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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 29, 1997
HEARST-ARGYLE TELEVISION, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-2700 74-2717523
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification Number)
Incorporation
888 Seventh Avenue
New York, New York 10106
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code:
(212) 649-2300
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
On October 14, 1997, Hearst-Argyle Television, Inc. ("Hearst-Argyle"
or the "Company") terminated its relationships with its independent auditors,
Ernst & Young LLP ("E&Y"). In addition, on October 15, 1997 the Company engaged
Deloitte & Touche LLP ("Deloitte & Touche") as its new independent auditors.
The Company's termination of its relationship with E&Y and the appointment of
Deloitte & Touche was approved by the Company's Board of Directors upon the
recommendation of the Audit Committee of the Board of Directors.
E&Y's reports on the Company's financial statements during the two
most recent fiscal years preceding the date hereof did not contain an adverse
opinion, disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the two most recent fiscal years preceding the date hereof,
there were no reportable events as contemplated by Item 304 of Regulation S-K
and no disagreements between the Company and E&Y on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of E&Y
would have caused it to make reference to the subject matter of the
disagreement in its report.
The Company has requested E&Y to provide a letter addressed to the
Commission stating whether it agrees with the above statements. A copy of that
letter is filed as an Exhibit to this Form 8-K.
ITEM 5. OTHER EVENTS.
Merger Consideration Elections and Allocations. As previously
reported on the Current Report on Form 8-K dated August 29, 1997, filed with
the Securities and Exchange Commission (the "SEC") on September 15, 1997, as
amended by Current Report on Form 8-K/A dated August 29, 1997, filed with the
SEC on September 26, 1997, on August 29, 1997, The Hearst Corporation, a
Delaware corporation ("Hearst"), contributed its television broadcast group
(the "Hearst Broadcast Group") to Argyle Television, Inc., a Delaware
corporation ("Argyle"), and merged a wholly- owned subsidiary of Hearst with
and into Argyle, with Argyle as the surviving corporation (renamed
"Hearst-Argyle Television, Inc."). The contribution (the "Contribution") and
merger (the "Merger") were consummated pursuant to an Amended and Restated
Agreement and Plan of Merger, dated as of March 26, 1997 (the "Merger
Agreement"), among Hearst, HAT Merger Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Hearst, HAT Contribution Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Hearst, and Argyle.
At the effective time of the Merger (the "Effective Time") on August
29, 1997, Hearst received 38,611,001 shares of Series B Common Stock, $.01 par
value, of the Company (the "Series B Common Stock") and holders of the existing
Series A Common Stock, $.01 par
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value, of Argyle (the "Argyle Series A Common Stock") received, at their
election, (i) one share of Series A Common Stock, $.01 par value, of the
Company (the "Series A Common Stock"), (ii) $26.50 in cash or (iii) a
combination of 0.5 share of Series A Common Stock and $13.25 in cash, subject
to certain limitations and allocation provisions. In addition, the holders of
options to purchase Argyle Series A Common Stock received, at their election,
(i) a new option to purchase the same number of shares of Series A Common Stock
of the Company (a "Rollover Option") or (ii) the same consideration that a
holder of Argyle Series A Common Stock could elect to receive in the Merger but
after subtracting the exercise price of such option, subject to certain
limitations and allocation provisions.
As a result of the foregoing elections and the limitations and
allocation provisions of the Merger Agreement, the aggregate cash consideration
payable in the Merger was approximately $98 million, and the Company issued a
total of 8,277,054 shares of its Series A Common Stock to the former holders of
Argyle Series A Common Stock and to the former holders of Argyle stock options,
and the Company issued Rollover Options to purchase a total of 230,275 shares
of its Series A Common Stock to former holders of Argyle stock options.
Accordingly, immediately after the Effective Time, the Company had outstanding
a total of 8,277,054 shares of Series A Common Stock and 38,611,002 shares of
Series B Common Stock. The shares of Series B Common Stock held by Hearst
represented at that time 82.35% of all such shares of Series A Common Stock and
Series B Common Stock considered as one class.
Certain Merger Agreement Adjustments. Pursuant to the Merger
Agreement, within sixty days after the Effective Time, Hearst is required to
deliver a balance sheet as of such date for the Hearst Broadcast Group and a
calculation of the amount, if any, by which the total current assets included
therein exceeded the total current liabilities included in the Contribution
(the "Parent Station Net Assets"). Within thirty days thereafter, the Company
is required to pay to Hearst, or Hearst is required to pay to the Company, the
amount by which the Parent Station Net Assets are greater or less,
respectively, than $30 million. The payment is required to be in cash, except
that if the payment is by the Company to Hearst, the Merger Agreement further
provides that Hearst may elect to receive all or any portion of such payment
in shares of the Company's Series B Common Stock, valued at $26.50 per share.
As of the date hereof, Hearst has not delivered to the Company the balance
sheet and calculation of Parent Station Net Assets. However, based upon
discussions between the Company and Hearst, the Company estimates that the
Parent Station Net Assets are approximately $73 million and, based upon
Hearst's indication that it will elect to receive its adjustment amount in
shares of Series B Common Stock, the Company expects to issue approximately
1.65 million additional shares of Series B Common Stock to Hearst.
In connection with the closing of the Merger Agreement, the Company
and Hearst mutually agreed to waive a provision in the Merger Agreement which
would have excluded cash held by the Hearst Broadcast Group from the
Contribution and the Parent Station Net Assets. Accordingly, the Contribution
included, and the current assets used to calculate the Parent Station Net
Assets will include, approximately $26 million in cash.
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1997 Stock Option Grants. In August 1997, the Company awarded
non-qualified stock options to purchase a total of 1,560,000 shares of the
Company's Series A Common Stock to a total of twenty-six key employees of the
Company (including options to purchase the following numbers of shares for
certain executive officers of the Company: Bob Marbut, Chairman and Co-Chief
Executive Officer - 300,000; David Barrett, Executive Vice President and Chief
Operating Officer - 230,000; Anthony J. Vinciquerra, Executive Vice President -
150,000; Dean H. Blythe, Senior Vice President - Corporate Development,
Secretary and General Counsel - 100,000; Harry T. Hawks, Senior Vice President
and Chief Financial Officer - 100,000; and Ibra Morales, Senior Vice President
- - Sales - 100,000). The exercise price per share for such awards is $26.50.
Each employee's award is divided into two for purposes of vesting as follows:
(i) options to acquire 50% of such shares automatically vest on August 12, 2000
and (ii) options to acquire the remaining 50% of such shares vest in one third
increments if the market price of the Company's Series A Common Stock for 10
consecutive trading days is equal to or greater than $31, $37 and $43;
provided, however, that all options which have not previously vested will
automatically vest on August 12, 2006 or, if earlier, upon the occurrence of a
"change of control"(as such term is defined in the Company's 1997 Stock Option
Plan).
The Company also awarded non-qualified stock options to those
directors who are not employees of Hearst or the Company for the following
numbers of shares: William R. Hearst III - 4,000; Virginia H. Randt - 4,000;
David Pulver - 5,000; and Caroline Williams - 5,000. The exercise price per
share for such awards is $26.50 and such options become exercisable on August
12, 1999.
Related Party Agreements. Prior to the Effective Time, Hearst and the
Company entered into the following agreements and arrangements which either
were required as conditions to the closing of the Merger Agreement or were
entered into in connection with the transactions contemplated thereby:
Management Agreement. As a condition to each party's obligation to
effect the Contribution and the Merger, Hearst and the Company entered into a
Management Services Agreement pursuant to which the Company will provide
certain management services (i.e., sales, news, programming, legal, financial,
accounting, engineering and promotion services) with respect to WWWB-TV
(Hearst's owned television station in Tampa, Florida), WBAL(AM) and WIYY-FM
(Hearst's owned AM/FM radio stations in Baltimore, Maryland), and WPBF-TV
(Hearst's owned television station in West Palm Beach, Florida, which it
acquired from Paxson Communications Corporation on July 31, 1997). In
addition, the Company will provide certain management services to Hearst in
order to allow Hearst to fulfill its obligations under the Program Services and
Time Brokerage Agreement between Hearst and the permittee of KCWB-TV (a Kansas
City, Missouri, television station). Hearst may also add to such managed
stations any additional broadcast stations which it may acquire (or for which
it enters into a time brokerage agreement) during the term of the Management
Services Agreement.
The management fee for the services provided to these stations will be
an amount equal to the greater of (i) (x) $50,000 for Hearst's radio stations
(counted as a single
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property) and $50,000 for KCWB-TV, or (y) for all others (including WWWB-TV and
WPBF-TV), $100,000 per station, and (ii) a specified percentage of the positive
broadcast cash flow from each such property (ranging from 20% for the first
year to 50% for the fourth year and thereafter). Hearst also will reimburse
the Company for its direct operating costs and expenses incurred with unrelated
third parties and amounts paid on behalf of a managed station under the
Services Agreement described below. Corporate overhead will not be reimbursed
except to the extent it had historically been treated as an operating expense
by Hearst in calculating broadcast cash flow for a station. The term of the
Management Agreement commenced at the Effective Time and will continue for each
station, respectively, until the earlier of (i) Hearst's divestiture of the
station to a third party; (ii) if applicable, the exercise of the option
granted to the Company to acquire certain of the stations pursuant to the
Option Agreement described below; or, (iii) five years after the Effective
Time; provided, however, that Hearst will have the right to terminate the
Management Services Agreement as to a particular station covered by an option
or right of first refusal under the Option 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. The Management Services
Agreement will also terminate if Hearst ceases to own a majority of the
Company's voting common stock or to have the right to elect a majority of the
Company's directors.
Television Station Option Agreement. As a condition to each party's
obligation to effect the Contribution and the Merger, Hearst and the Company
entered into an Option Agreement with Hearst pursuant to which Hearst granted
to the Company an option to acquire WWWB-TV and Hearst's interests (which
interests include an option to acquire the station) with respect to KCWB-TV
(together with WWWB-TV, the "Option Properties"), as well as a right of first
refusal for a period of 36 months starting at the Effective Time with respect
to WPBF-TV (if such station is proposed by Hearst to be sold to a third party).
