THE HEARST CORPORATION
By:
----------------------------------
Name:
Title:
HEARST/ARGYLE TELEVISION, INC.
By:
----------------------------------
Name:
Title:
5
<PAGE>
EXHIBIT 9.02(H)(A)
TO MERGER AGREEMENT
LIST OF PERSONS DELIVERING
MANAGEMENT TRANSFER RESTRICTION AGREEMENTS
Name Title
- ---- -----
Bob Marbut Chairman and Chief Executive Officer
Blake Byrne President, Chief Operating Officer and Director
<PAGE>
EXHIBIT 9.02(H)(B)
TO MERGER AGREEMENT
FORM OF MANAGEMENT
TRANSFER RESTRICTION AGREEMENT
Argyle Television, Inc.
200 Concord Plaza, Suite 700
San Antonio, Texas 78216
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger dated as of
March 26, 1997 (the "Agreement"), by and among Argyle Television, Inc., a
Delaware corporation (the "Company"), The Hearst Corporation ("Parent"), Hearst
Contribution Sub, Inc. and Hearst Merger Sub, Inc. ("Merger Sub"), pursuant to
which Merger Sub will be merged with and into the Company, as a result of which
the Company will be the surviving corporation (the "Merger"). As a result of
the Merger, the undersigned may receive shares of Surviving Corporation Series A
Common Stock (as defined in the Agreement) in exchange for shares owned by the
undersigned of Existing Series A Common Stock (as defined in the Agreement).
The execution and delivery by the undersigned of this agreement is a condition
precedent to your obligations to effect the Merger.
For and in consideration of your entering into the Merger Agreement
and the performance of your obligations thereunder, the undersigned agrees that,
until the earlier of the third anniversary of the date the undersigned acquired
the Surviving Corporation Series A Common Stock received in the Merger or, the
date the undersigned is no longer employed by the Company, the undersigned will
not, without the prior written consent of the Surviving Corporation (as defined
in the Agreement), directly or indirectly, sell, offer, contract to sell, grant
any option for the sale of, or otherwise dispose of any amount of the Surviving
Corporation Series A Common Stock or any securities convertible into,
exchangeable for, or exercisable for Surviving Corporation Series A Common
Stock, or any rights to purchase or acquire Surviving Corporation Series A
Common Stock, owned either of record or beneficially by the undersigned such
that, after such transfer, the undersigned and the undersigned's permitted
transferees would own less than * shares of the Surviving Corporation
Series A Common Stock; provided, however, that gifts or transfers for estate
planning purposes shall not be prohibited by this agreement if the donee or
transferee agrees to be bound by the foregoing in the same manner as it applies
to the undersigned.
- --------------------
* 624,375 shares in the case of Bob Marbut
384,647 shares in the case of Blake Byrne
<PAGE>
This agreement shall become effective as of the time the Merger
Agreement is executed, and shall be governed by and construed in accordance with
the laws of the State of Delaware.
Very truly yours,
___________________________
Name:
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,239
<SECURITIES> 0
<RECEIVABLES> 14,165
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,664
<PP&E> 50,174
<DEPRECIATION> 0
<TOTAL-ASSETS> 344,213
<CURRENT-LIABILITIES> 20,113
<BONDS> 191,500
0
2
<COMMON> 113
<OTHER-SE> 122,738
<TOTAL-LIABILITY-AND-EQUITY> 344,213
<SALES> 0
<TOTAL-REVENUES> 17,879
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<PAGE>
EXHIBIT 99
Date: March 26, 1997 Contacts: Bob Marbut/Harry Hawks
3:00 p.m. EST Argyle Television, Inc.
210-828-1700
James F. O'Donnell
The Hearst Corporation
212-649-2149
Thomas W. Campo
The Hearst Corporation
212-649-2147
Hearst and Argyle Join To Form
New 12-Station Television Company
New York, NY and San Antonio, TX . . . The Hearst Corporation, the privately-
held diversified communications company, and Argyle Television, Inc. (NASDAQ:
ARGL) announced today that they have entered into a definitive agreement to
combine six Hearst television stations with and into Argyle, with Argyle to be
renamed Hearst-Argyle Television, Inc. The announcement was made by Frank A.
Bennack, Jr., president and chief executive officer of Hearst, and Bob Marbut,
chairman and chief executive officer of Argyle.
In the merger, at the election of each Argyle shareholder and subject to certain
proration mechanisms, Argyle shareholders will receive (i) $26.50 per share in
cash; (ii) one share of Series A Common Stock of Hearst-Argyle Television; or
(iii) a "mixed consideration" of $13.25 in cash and one-half share of Series A
Common Stock of Hearst-Argyle Television. At the merger price, the total
capitalization of the new company will exceed $1.8 billion.