The option period for each Option Property will be from 18 to 36 months
following the Effective Time, and the purchase price will be the fair market
value of such station based upon agreement between the parties or, if either
party so elects, an independent third-party appraisal, subject to certain
specified parameters. If Hearst elects to sell an Option Property prior to the
commencement of, or during, the option period, the Company will have a right of
first refusal to acquire such Option Property. Hearst may elect to receive the
purchase price in either cash or shares of stock of the Company. The exercise
of the option and the right of first refusal will be by action of the
independent directors of the Company, and any option exercise may be withdrawn
by the Company after receipt of the appraisal described above.
Radio Facilities Lease. As a condition to each party's obligation to
effect the Contribution and the Merger, Hearst and the Company entered into a
Studio Lease Agreement pursuant to which Hearst leased from the Company
premises for WBAL(AM) and WIYY-FM, Hearst's Baltimore, Maryland, radio
stations. The term of the lease commenced at the Effective Time and will
continue as to the space occupied by each radio station, respectively, until
the earlier of (i) Hearst's divestiture of the radio station to a third party,
in which case either party (i.e., the Company or the buyer of the station) will
be entitled to terminate the lease with respect to that station upon certain
prior written notice or (ii) 36 months following the Effective Time. The
leased premises are those premises occupied by each radio station as of the
Effective Time. The rent under the lease is the sum of those amounts payable
to
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the Company under the Management Services Agreement described above for
managing the radio stations plus the annual costs related to such services
(which costs are required to be substantially similar to those historically
allocated by Hearst to the stations).
Services Agreement. At the closing of the Merger Agreement, Hearst
and the Company entered into a Services Agreement pursuant to which Hearst will
provide the Company with certain administrative services, including accounting,
financial, tax, legal, insurance, data processing and employee benefits. The
fees for such services are based on fixed and variable transaction amounts
negotiated between Hearst and the Company, subject to adjustment beginning in
1999, to reflect changes in costs or other assumptions used to establish such
fees, or at any time, to reflect the acquisition or disposition of a television
or radio station. The initial term of the Services Agreement will expire on
December 31, 1998 and thereafter is subject to one year renewals unless
terminated on six months' notice. Although the Company believes that such
terms are reasonable, there can be no assurance that more favorable terms would
not be available from unaffiliated third parties.
Benefit Plan Arrangements. As of the Effective Time, the Company
established defined benefit pension plans substantially similar to the Hearst
Corporation Retirement Plan (the "Hearst Plan") and The Hearst Corporation
Supplemental Retirement Plan and the other defined benefit plans in which
employees of the Hearst Broadcast Group participated immediately prior to the
Merger. At the Effective Time, all employees of the Company who previously
were employees of the Hearst Broadcast Group and participating in Hearst's
defined benefit plans, including Mr. David Barrett, the Company's Executive
Vice President and Chief Operating Officer, became participants in these new
defined benefit plans. It is currently anticipated that effective January 1,
1998, all remaining employees of the Company (in essence, certain executive
officers of the Company and the other employees of the Company prior to the
Effective Time) will be eligible to participate in these new defined benefit
plans. The incremental annual cost of participation in the new defined benefit
plans by the employees of the Company prior to the Effective Time is estimated
to be approximately $800,000. At the Effective Time, the Company and Hearst
entered into an Agreement which provides for a transfer as soon as practicable
after the Effective Time from the Hearst Plan to the Company's defined benefit
pension plan of plan assets having a value equal to $35.8 million in excess of
the obligations that existed at the time of establishment of the Company's new
defined benefit plans. Such a transfer would result in an approximately $3.8
million per year reduction in future expense associated with the new
Hearst-Argyle defined benefit plans. The transfer of such assets and the
assumption of such liabilities has not occurred as of the date hereof. The
Agreement also provides for the issuance to Hearst of one million shares of the
Company's Series B Common Stock.
The Agreement also provides that the Company will assume sponsorship
of certain pension plans for the benefit of union employees at the WCVB
(Boston, Massachusetts) and KMBC (Kansas, Missouri) television stations. The
Agreement provides that it will not be effective unless it is ratified by the
Board of Directors of Hearst on or before December 31, 1997, which ratification
has not been submitted to Hearst's Board as of the date hereof.
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Marbut Employment Agreement. As of August 12, 1997, the Company
entered into an Employment Agreement with Bob Marbut, the Company's Chairman of
the Board and Co-Chief Executive Officer, for a term commencing at the
Effective Time and ending on December 31, 2000. Pursuant to the Employment
Agreement, Mr. Marbut is entitled to an initial base salary of $650,000
(subject to review for an increase by the Company beginning in calendar year
1999) and a bonus in an amount and on the basis of criteria to be established
by the Compensation Committee of the Company's Board of Directors. The bonus
is subject to a maximum equal to seventy-five percent of the base salary for
that year, with a "target" bonus equal to forty percent of the base salary,
subject to the Committee's discretion to increase such percentages. Mr.
Marbut's employment terminates upon his death and may be terminated by the
Company upon his "disability" or for "cause" or "without cause" (in each case,
as defined in the Employment Agreement). Mr. Marbut may terminate his
employment voluntarily with "good reason" or "without good reason" (in each
case, as defined in the Employment Agreement). In the event of a termination
by the Company "without cause" or by Mr. Marbut with "good reason," Mr. Marbut
is entitled to receive a lump sum payment equal to his base salary and target
bonus for the longer of the then- remaining term of the Employment Agreement or
one year.
The Employment Agreement also provides for certain perquisites and the
award of options to purchase 300,000 shares of the Company's Series A Common
Stock, subject to vesting as described above under "1997 Stock Option Plan
Grants," except that if Mr. Marbut's employment is terminated "without cause"
on or after September 1, 1998, options to acquire 16 2/3% of such shares become
exercisable upon such termination or if Mr. Marbut's employment is terminated
"without cause" on or after September 1, 1999, options to acquire 33 1/3% of
such shares become exercisable upon such termination.
The Employment Agreement contains a covenant by Mr. Marbut against
solicitation of the Company's employees, independent contractors, customers,
agencies, or advertisers for two years following termination of his employment
for any reason and, in the case of a termination by the Company for "cause" or
by Mr. Marbut without "good reason" a covenant by Mr. Marbut against directly
competing with the Company for a period equal to the lesser of two years and
the remainder of the term of the Agreement.
Redemption of Senior Subordinated Notes due 2005. As a result of the
Merger, a "change of control" occurred for purposes of the Company's $150
million aggregate principal amount 9-3/4% Senior Subordinated Notes due 2005
(the "Notes"). Pursuant to the requirements of the Indenture for the Notes, on
September 26, 1997 the Company commenced an offer to repurchase such Notes for
cash at 101% of their principal amount plus accrued and unpaid interest to the
date of repurchase. The tender offer currently expires on October 27, 1997.
Based on the most recent "asked" quotations for the Notes and similar prior
quotations, the Company anticipates that if prior to the expiration date,
prevailing interest rates remain relatively stable and there are no material
adverse developments with respect to the Company, the then holders of the Notes
will not accept such offer.
The Indenture for the Notes provides that the Company may redeem the
Notes at any time during the 180-day period following the completion of the
repurchase offer described
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above. The redemption price is equal to the sum of (i) the principal amount
thereof, plus (ii) accrued and unpaid interest to the redemption date, plus
(iii) the Applicable Premium (as hereinafter defined).
"Applicable Premium" is defined in the Indenture to mean the greater
of (i) 1.0% of the then outstanding principal amount of the Note to be redeemed
and (ii) (a) the sum of the present values, discounted for all full semiannual
periods at a discount rate equal to one-half multiplied by the Treasury Rate
(defined in the Indenture to mean the yield-to-maturity of United States
Treasury securities with a constant maturity most nearly equal to the then
remaining "weighted average life to maturity" (as defined in the Indenture) of
the Notes, subject to certain exceptions) plus 75 basis points (except that the
discount rate for the period from the redemption date to the next interest
payment date is subject to a different calculation in the Indenture), of (I)
the remaining payments of interest on such Note and (II) the payment of the
principal amount that, but for such redemption, would have been payable on such
Note at stated maturity, minus (b) the then outstanding principal amount of
such Note, minus, (c) accrued and unpaid interest paid on the redemption date.
In addition, up to $45 million of the aggregate principal amount of
the Notes outstanding on the date of the Indenture may be redeemed at any time
on or prior to November 1, 1998 at the option of the Company within 180 days
following one or more Public Equity Offerings (as defined below) by the Company
from the net proceeds of such offering or offerings, at a redemption price
equal to 109.75% of the principal amount, together with accrued and unpaid
interest, if any, to the redemption date; provided that after giving effect to
any such redemption, at least $105 million aggregate principal amount of the
Notes remains outstanding.
"Public Equity Offering" is defined in the Indenture to mean an
underwritten offer and sale of the Company's common stock to the public
pursuant to a registration statement (other than in connection with any benefit
plan) that has been declared effective by the SEC.
The Company has filed a shelf registration statement with the SEC to
register 11.5 million shares of common stock and $600 million of debt
securities. If the Company determined to issue and sell the equity securities
covered by such registration statement, the Company currently intends to apply
a portion of the net proceeds of such offering towards the redemption or
repurchase of those Notes that are not tendered in the repurchase offer
described above. Since the amount of the Applicable Premium referred to above
is dependent on prevailing interest rates, the Company is unable to predict
whether it would redeem the Notes pursuant to the Indenture provisions
described above or would repurchase the Notes in the open market, in privately
negotiated purchases or pursuant to a tender offer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.1 Employment Agreement, dated as of August 12, 1997, between
Hearst-Argyle Television, Inc. and Bob Marbut.
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10.2 Management Services Agreement, dated as of August 29, 1997,
between The Hearst Corporation and Argyle Television, Inc.
10.3 Option Agreement, dated as of August 29, 1997, between The
Hearst Corporation and Argyle Television, Inc.
10.4 Studio Lease Agreement, dated as of August 29, 1997, between
The Hearst Corporation and Argyle Television, Inc.
10.5 Services Agreement, dated as of August 29, 1997, between The
Hearst Corporation and Argyle Television, Inc.
16.1 Letter from Ernst & Young LLP to the Securities and Exchange
Commission pursuant to Item 304(a)(3) of Regulation S-K.
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.
HEARST-ARGYLE TELEVISION, INC.
Date: October 16, 1997 By: /s/ Dean H. Blythe
-----------------------------------
Dean H. Blythe
Senior Vice President-
Corporate Development
Secretary and General Counsel
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Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is executed as of August 12, 1997,
by and between HEARST-ARGYLE TELEVISION, INC., a Delaware corporation
("Hearst-Argyle"), and BOB MARBUT of 200 Concord Plaza, Suite 700, San Antonio,
Texas 78216 ("Employee").
WHEREAS, Employee possesses special, unique and original
ability, and Hearst-Argyle desires to secure Employee's exclusive services for
the period and on the terms hereinafter mentioned, which employment Employee
desires to secure and accept,
NOW, THEREFORE, in consideration of the compensation and the
mutual provisions and conditions herein contained, the parties agree as follows:
FIRST: Hearst-Argyle hereby employs Employee to render
exclusive services to and for Hearst-Argyle as its Chairman and Co-Chief
Executive Officer and Employee agrees to render services to Hearst-Argyle in
such capacities, and shall so serve, subject, however, to such limitations,
instructions, directions, and control as the Board of Directors of Hearst-Argyle
may specify from time to time, during the period beginning on the Commencement
Date, as hereinafter defined, and extending to and terminating on December 31,
2000 (the "Expiration Date") unless terminated earlier in accordance with the
provisions hereof. The Commencement Date shall be the same as the "Effective
Time" (as such term is defined in the Amended and Restated Agreement and Plan of
Merger dated as of March 26, 1997 between The Hearst Corporation and Argyle
Television, Inc.). Employee hereby accepts the aforesaid
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employment and agrees to render his exclusive services hereunder on the terms
and conditions herein set forth.
SECOND: Hearst-Argyle agrees to pay to Employee and he agrees
to accept from Hearst-Argyle, as basic compensation for his services hereunder,
salary at the annual rate of Six Hundred Fifty Thousand Dollars ($650,000)
beginning with the Commencement Date and extending to and terminating on the
Expiration Date, payable in installments in accordance with the prevailing
payroll practices of Hearst-Argyle during the term hereof, but in no event less
frequently than twice a month.
In or about December 1998 and December 1999, Hearst-Argyle
will review Employee's compensation provisions herein contained for the purpose
of determining whether an increase in compensation should be effected in respect
of the period commencing with the 1st day of January, 1999 to December 31, 1999,
and the period January 1, 2000 to the Expiration Date, respectively.
As additional compensation hereunder, Employee shall be
eligible to receive a bonus for each calendar year during the term of this
Agreement (with such bonus to be prorated for the period from the Effective Time
through December 31, 1997), the amount and basis of the bonus to be determined
in accordance with such criteria as shall be established by the Compensation
Committee of the Board of Directors of Hearst-Argyle. It is understood and
agreed that the maximum additional compensation payable in respect of each such
year shall not exceed a sum equal to Seventy Five Percent (75%) of Employee's
base compensation for that year with the "target" bonus equal to 40% of
Employee's base compensation for
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that year, as such maximum and target percentages may be increased in the sole
discretion of the Compensation Committee of the Board of Directors of
Hearst-Argyle. The Compensation Committee may, in its discretion, award any
special bonus to Employee that it deems appropriate, notwithstanding any other
provisions set forth in this Agreement.
In determining the amount of additional compensation to be
paid to Employee hereunder, the books of Hearst-Argyle shall be absolute and
final and shall not be open to dispute by Employee. Hearst-Argyle shall pay the
additional compensation, if any, due hereunder at any time prior to March 31 of
the year following each calendar year during the term of this Agreement.
It is mutually understood and agreed that the additional
compensation hereinbefore provided shall be due and payable only for so long as
Employee shall perform services under this Agreement and, in the event
Employee's employment hereunder or this Agreement shall be terminated for any
cause, or should Hearst-Argyle assign this Agreement in accordance with the
terms of Paragraph SIXTH hereof, Hearst-Argyle shall compute the additional
compensation by limiting the amount thereof to the period commencing with the
first day of the calendar year in which such termination or assignment shall
take effect to and including the date of termination or assignment.
THIRD: To induce Hearst-Argyle to enter into this Agreement
and to pay the compensation herein provided, Employee hereby represents,
warrants and agrees to the following:
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(a) Employee will faithfully and diligently carry out
Employee's duties hereunder.
(b) Employee will work for, and render services to,
Hearst-Argyle exclusively, and that Employee will give and devote to the pursuit
of Employee's duties, exclusive time, best skill, attention and energy, and that
during the term of employment, Employee will not perform any work, render any
services or give any advice, gratuitously or otherwise, for or to any other
person, firm or corporation, which shall be inconsistent in any material respect
with Employee's duties or obligations hereunder, as reasonably determined by
Hearst-Argyle, without the prior consent of Hearst-Argyle in each such instance.
Notwithstanding the foregoing, it is the understanding of the parties hereto
that Employee shall be permitted to serve, and in certain instances to continue
to serve, as a member of the board of directors of other organizations,
including charitable or not-for-profit corporations and profit-making
corporations, but only if such board membership does not interfere or conflict
with Employee's work hereunder in any material respect and such board membership
is approved in advance by Hearst-Argyle, which approval shall not be
unreasonably withheld. Hearst-Argyle hereby approves Employee's continued
service on the Board of Directors of those organizations listed on Exhibit A
hereto.
Should there be a violation or attempted or, threatened
violation of this provision, Hearst-Argyle may apply for and obtain an
injunction to restrain such violation or attempted or threatened violation, to
which injunction Hearst-Argyle shall be entitled as
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a matter of right, Employee conceding that the services contemplated by this
Agreement are special, unique and extraordinary, the loss of which cannot
reasonably or adequately be compensated in damages in an action at law, and that
the right to injunction is necessary for the protection and preservation of the
rights of Hearst-Argyle and to prevent irreparable damage to Hearst-Argyle. Such
injunctive relief shall be in addition to such other rights and remedies as
Hearst-Argyle may have against Employee arising from any breach hereof on
Employee's part.
(c) No impediment, contractual or otherwise, exists which
limits or precludes Employee from entering into this Agreement and rendering
full performance in accordance with the terms and conditions herein provided.
FOURTH: During the period of, and after the expiration of,
this Agreement or after the termination of his employment (whether such
employment is pursuant to the terms of this Agreement or otherwise), Employee
will not use, divulge, sell or deliver to or for any other person, firm or
corporation other than Hearst-Argyle or a successor to, or a parent (direct or
indirect), or an affiliate or subsidiary of, Hearst-Argyle (hereinafter in this
paragraph collectively referred to as "HEARST-ARGYLE") any and all confidential
information and material (statistical or otherwise) relating to HEARST-ARGYLE's
business, including, but not limited to, confidential information and material
concerning broadcasting, magazines, newspapers, cable systems operations, cable
programming, books, syndication, circulation, distribution, marketing,
advertising, customers, authors, employees, literary property and
5
<PAGE> 6
rights appertaining thereto, copyrights, trade names, trademarks, financial
information, methods and processes incident to broadcasting, programming,
publication or printing,, and any other secret or confidential information. Upon
the termination of Employee's employment irrespective of the time, manner or
cause of termination, Employee will surrender to HEARST-ARGYLE all lists, books
and records of or in connection with HEARST-ARGYLE's business and all other
property belonging to HEARST-ARGYLE. Should there be a violation or attempted or
threatened violation by Employee of any of the provisions contained in this
Paragraph FOURTH, HEARST-ARGYLE shall be entitled to the same rights and relief
by way of injunction and other remedies as are provided for under subparagraph
(b) of Paragraph THIRD hereof.
FIFTH: Employee's employment hereunder may be terminated by
Hearst-Argyle (a) by reason of a Disability, as hereinafter defined, (b) for
Cause, as hereinafter defined, or (c) Without Cause, as hereinafter defined, all
upon payment of the sums hereinafter set forth. Employee may terminate
Employee's employment hereunder (a) voluntarily, with Good Reason, as
hereinafter defined, or (b) voluntarily, without Good Reason, subject to a
covenant not-to-compete as provided in Paragraph TENTH. In the event of
Employee's death, this Agreement shall terminate and all rights and obligations
of this Agreement shall cease except as otherwise herein provided.
In the event Employee's employment is terminated due to
Employee's death, Employee's legal representative or estate, as the case may be,
shall be entitled to receive any compensation to which
6
<PAGE> 7
Employee was entitled, but which Employee had not yet received, at the time of
Employee's death.
(a) For purposes of this Paragraph FOURTH, Disability shall
mean that for a period of one hundred eighty (180) consecutive days, Employee is
unable to fulfill the duties and responsibilities of Chairman and Co-Chief
Executive Officer of Hearst-Argyle because of physical or mental incapacity. If,
as a result of a Disability, Employee shall have been unable to fulfill
Employee's duties and responsibilities, and within thirty (30) days after
written Notice of Termination, as hereinafter defined, is given, Employee shall
not have returned to the performance of Employee's duties hereunder on a
full-time basis, Hearst-Argyle may terminate Employee's employment.
In the event of a termination due to Disability, Employee
shall be entitled to receive compensation through the Date of Termination, as
hereinafter defined. In the event that Employee is otherwise receiving or is
entitled to receive disability benefits at the time Employee's employment is
terminated, nothing herein contained shall be construed to terminate or
otherwise adversely affect Employee's right to receive such benefits.
(b) Employee's employment may be terminated for "Cause" by
Hearst-Argyle. For purposes of this Agreement, "Cause" shall mean (i) conviction
of a felony; (ii) willful gross neglect or willful gross misconduct in the
performance of Employee's duties hereunder; (iii) willful failure to comply with
applicable laws with respect to the conduct of Hearst-Argyle's business,
resulting in material economic harm to Hearst-Argyle; (iv) theft, fraud or
7
<PAGE> 8
embezzlement, resulting in substantial gain or personal enrichment, directly or
indirectly, to Employee at Hearst-Argyle's expense; (v) inability to perform the
duties and responsibilities of Employee's office as a result of addiction to
alcohol or drugs, other than drugs legally prescribed or administered by a duly
licensed physician; or (vi) continued willful failure to comply with the
reasonable directions of the Board of Directors which directions have been voted
upon and approved by a majority of such Board and of which Employee has been
made fully aware.