After the combination and assuming an election for the maximum cash component,
The Hearst Corporation will hold approximately 86% of the common shares of
Hearst-Argyle Television, and current Argyle shareholders will hold
approximately 14% of the common shares of Hearst-Argyle Television to be
outstanding.
The stations to be owned and managed by Hearst-Argyle Television (15 in all)
will reach approximately 11.6% of U.S. television households and will include
more ABC-affiliated television stations (nine) than any other television station
group owner, other than ABC, Inc. itself.
Hearst Broadcasting Productions, a unit of Hearst's Boston television station
WCVB-TV, will become part of Hearst-Argyle as part of this transaction.
Hearst-Argyle also will manage WPBF-TV, the ABC affiliate in West Palm Beach,
FL, that Hearst announced yesterday it has agreed to acquire, and WWWB-TV, the
WB affiliate in Tampa, FL, both of which will continue to be owned by Hearst
Broadcasting, and KCWB-TV, the WB affiliate in Kansas City, MO, which Hearst
currently operates under a local marketing agreement. Hearst-Argyle
<PAGE>
will also have an option to acquire WWWB and the KCWB local marketing agreement
and a right of first refusal on WPBF. In addition, Hearst-Argyle will manage two
radio stations (WBAL-AM and WIYY-FM, Baltimore, MD) that will continue to be
held by Hearst.
In the combination and assuming the maximum cash election, the current Argyle
shareholders will receive approximately six million shares of common stock of
Hearst-Argyle Television and $159.7 million in cash. For each share of Argyle
stock currently outstanding (a fully-diluted total of approximately 12.1 million
shares), Argyle shareholders will receive, at the election of each Argyle
shareholder and subject to certain proration mechanisms, (i) $26.50 per share in
cash; (ii) one share of Series A Common Stock of Hearst-Argyle Television; or
(iii) a "mixed consideration" of $13.25 in cash and one-half share of Series A
Common Stock of Hearst-Argyle Television.
Shareholders electing to receive the mixed consideration will receive $13.25 in
cash and one-half share of Series A Common Stock of Hearst Argyle Television for
each share of Argyle common stock held; the all-cash and all-stock elections
will be subject to proration if the aggregate cash election by the Argyle
shareholders (including the cash portion of the mixed consideration elections)
is more than $159.7 million or less than $100 million.
Argyle Television Investors, L.P., Television Investment Partners, L.P., Argyle
Television Partners, L.P. and certain other shareholders, which collectively own
approximately two-thirds of the shares of Argyle Common Stock outstanding, have
agreed to vote the Argyle shares they hold in favor of the merger to effect this
combination.
Senior broadcast executives from both Hearst and Argyle will lead the combined
company. Bob Marbut, co-founder of Argyle and its chairman and CEO, will become
chairman and Co-CEO; John G. Conomikes, Hearst director, vice president and
general manager of broadcasting, will become president and Co-CEO; David J.
Barrett, Hearst vice president and deputy general manager of broadcasting, will
become executive vice president and chief operating officer; and, Blake Byrne,
co-founder of Argyle and its president and chief operating officer, will become
executive vice president of Hearst-Argyle.
The two other Argyle founders also will continue with Hearst-Argyle: Harry T.
Hawks, Argyle's chief financial officer, will become CFO; and, Ibra Morales,
Argyle's executive vice president and chief revenue officer, will become the
senior staff sales executive in the combined company. Also, most other senior
staff executives from both companies are expected to be part of Hearst-Argyle.
"The Hearst Corporation has been a private company for decades and intends to
remain so," Frank A. Bennack, Jr., president and chief executive officer of
Hearst, said. "However, fundamental changes taking place in broadcasting have
led to a major consolidation trend in the television industry. That trend
clearly indicates that if we choose to be a consolidator, as we do, it is
prudent and advantageous for Hearst Broadcasting to broaden the options to grow
its television operations. The availability of the public markets along with
the substantial cash flow of the new Hearst-Argyle should mean we can gain the
benefits of scale through acquisitions more quickly this way.
"In addition to the strong financial position the new combined company will
have, the combined management team will bring together several of the most
respected executives in television," Bennack
<PAGE>
added. "My colleagues and I welcome this opportunity to work with Bob Marbut and
his team. This is a team with the proven ability to make Hearst-Argyle grow."
Commenting on the transaction, Marbut said, "This is an exciting moment for the
shareholders, employees and other constituents of Argyle Television. We founded
Argyle with the goal of making it a successful, permanent part of the television
business while, at the same time, giving our shareholders attractive investment
returns and being responsible to the communities and advertisers we serve. The
combining of Argyle with Hearst Broadcasting in a continuing public company with
such bright prospects will make it possible to achieve all of these goals.