A termination for Cause will be deemed to have occurred as of
the date when there shall have been delivered to Employee a copy of a
resolution, duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board of Directors at a meeting of such Board
called and held for that purpose and any other purpose or purposes (after
reasonable written notice to Employee, and an opportunity for Employee, together
with Employee's counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, Employee's conduct met the definition of
termination for Cause set forth above.
In the event of a termination for Cause, Employee shall be
entitled to receive compensation through the Date of Termination, as hereinafter
defined.
(c) A termination "Without Cause" shall mean a
termination of employment by Hearst-Argyle other than due to Employee's death
or Disability or for Cause.
In the event of a termination Without Cause, Employee shall be
entitled to receive, in a lump sum payment at the time of
8
<PAGE> 9
such termination, an amount equal to Employee's salary provided in Paragraph
SECOND plus an amount equal to Employee's "target" bonus, as if Employee had
remained an employee of Hearst-Argyle for the longer of the duration of the term
of this Agreement or one year (the "Payment Period"). In the event Employee's
employment is terminated Without Cause, Employee shall have no duty to mitigate
damages. Notwithstanding the above, Hearst-Argyle's obligation to pay the
amounts referenced hereinabove shall be conditioned on Employee's signing a
general release in form satisfactory to Hearst-Argyle.
(d) At any time during the term of the Agreement, Employee may
voluntarily terminate Employee's employment for "Good Reason". For purposes of
this Agreement, "Good Reason" shall mean, without Employee's express written
consent, the occurrence of any of the following circumstances: (i) the removal
of Employee from the position of Chairman and Co-Chief Executive Officer of
Hearst-Argyle; (ii) the assignment to Employee of any duties or responsibilities
inconsistent with Employee's status and authority as Chairman and Co-Chief
Executive Officer, or a substantial adverse alteration in the nature or status
of Employee's duties or responsibilities from those in effect at the
commencement of this Agreement, if such assignment or alteration reduces the
duties, responsibilities, importance or scope of Employee's position, (iii) a
reduction of Employee's compensation as set forth in this Agreement; (iv) a
material breach of this Agreement by Hearst-Argyle; or (v) the relocation of the
principal executive offices of Hearst-Argyle or of Employee's principal office
to a location more
9
<PAGE> 10
than fifty (50) miles from New York City or the imposition of a requirement that
Employee be based anywhere other than at such principal executive offices.
Employee's right to terminate Employee's employment shall not
be affected by Employee's incapacity due to physical or mental illness.
Employee's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstances constituting Good Reason hereunder.
If Employee desires to terminate Employee's employment for
Good Reason, Employee shall first give Hearst-Argyle Notice of Termination, as
hereinafter defined, and shall allow Hearst-Argyle no less than thirty (30) days
to remedy, cure or rectify the situation giving rise to Employee's Good Reason.
If Employee terminates Employee's employment for Good Reason,
Employee shall receive the same compensation and benefits as if Employee was
terminated by Hearst-Argyle Without Cause.
Any termination of Employee's employment hereunder, whether by
Hearst-Argyle or by Employee, shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a Notice
of Termination shall indicate the specific termination provision in this
Agreement relied upon and, if by Hearst-Argyle for Cause or by Employee for Good
Reason, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for such termination.
"Date of Termination" shall mean (i) if Employee's employment
is terminated by death, the date of Employee's death, (ii) if Employee's
employment is terminated due to Disability,
10
<PAGE> 11
thirty (30) days after Notice of Termination is given (provided that Employee
shall not have returned to the performance of Employee's duties on a full-time
basis during such thirty (30) day period), (iii) if Employee's employment is
terminated by Hearst-Argyle Without Cause, the date specified in the Notice of
Termination, which date shall be not less than five (5) nor more than thirty
(30) days from the date Notice of Termination was given, (iv) if Employee's
employment is terminated by Employee for Good Reason, the date specified in the
Notice of Termination which date shall be not less than five (5) nor more than
thirty (30) working days from the expiration of the time to remedy, cure or
rectify the situation giving rise to Employee's Good Reason, and (v) if
Employee's employment is terminated by Hearst-Argyle for Cause, the date
specified in the Notice of Termination.
Except as otherwise set forth in this Agreement, any payments
pursuant to the provisions of this Paragraph FIFTH shall be severance payments
or liquidated damages or both, shall not be subject to any requirements as to
mitigation or offset, except as otherwise specifically provided, and shall not
be in the nature of a penalty. No payment resulting from the termination of
Employee's employment shall adversely affect Employee's entitlement to benefits
under any Hearst-Argyle benefit plan in which Employee was participating at the
time of such termination.
SIXTH: Hearst-Argyle shall have the right to transfer
Employee to any property owned or controlled, directly or indirectly, by it,
or constituting a part of Hearst-Argyle, and should such property be operated
by a successor to, or a subsidiary
11
<PAGE> 12
or an affiliate of, Hearst-Argyle, this Agreement shall be assignable by
Hearst-Argyle to such successor or to such subsidiary or affiliate. This right
of transfer shall be subject however to Employee's rights under Paragraph FIFTH
(d)(v). It is further understood that this Agreement and all of the rights and
benefits hereunder are personal to Employee and neither this Agreement nor any
right or interest of Employee herein or arising hereunder shall be subject to
voluntary or involuntary alienation, assignment, hypothecation or transfer by
him.
SEVENTH: Employee will accept any additional office (whether
such be that of director, officer or otherwise) to which Employee may be elected
or appointed in Hearst-Argyle or in any firm, association or corporation which
is a successor to, or a subsidiary or an affiliate of, Hearst-Argyle or in which
Hearst-Argyle holds an interest. In the event of such election or appointment,
Employee agrees to serve without extra compensation.
EIGHTH: Employee covenants and agrees that during the term
hereof and within the two (2) year period immediately following the termination
of this Agreement, regardless of the reason therefor, Employee shall not
solicit, induce, aid or suggest to (i) any employee, (ii) any author, (iii) any
independent contractor or other service provider, or (iv) any customer, agency
or advertiser of Hearst-Argyle to leave such employ, to terminate such
relationship or to cease doing business with Hearst-Argyle. Employee
acknowledges that the terms of this paragraph are reasonable and enforceable and
that should there be a violation or attempted or threatened violation by
Employee of any of the
12
<PAGE> 13
provisions contained in this Paragraph EIGHTH, Hearst-Argyle shall be entitled
to the same rights and relief by way of injunction as are provided for under
subparagraph (b) of Paragraph THIRD hereof. In the event that this
non-solicitation covenant shall be deemed by any court of competent
jurisdiction, in any proceedings in which Hearst-Argyle shall be a party, to be
unenforceable because of its duration, scope, or area, it shall be deemed to be
and shall be amended to conform to the scope, period of time and geographical
area which would permit it to be enforced.
NINTH: Upon the termination of Employee's employment by
Hearst-Argyle for Cause or by Employee without Good Reason, Employee agrees
that, without the express approval of Hearst-Argyle, Employee shall not, for a
period which is the lesser of two (2) years or the remaining term of this
Agreement subsequent to such termination, engage in any activity or render
service in any capacity (whether as principal, five percent (5%) shareholder,
employee, consultant or otherwise) for or on behalf of any person or persons if
such activity or service directly competes with the business of Hearst-Argyle.
It is understood and agreed that nothing herein contained shall prevent Employee
from engaging in discussions concerning business arrangements to become
effective upon the expiration of the term of this covenant not to compete. In
the event Hearst-Argyle shall not offer to renew this Agreement, the provisions
of this Paragraph NINTH shall be of no force or effect. Employee acknowledges
that the terms of this paragraph are reasonable and enforceable and that should
there be a violation or attempted or threatened violation by Employee of any of
the
13
<PAGE> 14
provisions contained in this Paragraph NINTH, Hearst-Argyle shall be entitled to
the same rights and relief by way of injunction as are provided for under
subparagraph (b) of Paragraph THIRD hereof. In the event that this covenant not
to compete shall be deemed by any court of competent jurisdiction, in any
proceedings in which Hearst-Argyle shall be a party, to be unenforceable because
of its duration, scope, or area, it shall be deemed to be and shall be amended
to conform to the scope, period of time and geographical area which would permit
it to be enforced.
TENTH: Hearst-Argyle and Employee acknowledge that the terms
of this Agreement are confidential and, among other things, constitute trade
secrets, the disclosure of which likely would inure to the material detriment of
Hearst-Argyle's business operations. Except as required by securities laws, FCC
regulations, other regulatory requirements, or court order, Hearst-Argyle and
Employee agree not to disclose any of the terms of this Agreement to any other
person or persons, provided, however, that Employee may make a limited
disclosure to his legal or financial advisors, or to members of his immediate
family, on condition that each such person to whom disclosure is made agrees to
maintain the confidentiality of such information and to refrain from making
further disclosure.
ELEVENTH: It is understood and agreed that this Agreement
shall be interpreted, construed and enforced in accordance with the laws of the
State of Texas' without regard to Texas, conflicts or choice of law rules.
14
<PAGE> 15
TWELFTH: It is understood and agreed that this Agreement
supersedes all prior agreements and understandings, if any, between
Hearst-Argyle and Employee. No provision of this Agreement may be waived,
changed or otherwise modified except by a writing signed by the party to be
charged with such waiver, change or modification.
THIRTEENTH: Each and every covenant, provision, term and
clause contained in this Agreement is severable from the others and each such
covenant, provision, term and clause shall be valid and effective,
notwithstanding the invalidity or unenforceability of any other such covenant,
provision, term or clause.
FOURTEENTH: Any notice, request, demand, waiver or consent
required or permitted hereunder shall be in writing and shall be given by
prepaid registered or certified mail, with return receipt requested, addressed
as follows:
If to Hearst-Argyle:
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10019,
Attention: Secretary
If to Employee:
Robert G. Marbut
200 Concord Plaza
Suite 700
San Antonio, Texas 78216
The date of any such notice and of service thereof shall be
deemed to be the date of mailing. Either party may change its address for the
purpose of notice by giving notice to the other in writing as herein provided.
FIFTEENTH: This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original,
15
<PAGE> 16
but all of which together shall constitute one and the same instrument.
SIXTEENTH: Hearst-Argyle and Employee agree that any claim
which either party may have against the other under local, state or federal law
including, but not limited to, matters of discrimination, arising out of the
termination or alleged breach of this Agreement or the terms, conditions or
termination of such employment, will be submitted to mediation and, if mediation
is unsuccessful, to final and binding arbitration in accordance with
Hearst-Argyle's Dispute Settlement Procedure ("Procedure") of which Employee has
received a copy. During the pendency of any claim under this Procedure,
Hearst-Argyle and Employee agree to make no statement orally or in writing
regarding the existence of the claim or the facts forming the basis of such
claim, or any statement orally or in writing which could impair or disparage the
personal or business reputation of Hearst-Argyle or Employee. The Procedure is
hereby incorporated by reference into this Agreement.
IN WITNESS WHEREOF, Hearst-Argyle and Employee have executed
this Agreement as of the date first written above.
HEARST-ARGYLE TELEVISION, INC.
By:/s/ Harry T. Hawks
--------------------------------------
EMPLOYEE
By:/s/ Bob Marbut
--------------------------------------
Bob Marbut
16
<PAGE> 17
EXHIBIT A
1. Tracor
2. Tupperware
3. UDS
4. Katz
5. Up with People
<PAGE> 18
As of August 12, 1997
PERSONAL AND CONFIDENTIAL
Mr. Bob Marbut
200 Concord Plaza
Suite 700
San Antonio, Texas 78216
RE: Employment Agreement --
As of August 12, 1997
------------------------
Dear Mr. Marbut:
In connection with the Employment Agreement dated as of August 12, 1997
between Hearst-Argyle Television, Inc. ("Hearst-Argyle") and you executed
immediately prior to the execution of this letter, you and Hearst-Argyle have
agreed on certain additional matters as set forth below. We have further agreed
that this letter modifies the Employment Agreement and shall be deemed
incorporated into and made a part of the Employment Agreement.
1. Life Insurance. Hearst-Argyle shall purchase a term life
insurance policy on your life providing a $3,000,000 death benefit payable to
the beneficiaries to be selected by you, and will pay the periodic premiums
thereon at competitive rates during the term of the Employment Agreement. In
lieu of purchasing all or part of such life insurance directly, Hearst-Argyle
and you may agree that Hearst-Argyle will pay you an equivalent amount (or a
portion thereof) in order to reimburse you for all or part of annual premiums
for the life insurance that you obtain.
2. Stock Options. Hearst-Argyle shall grant to Employee on or
before the Effective Date of the Employment Agreement an option to purchase
300,000 shares of Series A Common Stock of Hearst-Argyle upon the terms set
forth in the option agreement attached as Exhibit A to this letter. Nothing
contained in this letter, the Employment Agreement, or the option agreement
shall preclude the grant of any additional options to Employee, which grants
shall be made in the discretion of the Board of Directors of Hearst-Argyle.
3. Automobile. During the term of the Employment Agreement,
Hearst-Argyle shall pay or reimburse you for the costs of an automobile. The
automobile shall be of your choice with the maximum monthly payment, subject to
applicable payroll taxes and other deductions, not to exceed $1,000.
4. Vacation. During the term of the Employment Agreement, you
will be entitled to a reasonable paid vacation in accordance with the policies
of Hearst-Argyle then in effect for executives, but in no event shall such
vacation be less than the amount of vacation you are entitled to at present.
<PAGE> 19
Mr. Bob Marbut
August 12, 1997
Page -2-
5. Travel and Entertainment. You will be reimbursed for all
reasonable travel and entertainment expenses, including first class air travel
and car service for business-related travel not including normal commutation,
consistent with your position, upon submission of appropriate substantiation.
6. Retirement Planning. You, in your sole discretion, may
defer receipt of some or all of any bonus that you otherwise would be entitled
to receive under the terms of the Employment Agreement and may cause such
deferred bonus to be contributed to a vehicle for deferred compensation
established by Hearst-Argyle for such purpose. Hearst-Argyle, at its own
expense, shall promptly take all steps reasonably necessary to establish such a
vehicle for deferred compensation if so requested by Employee. Nothing contained
herein shall preclude the payment of any special bonus by Hearst-Argyle to any
such deferred compensation vehicle.
7. Tax Preparation. Hearst-Argyle will pay up to currently
$9,000 annually to you, or on your behalf, for the preparation of your annual
tax returns and related tax planning.
8. Disability. If the Employment Agreement is terminated by
Hearst-Argyle by reason of Disability of Employee, Hearst-Argyle shall pay
Employee for the remainder of the original term of the Employment Agreement a
disability benefit such that, when taken together with any group
insurance-funded benefit provided to employees by Hearst-Argyle, Employee
receives a total disability benefit equal to 60% of Employee's then current base
salary, up to a maximum of Twenty-Five Thousand Dollars ($25,000) per month.
9. MER. Employee shall participate in the Medical Expense
Reimbursement plan.
10. Club Membership. Hearst-Argyle shall reimburse Employee or
pay directly the initiation and monthly fees to join and belong to The New York
Athletic Club.
11. Benefits. In addition to the compensation to be paid to
Employee pursuant to the Employment Agreement, Employee shall further be
entitled to participate in any employee benefit programs established from time
to time for non-union employees or executives of Hearst-Argyle and any of its
subsidiaries, to the extent that executives or senior management employee of
Hearst-Argyle or its employees generally are eligible to participate in such
programs.
Please review the enclosed Employment Agreement at your
convenience in order to determine if it is consistent with your
<PAGE> 20
Mr. Bob Marbut
August 12, 1997
Page -3-
understanding of our arrangements. Assuming that it is satisfactory and that you
agree with the matters discussed in this letter, please execute all five copies
of the Employment Agreement and return them to me for execution on behalf of
Hearst-Argyle. In addition, please sign the enclosed three copies of this letter
on the signature lines provided and also return them to me.
Sincerely,
HEARST-ARGYLE TELEVISION, INC.
By:/s/ Dean H. Blythe
--------------------------------------
Senior Vice President -- Corporate
Developement, Secretary and General
Counsel
Enclosures
ACCEPTED AND AGREED:
By:/s/ Bob Marbut
----------------------------------
Bob Marbut
<PAGE> 21
OPTION AGREEMENT
FOR EMPLOYEES
Option Agreement
under
Hearst-Argyle Television, Inc.
1997 Stock Option Plan
Date of Grant:
Name of Optionee:
Number of Shares:
Price Per Share:
Hearst-Argyle Television, Inc., a Delaware corporation (the "Company"),
hereby grants as of the date specified above (the "Date of Grant") to the
above-named optionee (the "Optionee") an option to purchase from the Company,
for the price per share set forth above, the number of shares of Series A Common
Stock, $0.01 par value per share (the "Stock"), of the Company set forth above
pursuant to the Hearst-Argyle Television, Inc. 1997 Stock Option Plan (the
"Plan"). This option is not intended to be treated as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The terms and conditions of the option granted hereby, to the extent
not controlled by the terms and conditions contained in the Plan, are as
follows:
1. The price at which each share of Stock subject to this option may be
purchased shall be the price set forth above, subject to any adjustments that
may be made pursuant to the terms of the Plan.
2. This option shall vest and become exercisable in accordance with the
provisions set forth in the Vesting Schedule
attached as Appendix A hereto.
3. Except as provided in Section 7 hereof, this option may not be
exercised unless the Optionee is in the employ of the Company or one of its
Subsidiaries at the time of such exercise.
4. The Optionee (or his or her representative, devisees or heirs, as
applicable) may exercise any portion of this option that has become exercisable
in accordance with the terms hereof as to all or any of the shares of Stock then
available for purchase by delivering to the Company written notice specifying:
(i) the number of whole shares of Stock to be purchased
together with payment in full of the aggregate
<PAGE> 22
option price of such shares, provided that this option may not be
exercised for less than one hundred (100) shares of Stock or the number
of shares of Stock remaining subject to this option, whichever is
smaller;
(ii) the address to which dividends, notices, reports,
etc. are to be sent; and
(iii) the Optionee's social security number.
Payment shall be in cash, or by certified or bank cashier's check payable to the
order of the Company, free from all collection charges, or in such other form as
may be permitted by the Committee. Only one stock certificate will be issued
unless the Optionee otherwise requests in writing. Shares of Stock purchased
upon exercise of the option will be issued in the name of the Optionee. The
Optionee shall not be entitled to any rights as a stockholder of the Company in
respect of any shares of Stock covered by this option until such shares of Stock
shall have been paid for in full and issued to the Optionee.
5. As soon as practicable after the Company receives payment for shares
of Stock covered by this option, it shall deliver to the Optionee a certificate
or certificates representing the shares of Stock so purchased. Such
certificate(s) shall be registered in the name of the Optionee. Such stock
certificate(s) shall carry such appropriate legends, and such written
instructions shall be given to the Company's transfer agent, as may be deemed
necessary or advisable by counsel to the Company in order to comply with the
requirements of the Securities Act of 1933, any state securities laws or any
other applicable laws.
6. This option is personal to the Optionee and during the Optionee's
lifetime may be exercised only by the Optionee or his or her representative in
the event of the Optionee's Disability. In the event of Optionee's death,
options that remain exercisable under the terms of the Plan and this Option
Agreement may be exercised by the Optionee's devisees or heirs, as applicable.
This option shall not be transferable other than by will or the laws of descent
and distribution.
7. If the Optionee's employment with the Company or any Subsidiary
shall terminate, then the terms and provisions of Section 5(e) of the Plan shall
govern any options that remain unexercised as of the date of such termination.
8. If, prior to the delivery by the Company of all the shares of Stock
with respect to which this option is granted, a Change of Control (as described
in Appendix A attached hereto) shall occur, then this option shall become vested
and exercisable with respect to the shares of Stock as set forth in Appendix A
attached hereto.
2
<PAGE> 23
9. This option does not confer on the Optionee any right to continue in
the employ of the Company or any Subsidiary or interfere in any way with the
right of the Company or any Subsidiary to determine the terms of the Optionee's
employment.
10. This option and the terms and conditions herein set forth are
subject in all respects to the terms and conditions of the Plan, which shall be
controlling. All interpretations or determinations of the Committee (or the
Board of Directors, as applicable under the Plan) shall be binding and
conclusive upon the Optionee and his or her legal representatives on any
question arising hereunder.
11. All notices hereunder to the party shall be delivered or mailed to
the following addresses:
If to the Company:
Hearst-Argyle Television, Inc.