"In its own right, Hearst-Argyle will have the critical mass to be an active
player in the industry's consolidation and also have long term stability; it
will have the resources to cope with aggressive competition and the wherewithal
to be an innovator in this time of dramatic change," Marbut continued. "Given
the rate of the industry's consolidation, if we are successful in participating
in this consolidation, I would see Hearst-Argyle doubling in size in the next
three to five years."
"Also," he said, "it will be a significant advantage to have The Hearst
Corporation as our largest shareholder. Their commitment, staying power and
success are well known throughout the communications business. For me, it's a
special privilege to be associated with Frank Bennack. We have been friends for
over 25 years, and I have watched with great admiration as he has led this 110-
year-old company through a period of renewal and impressive growth. We at
Argyle look forward to working with Frank and his associates in building Hearst-
Argyle into a successful company in the years ahead."
The Hearst television stations to become part of Hearst-Argyle Television are
WCVB, the ABC affiliate in Boston, MA; WTAE, the ABC affiliate in Pittsburgh,
PA.; WBAL, the NBC affiliate in Baltimore, MD; KMBC, the ABC affiliate in Kansas
City, MO; WISN, the ABC affiliate in Milwaukee, WI; and, WDTN, the ABC affiliate
in Dayton, OH.
The Argyle television stations to become part of Hearst-Argyle Television are
WLWT, the NBC affiliate in Cincinnati, OH; KOCO, the ABC affiliate in Oklahoma
City, OK; WNAC, the Fox affiliate in Providence, RI; KITV, the ABC affiliate in
Honolulu, HI; WAPT, the ABC affiliate in Jackson, MS; and, KHBS and KHOG, the
ABC affiliates in Fort Smith/Fayetteville, AR.
Under current FCC regulations, Argyle's WNAC in Providence, RI, would have to be
divested because of an overlap with Hearst's WCVB in Boston, MA, and Hearst's
WDTN in Dayton, OH, would have to be divested because of an overlap with
Argyle's WLWT in Cincinnati, OH.
For the year ended December 31, 1996 (pro forma for the transactions), the
combined company had net revenues of $369 million (approximately $285 million
from Hearst and $84 million from Argyle) and broadcast cash flow of $160 million
(approximately $122 million from Hearst and $38 million from Argyle).
After completion of the combination, Hearst-Argyle Television will have
approximately $640 million of long term debt and approximately $22 million of
preferred stock outstanding.
<PAGE>
Hearst will own all of the Series B Common Stock of Hearst-Argyle Television,
which Series B stock gives the holders the right to elect a majority of the
Board of Directors. The size of the board will be increased to 12, and Hearst
will have the right to elect 10 members, of which two will be current members of
Argyle management. The Series B Common Stock will be convertible on a share-
for-share basis into Series A Common Stock and will be nontransferable as Series
B Shares.
The definitive agreement between Hearst and Argyle has been approved by the
boards of directors of both companies. The transaction is expected to close in
the third quarter of 1997 and is subject to approval by the Argyle shareholders
and regulatory approvals.
Today, Argyle Television, Inc. owns and operates network-affiliated television
stations WLWT-TV, the NBC affiliate in Cincinnati, OH; KOCO-TV, the ABC
affiliate in Oklahoma City, OK; WNAC-TV, the Fox affiliate in Providence, RI;
KITV-TV, the ABC affiliate in Honolulu, HI; WAPT-TV, the ABC affiliate in
Jackson, MS; and, KHBS-TV, the ABC affiliate in Fort Smith, AR, and its
satellite KHOG-TV, the ABC affiliate in Fayetteville, AR. Argyle's Series A
Common Stock trades on the Nasdaq National Market System under the symbol
"ARGL".
The Hearst Corporation is one of the largest diversified communications
companies in the nation. Its 12 daily and seven non-daily newspapers are among
the largest groups in that industry, and its 16 consumer magazines make Hearst
the largest publisher of monthly magazines in the world. The company also
operates eight television stations and the Hearst Book Group. Hearst syndicates
newspaper comics and features; produces and distributes television programming,
both domestically and internationally; and publishes multimedia software for the
new media technologies.
Hearst has a history of joint ventures with public broadcasting companies and is
a pioneer in cable television, as a founding partner with ABC, Inc. in the
Lifetime, A&E and The History Channel cable networks. The company is also a
partner with ABC, Inc. in ESPN, ESPN2 and ESPNEWS.
Hearst publishes nine monthly magazines in the United Kingdom through its wholly
owned subsidiary, The National Magazine Company Limited. Hearst Magazines
International publishes over 80 editions, through partnerships, joint ventures
and licensees, in 16 languages for distribution in more than 100 countries.
Hearst corporate news releases can be found at The Hearst Corporation's Web
site, http://www.hearstcorp.com.
Attachments:
A. Station Lineup
B. Station Map
C. Pro Forma Financial Results
D. Pro Forma Capitalization
E. Transaction Flow Chart