------------------------------
New York, New York
---------
Attention: Secretary
If to the Optionee:
--------------------------------------
--------------------------------------
Such addresses for the service of notices may be changed at any time provided
notice of such change is furnished in advance to the other party.
12. This Option Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without application of the
conflict of laws principles thereof.
IN WITNESS WHEREOF, the undersigned have caused this Option
Agreement to be duly executed as of the date first above written.
HEARST-ARGYLE TELEVISION, INC.
By:
----------------------------------------
Name:
---------------------------------
Title:
--------------------------------
OPTIONEE:
-------------------------------------------
Name:
3
<PAGE> 24
APPENDIX A
VESTING SCHEDULE
I. Options to acquire [50%] shares of Stock shall automatically become
exercisable under this option on September 1, 2000; provided, however, that in
the event the Employment Agreement between the Company and Optionee dated as of
August 27, 1997 is terminated by the Company "Without Cause" (as defined
therein), (i) on or after September 1, 1998, options to acquire [16 2/3%] shares
shall become exercisable concurrently with such termination or (ii) on or after
September 1, 1999, options to acquire [33 1/3%] shares shall become exercisable
concurrently with such termination.
II. Options to acquire [16 2/3%] shares of Stock shall become exercisable when
the Market Price of the Stock equals $31 per share; options to acquire an
additional [16 2/3%] shares of Stock shall become exercisable when the Market
Price of the Stock equals $37 per share; and, an additional [16 2/3%] shares of
Stock shall become exercisable when the Market Price of the Stock equals $43 per
share. "Market Price" shall mean the price of the Stock as quoted on NASDAQ
National Market, or such other national exchange as the Stock will then be
listed, with such price having been equal to or greater than the applicable
price for a period of 10 consecutive trading days. Once vested, the options
shall not be subject to divesting notwithstanding a change in the Market Price
to below the applicable price. The applicable prices ($31.00, $37.00, and
$43.00) shall be adjusted for a stock split, stock dividend, or other
recapitalization with respect to the Stock.
III. All options that have not otherwise vested shall automatically become
exercisable under this option on September 1, 2006.
IV. In the event that, prior to delivery by the Company of all the shares of
Stock with respect to the Time Vested Options, a Change of Control (as defined
in the Plan) shall occur, then this option shall become vested and exercisable
with respect to all options that are unvested and unexercisable immediately
prior to the date of the Change of Control.
APPENDIX A - Page 1
<PAGE> 1
Exhibit 10.2
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is entered into as of the 29th day
of August, 1997, by and between The Hearst Corporation ("Hearst"), a Delaware
corporation, and Argyle Television, Inc. ("Argyle"), a Delaware corporation.
WHEREAS, Hearst and Argyle have entered into an Amended and Restated
Agreement and Plan of Merger dated as of March 26, 1997 (the "Merger Agreement")
pursuant to which certain Hearst subsidiaries will, subject to the terms and
conditions of the Merger Agreement, merge with and into Argyle; and
WHEREAS, Argyle will be the surviving corporation under the Merger
Agreement and will be renamed Hearst-Argyle Television, Inc. ("HAT"); and
WHEREAS, this Management Services Agreement is entered into in
accordance with Section 9.01(i) of the Merger Agreement and in further
consideration thereof and shall be binding upon HAT as of the Effective Date of
the Merger contemplated by the Merger Agreement;
NOW, THEREFORE, Hearst and Argyle hereby agree as follows:
1. Managed Stations. Hearst, or a subsidiary, is the licensee of Radio
Stations WBAL(AM) and WIYY-FM, Baltimore, Maryland and Television Stations
WWWB-TV, Lakeland, Florida ("WWWB-TV") and WPBF-TV, Tequesta, Florida
("WPBF-TV"). Additionally, Hearst brokers time and provides programming and
other services to Television Station KCWB-TV, Kansas City, Missouri ("KCWB-TV")
pursuant to a Program Service and Time Brokerage Agreement. WBAL(AM) and
WIYY-FM, WWWB-TV, WPBF-TV and KCWB-TV are collectively referred to herein as the
"Managed Stations." Additionally, Hearst shall have the right (but not the
obligation) to include under this Management Services Agreement any additional
broadcast stations which it or any of its subsidiaries or affiliates (other than
HAT) may acquire (or for which Hearst or any such subsidiary or affiliate enters
into a time brokerage agreement) during the Term hereof; if Hearst desires to
include such additional station hereunder it will so advise HAT in writing and
such station will thereupon be included as a Managed Station hereunder.
2. Services. Subject to applicable laws, rules and regulations
(including those of the FCC), during the term of this Agreement, HAT shall
provide Hearst with respect to the Managed Stations, with management services
substantially similar to those management services Hearst's broadcast group
management has provided to the Managed Stations prior to the Effective Time (as
such term is defined in the Merger Agreement), and HAT's services to Hearst
hereunder will include, without limitation, management services with respect to:
sales; news; programming (subject to the rights of each Managed 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 this
Management Services Agreement); assuring compliance
<PAGE> 2
with FCC and EEO laws, rules and regulations; finances including preparation of
operating and capital budgets and financial statements in accordance with GAAP);
engineering; promotion; and accounting services.
3. Facilities and Employees of HAT. HAT shall maintain such office
facilities, space, supplies, and equipment and shall hire, supervise, and direct
such employees as are necessary to the performance of the services provided for
herein. HAT will be responsible for the furnishing, recruiting, training,
supervising and managing of all such employees of Hearst employed by Hearst at
the Managed Stations, provided however, such employees shall remain subject to
the ultimate management and direction of Hearst. It is understood and agreed
that the responsibility for compensating the employees of Hearst is solely the
responsibility of Hearst and not that of HAT, regardless of the nature of the
services rendered by such employees of the party benefiting from the same.
4. Management Fee. (a) The management fee with respect to the Managed
Stations shall be an annual amount equal to the greater of (i) (x) $50,000 for
the Managed Radio Stations (counted as a single property) and $50,000 for
KCWB-TV, or (y) for all others, $100,000 per station, and (ii) a percentage
listed below of the positive broadcast cash flow from each such property:
<TABLE>
<CAPTION>
<S> <C>
Year 1 - 20%
Year 2 - 30%
Year 3 - 40%
Year 4 and thereafter - 50%
</TABLE>
As used herein, "broadcast cash flow" is defined, for each Managed
Station respectively, as station operating income, plus depreciation and
amortization of program rights, minus program payments and adjusted for any
non-cash compensation expense. Reimbursable expenses pursuant to Section 4(b)
below shall also be deducted from broadcast cash flow to the extent such
deductions were not already included in the calculation of broadcast cash flow.
(b) In addition to such management fee, HAT shall also be entitled to
the reimbursement of HAT's direct operating costs and expenses incurred with
unrelated third parties, plus the reimbursement of amounts paid on behalf of a
Managed Station under the Services Agreement between Hearst and Argyle of even
date to the extent such amounts were paid by HAT and were not paid directly by
the Managed Station. Corporate overhead shall not be a reimbursable expense
except to the extent corporate overhead has been historically treated as an
operating expense for each Managed Station respectively and has been included as
part of the calculation of broadcast cash flow for such Managed Station as shown
in the Form S-4 Registration Station filed by Argyle with the Securities and
Exchange Commission on July 30, 1997.
(c) Management fees (including the reimbursement of expenses) shall be
made on a calendar quarterly basis. HAT shall provide Hearst with a statement
setting forth the reimbursable expenses for such quarter, plus an amount equal
to 25% of the annual fixed amount or positive broadcast cash flow, as the case
may be, within thirty days following the end of each
2
<PAGE> 3
quarter. Reasonable estimates of broadcast cash flow may be made, with
adjustments thereto to be made in the following quarter. Each statement shall
include such information as Hearst reasonably requires. Hearst will pay the
quarterly amount due within 15 days of its receipt of such statement.
5. Records. HAT shall, at all times, keep proper books of account and
records relating to services performed hereunder, including records relating to
the computation of management fees, which books of account and records shall be
accessible for inspection by Hearst at any time during normal business hours.
6. Term. The term of this Agreement shall commence upon the Effective
Time and shall continue for each of the Managed Stations respectively until the
earlier of: (i) Hearst's divestiture of such Managed Station to a third party;
(ii) if applicable, the exercise of the option granted to HAT for certain of the
Managed Stations, pursuant to the Option Agreement of even date entered into
between the parties hereto; or (iii) five (5) years following the Effective
Time, provided that, Hearst shall have the right to terminate this Agreement
with respect to any Managed Station at any time upon 90 days prior written
notice if the option period or right of first refusal period with respect to
such Managed Station, as applicable, each as set forth in the Option Agreement,
has expired without having been exercised. Additionally, if either party shall
breach in any material respect any of its obligations or agreements under this
Agreement, and said party does not cure such default within 30 days after
receiving written notice thereof from the non-breaching party, the non-breaching
party may terminate this Agreement by providing written notice of termination
given at least 60 days prior to the proposed termination date. Upon such
termination, Hearst and/or Argyle shall promptly return any and all property of
the other party used in connection with the provision of services hereunder.
7. FCC Filing and Licensee Responsibility. A copy of this Agreement
shall be filed with the Federal Communications Commission in accordance with 47
C.F.R. Section 73.3613(c)(1) (1996). Nothing contained herein shall be construed
so as to constitute a relinquishment, abdication or transfer of control of
responsibility for Hearst's and its subsidiaries' obligations as the licensees
of their respective broadcast stations or tower facilities. It is expressly
recognized and agreed that all services performed for Hearst shall be performed
pursuant to and under the authority of Hearst's management and Board of
Directors and, whenever necessary, Hearst's stockholders.
8. Change in Control. Notwithstanding anything to the contrary
contained herein, this Agreement shall terminate at any time that Hearst ceases
to own more than 50% of HAT's outstanding voting common stock or otherwise
ceases to have the right to elect a majority of the Board of Directors of HAT.
Upon such a termination, the final Management Fees due hereunder will be
determined through the date of termination in a manner consistent with the
quarterly determinations provided hereunder.
9. Limitation of Liability; Consequential Damages. In providing the
Services, HAT shall not have any liability hereunder except to the extent that
HAT shall be finally judicially determined to have engaged in gross negligence
or willful misconduct. In addition, HAT shall not be liable, whether in
contract, in tort (including negligence and strict liability), or otherwise,
3
<PAGE> 4
for any special, indirect, incidental or consequential damages whatsoever
(including, but not limited to, lost profits), which in any way arise out of,
relate to, or are a consequence of, its performance or nonperformance under this
Agreement, or the provision of or failure to provide any service under this
Agreement.
10. Indemnity. (a) HAT hereby agrees to indemnify and hold harmless
Hearst, and its affiliates, their respective officers, directors, employees,
successors and assigns and agents and each other person, if any, controlling
Hearst, or any of its affiliates (Hearst and each such other person being a
"Hearst Indemnified Person") from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) related to, arising out of or in connection with
the services provided pursuant to this Agreement, provided, however, HAT shall
not be responsible for any losses, claims, damages or liabilities (or expenses
relating thereto) that are finally judicially determined to have resulted from
the gross negligence or willful misconduct of any Hearst Indemnified Person; and
provided further that nothing contained herein shall cause HAT to be liable to
Hearst for operating losses at the Managed Stations not caused by the gross
negligence or willful misconduct of HAT.
(b) Hearst hereby agrees to indemnify and hold harmless HAT, its
affiliates, and their respective officers, directors, employees, successors
and assigns and agents and each other person, if any, controlling HAT, or any of
its affiliates from and against any and all losses, claims, damages or
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that are finally judicially determined to have resulted
from the gross negligence or willful misconduct of Hearst in connection with the
services provided pursuant to this Agreement.
(c) The party making a claim under this Section 10 is referred
to as the "Indemnified Party" and the party against whom such claims are
asserted under this Section 10 is referred to as the "Indemnifying Party." All
claims by any Indemnified Party under this Section 10 shall be asserted and
resolved as follows:
(i) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a third party,
said Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of such
claim or demand, and the amount or the estimated amount thereof to the extent
then determinable (which estimate shall not be conclusive of the final amount of
such claim and demand) (the "Claim Notice"); provided, however, that any failure
to give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party shall have the right
to control the defense of such claim or demand and shall retain counsel (who
shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party and shall pay the reasonable fees and disbursements of such
counsel with regard thereto; provided, however, that any Indemnified Party is
hereby authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose
4
<PAGE> 5
fees and expenses shall be at the expense of the Indemnifying Party, to file any
motion, answer or other pleading and take such other action which it reasonably
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party.
The Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one counsel for the Indemnified Party (except to the extent the
Indemnified Party retained counsel to protect its (or the Indemnifying Party's)
rights prior to the selection of counsel by the Indemnifying Party). If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party defends. A claim or demand may not be settled by
the Indemnifying Party without the prior written consent of the Indemnified
Party (which consent will not be unreasonably withheld) unless, as part of such
settlement, the Indemnified Party shall receive a full and unconditional release
reasonably satisfactory to the Indemnified Party. If the Indemnifying Party
elects to defend a claim or demand, the Indemnified Party shall not pay or
settle such claim or demand without the consent of the Indemnifying Party. In
each instance, the Indemnified Party shall have the right to be kept fully
informed by the Indemnifying Party and its legal counsel with respect to any
legal proceedings.
(ii) In the event any Indemnified Party shall have a claim
against any Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party.
(d) The provisions of this Section 10 shall survive the expiration
or termination of this Agreement.
11. Successors and Assigns. This Agreement may not be assigned by
Hearst or HAT without the prior written consent of the other party, except that
either Hearst or HAT may assign its right and obligations hereunder to one of
its wholly owned subsidiaries, and any attempt to assign any rights or
obligations arising under this Agreement without such prior consent in violation
hereof shall be null and void.
12. Governing Law. The construction, validity and enforceability of
this Agreement shall be governed by the laws of the State of New York, without
regard to conflicts of laws principles.
13. 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:
5
<PAGE> 6
(a) If to Hearst:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10019
Attn.: Victor F. Ganzi
Telephone: (212) 649-2000
Fax: (212) 649-2035
(b) If to HAT:
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
Attn.: Dean H. Blythe
Telephone: (212) 649-2307
Fax: (212) 489-2314
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.
14. No Waiver. The failure of either party at any time to require
performance by the other party of any provision of this Agreement shall in no
way affect the right of such party to require performance of that provision. Any
waiver by either party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself or a waiver of any right under this
Agreement.
15. Severability. All provisions of this Agreement are severable and
any provision which may be prohibited by law shall be ineffective to the extent
of such prohibition without invalidating the remaining provisions of this
Agreement.
16. Entire Agreement; Modifications and Amendments. This Agreement
constitutes the entire agreement between the parties concerning the subject
matter thereof and supersedes all prior agreements and understandings, both oral
or written, between the parties with respect to the subject matter hereof, and
cannot be modified or amended except by an instrument in writing signed by all
parties hereto or their respective successors or assigns.
17. Independent Contractor Status. HAT shall be deemed to be an
independent contractor to Hearst. Nothing contained in this Agreement shall
create or be deemed to create the relationship of employer and employee, and no
party to this Agreement shall, by reason hereof, be deemed to be a partner or a
joint venturer of any other party hereto in the conduct of their respective
business and/or the conduct of the activities contemplated by this Agreement.
6
<PAGE> 7
18. Binding Effects; Benefits. This Agreement will be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any person other than the parties and their respective successors and
permitted assigns any rights or remedies under or by reason of this Agreement.
19. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not in any way control the meaning or
interpretation of this Agreement.
20. Force Majeure. HAT shall be excused from performing the services
under this Agreement and shall have no liability to Hearst for any period it is
prevented from performing the services, in whole or in part, as a result of
delays caused by an act of God, war, civil disturbance, court order, labor
dispute, or other cause beyond its reasonable control, including failures or
fluctuations in electrical power or telecommunications or, in the event that HAT
obtains any services from a third party, the failure of such third party to
provide such services, or the misconduct or negligence of such party in
providing such services. Additionally, in the event the force majeure period
continues for six consecutive months, either party may terminate this Agreement
on written notice given by the terminating party at least five days prior to the
proposed termination date. Also, if during the force majeure period, HAT
outsources to a third party any services provided by it hereunder, the
management fees payable to HAT hereunder shall be adjusted to reflect amounts
paid to such third party.
21. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall constitute an
original, but all such counterparts shall together constitute one and the same
instrument.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE HEARST CORPORATION
By:/s/ Jonathan E. Thackeray
----------------------------
Name: Jonathan E. Thackeray
Title: Vice President
ARGYLE TELEVISION, INC.
By:/s/ Harry T. Hawks
----------------------------
Name: Harry T. Hawks
Title: Chief Financial Officer
Assistant Secretary & Treasurer
8
<PAGE> 1
Exhibit 10.3
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of the 29th day of
August, 1997, by and between The Hearst Corporation ("Hearst"), a Delaware
corporation, and Argyle Television, Inc. ("Argyle"), a Delaware corporation.
WHEREAS, Hearst and Argyle have entered into an Amended and
Restated Agreement and Plan of Merger dated as of March 26, 1997 (the "Merger
Agreement") pursuant to which certain Hearst subsidiaries will, subject to the
terms and conditions of the Merger Agreement, merge with and into Argyle; and
WHEREAS, Argyle will be the surviving corporation under
the Merger Agreement and will be renamed Hearst-Argyle Television,
Inc. ("HAT"); and
WHEREAS, this Option Agreement is entered into in accordance
with Section 9.01(i) of the Merger Agreement and in further consideration
thereof;
NOW, THEREFORE, Hearst and Argyle hereby agree as follows:
1. Hearst, or a subsidiary, is the licensee of
Television Stations WWWB-TV, Lakeland, Florida ("WWWB-TV") and WPBF-TV,
Tequesta, Florida ("WPBF-TV") and Hearst brokers time and provides programming
and other services to Television Station KCWB-TV, Kansas City, Missouri
("KCWB-TV") pursuant to a Program Service and Time Brokerage Agreement more
particularly described hereinafter. WWWB-TV, WPBF-TV and KCWB-TV are sometimes
collectively referred to herein as the "Option Stations". During the period
commencing eighteen (18) months following the Effective Time (as defined in the
Merger Agreement) and terminating thirty-six (36) months following the Effective
Time (the "Option Period"), HAT shall have the following options, exercisable
upon written notice to Hearst:
(a) The option to purchase WWWB-TV. The form of
the transaction shall be either the purchase of those assets (including the
applicable Federal Communications Commission ("FCC") licenses) then used solely
by WWWB-TV to conduct its operations and business or the purchase of the capital
stock of WWWB-TV, Inc., as determined by Hearst. The purchase price shall be the
Fair Market Value (as defined below) of such assets or capital stock, as the
case may be, as of the option exercise date.
(b) With respect to KCWB-TV, (i) if Hearst has
not exercised its option to purchase KCWB-TV, the option to have Hearst assign
to HAT the Option Agreement dated December 7, 1995 (the "1995 Option Agreement")
by and between Hearst and CamEl, L.L.C.
<PAGE> 2
and David E. and Sonia G. Salzman, and subject to applicable contractual
consents, if any, the Programming Services and Time Brokerage Agreement dated
August 24, 1995 between Hearst and T.V. 32, Inc. (the "TBA"), and (ii) if Hearst
has exercised its option to purchase KCWB-TV, the option to purchase those
assets (including the applicable FCC licenses) then used solely to conduct the
operations and business of KCWB-TV. The purchase price shall be the Fair Market
Value (as defined below) of either the 1995 Option Agreement and the TBA in the
case of (i) above, or the assets of KCWB-TV in the case of (ii) above, as of the
option exercise date, provided that, in no event shall the purchase price be
less than the aggregate amount of the Accumulated Costs, as such term is defined
in the 1995 Option Agreement, plus interest thereon at the annual average rate
of prime as declared from time to time by Chase Bank (or its successor) plus one
percent (1%) compounded semi-annually.
If HAT exercises an option, Hearst and HAT agree they shall
each use their respective commercially reasonable efforts to cause the closing
of the sale to HAT pursuant to this Section 1 to occur as soon as practicable
after HAT has delivered a notice to Hearst of HAT's intent to exercise its
option and all other necessary and reasonable requirements for the sale are met,
including but not limited to obtaining all necessary governmental and
third-party approvals required for the consummation of such transaction. The
closing of such sale to HAT shall take place at the offices of Hearst specified
in Section 5(b) below, or such other place as the parties may agree upon. At
such closing, (i) Hearst shall, or it shall cause the applicable seller to,
deliver to HAT either the stock certificates, in the case of a sale of stock, or
all necessary conveyancing documents, in the case of a sale of assets, and such
other conveyancing instruments and other documents as shall be reasonably
requested by HAT and (ii) HAT shall deliver to Hearst or the applicable seller,
as the case may be, the purchase price for the stock or assets to be sold by
either wire transfer of immediately available funds to a bank account designated
to such party, or, at Hearst's election, stock of HAT (with the number of shares
to be determined by market value at the time of closing).
2. As used in this Agreement the term "Fair Market Value"
shall mean the cash price that a willing buyer would pay a willing seller, both
in reasonable possession of the relevant facts with neither acting under
compulsion to buy or sell or under time constraints, in an arm's-length
transaction in an asset sale (or a stock sale, as the case may be with respect
to WWWB-TV) for the going concern of the applicable station, which for these
purposes should be deemed to be as it would exist if operated by the buyer in a
like manner as then being operated by Hearst (and, in the case of KCWB-TV,
without the existence of the TBA). Any determination of Fair Market Value
hereunder shall be agreed to by the parties, provided that if any party so
elects, such determination shall be conclusively established by independent
appraisal in the manner
2
<PAGE> 3
contemplated below by giving the other party written notice of appraisal.
3. The exercise of HAT's options hereunder shall be by
action of HAT's directors elected by the holders of HAT's Series A Common Stock.
Additionally, HAT may withdraw the exercise of such option within twenty (20)
days following the receipt of an appraisal, as described hereinafter. The
appraiser shall be independent and selected by mutual agreement of HAT and
Hearst. If HAT and Hearst cannot within ten (10) days agree as to the selection
of the appraiser, then each of them shall select an appraiser and the two
appraisers shall select a third appraiser within an additional ten (10) days.
The appraisal shall take into account both the structure of the proposed
transaction and the tax basis of the property (assets or stock) to be acquired
by HAT. If three appraisers are used, the appraised value shall 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 HAT and Hearst; and (ii) if three appraisers are used, each party
pays the fees of its appraiser and HAT and Hearst shall pay the fees of the
third appraiser equally. If the option is exercised and withdrawn, then HAT
shall pay the fees of all appraisers and all options and rights of first refusal
with respect to such station shall terminate.
4. Notwithstanding any provision of this Agreement to
the contrary, Hearst shall have the right to sell, assign or otherwise transfer
any or all of the Option Stations (or their assets or stock) or WPBF-TV to a
wholly-owned subsidiary of Hearst or to a third party unrelated to Hearst prior
to the commencement of or during the Option Period, subject in the case of a
sale, assignment or transfer to a third party unrelated to Hearst to a right of
first refusal to HAT as follows:
If Hearst receives a bona fide written offer (the
"Bona Fide Offer") submitted by a third person to acquire the
assets or stock of any of the Option Stations or WPBF-TV,
Hearst will first offer to sell same to HAT at such price and
on such terms and conditions as are contained or included in
the written offer so submitted by such third person. HAT, by
action of its independent directors, will have thirty (30)
days from the date of its receipt of the aforesaid offer from
Hearst (which offer must be accompanied by a copy of the
written offer from the third person) to commit to purchase
such stock or assets, at the same price and on the same terms
and conditions. Should HAT fail to commit to purchase under
this section within the aforesaid thirty (30) day period,
Hearst may sell the applicable Option Station or WPBF-TV to
the offering third person in accordance with the third
person's written offer. Should HAT fail to commit to so
purchase the Option Station, then its right
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<PAGE> 4
of first refusal hereunder with respect hereto shall terminate
and, in the case of either of the Option Stations, HAT's
option with respect thereto pursuant to Section 1 shall also
terminate. In the event that HAT exercises its right of first
refusal, then the purchase price, and all other terms and
conditions for the purchase by HAT shall be the same as those
set forth in the Bona Fide Offer, except that, if any portion
of the proposed purchase price in the Bona Fide Offer includes
non-cash consideration, then HAT shall pay cash consideration
equal to the fair market value of such non-cash consideration,
as determined in accordance with the appraisal procedures as
defined in Section 3 above.
5. 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:
(a) If to Hearst:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10019
Attn.: Victor F. Ganzi
Telephone: (212) 649-2000
Fax: (212) 649-2035
(b) If to HAT:
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
Attn: Dean H. Blythe
Telephone: (212) 649-2307
Fax: (212) 489-2314
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.
6. Assignment. Neither party shall assign or otherwise
transfer this Agreement or any of their respective rights and obligations to any
other party without the prior written consent of the other party hereto, and any
assignment or transfer in violation of the foregoing shall be null and void ab
initio, provided however, that the parties acknowledge that this Agreement shall
be binding upon and inure to the benefit of HAT.
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<PAGE> 5
7. Entire Agreement; Amendments. This Agreement contains
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof, supersedes and replaces all prior agreements and
understandings (oral or written), and cannot be modified or amended except by an
instrument in writing signed by all parties hereto or their respective
successors or assigns.
8. Governing Law. This Agreement shall bind the parties
and their successors and assigns, and shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
wholly entered into and performed therein, without giving effect to provisions
regarding conflicts of laws.
9. Counterparts. This Agreement may be executed in
separate counterparts, each of which so executed and delivered
shall constitute an original, but all such counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, each party has caused this Agreement to be
duly executed as of the date first written above.
THE HEARST CORPORATION
/s/ Jonathan E. Thackeray
------------------------------------
By: Jonathan E. Thackeray
Name: Vice President
ARGYLE TELEVISION, INC.
/s/ Harry T. Hawks
------------------------------------
By: Harry T. Hawks
Name: Chief Financial Officer
Assistant Secretary &
Treasurer
5
<PAGE> 1
Exhibit 10.4
STUDIO LEASE AGREEMENT
THIS STUDIO LEASE AGREEMENT, is entered into as of the 29th day of
August, 1997, by and between The Hearst Corporation ("Hearst" and also herein
referred to as "Tenant"), a Delaware corporation, and Argyle Television, Inc.
("Argyle"), a Delaware corporation.
WHEREAS, Hearst and Argyle have entered into an Amended and Restated
Agreement and Plan of Merger dated as of March 26, 1997 (the "Merger Agreement")
pursuant to which certain Hearst subsidiaries will, subject to the terms and
conditions of the Merger Agreement, merge with and into Argyle; and
WHEREAS, Argyle will be the surviving corporation under the Merger
Agreement and will be renamed Hearst-Argyle Television, Inc. ("HAT" and also
herein referred to as "Landlord"); and
WHEREAS, Hearst, or a subsidiary, is the licensee of radio stations
WBAL(AM) and WIYY-FM, Baltimore, Maryland (each a "Radio Station" and
collectively, the "Radio Stations"); and
WHEREAS, the Radio Stations occupy certain space and facilities within
certain premises, which premises will at the Effective Time (as such term is
defined ill the Merger Agreement), become the property of HAT; and
WHEREAS, in connection with the Merger, HAT will become the owner of
television station WBAL-TV, Baltimore, Maryland; and
WHEREAS, it is the intention of the parties hereto that the Radio
Stations will continue to occupy and use such premises following the Effective
Time on terms and conditions set forth hereinafter; and
WHEREAS, this Studio Lease Agreement is entered into in accordance with
Section 9.02(i) of the Merger Agreement and in further consideration thereof;
NOW, THEREFORE, Hearst and Argyle hereby agree as follows:
1. Leased Premises. Landlord is the owner of certain real property and
a building located at 3800 Hooper Avenue, Baltimore, Maryland 21211, which is
used for the main studios and transmission facilities of Television Station
WBAL-TV. A portion of such premises (including parking areas and facilities and
driveway) is occupied and used by the Radio Stations, which portion is more
particularly described in Exhibit A attached hereto and made a part hereof (the
"Leased Premises"). Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the "Leased Premises".
<PAGE> 2
2. Term of Lease. The term ("Term") of this lease shall be for a period
of 36 months commencing at the Effective Time and unless sooner terminated as
provided in this Lease, ending on a date (the "Expiration Date") which shall be
the 36 month anniversary of the Effective Time.
3. Rent. In accordance with Section 9.01(i) of the Merger Agreement,
Hearst and Argyle have entered into a Management Services Agreement of even date
with this Studio Lease Agreement whereby HAT will provide certain management
services to Hearst with respect to the Radio Stations, and Hearst will pay HAT
certain amounts in consideration of such services. For each year during the
Term, the full and complete consideration to Landlord for this Studio Lease
Agreement shall consist of: (a) those annual amounts payable to HAT under said
Management Services Agreement, plus (b) the annual costs related to the Services
provided by the Landlord to the Radio Stations, which the parties agree shall be
substantially similar to the annual expense amounts Hearst has historically
allocated to the Radio Stations (by way of example, Exhibit B hereto sets forth
the 1997 expense amounts Hearst has allocated to the Radio Stations). Such
consideration shall be subject to pro rata adjustments for partial years of the
Term. Such consideration includes all amounts whatsoever (as rent or otherwise)
payable by Tenant to Landlord with respect to this Studio Lease Agreement, and
Tenant shall not be obligated to pay any additional amounts to Landlord. In the
event that said Management Services Agreement shall terminate prior to the
expiration or termination of the Term hereunder or a Radio Station shall be sold
to a third party as contemplated by Section 2, then Landlord and Tenant shall
negotiate in good faith amounts payable to Landlord in consideration of this
Studio Lease Agreement.
4. Services. During the Term, Landlord shall operate and maintain the
Leased Premises in a manner consistent with past practice with respect to the
operation and maintenance of the Building by Hearst Broadcast Group and in
accordance with all applicable laws and regulations and shall provide the
following services to the Leased Premises: (i) all utilities, including heat,
ventilation, cooling, lighting, and electrical service; (ii) insurance; (iii)
telephone; (iv) building maintenance, and (v) janitorial service and all other
services as needed by Tenant consistent with past practice with respect to
Services previously provided by Hearst Broadcast Group to the Radio Stations
(the "Services"). Landlord shall maintain and repair the foundations, structure
and roof of the Building and shall operate, maintain, repair and replace the
systems, facilities and equipment necessary to provide the services described in
this Section.
5. Taxes. Tenant shall not be responsible for payment of real estate or
other taxes, and any increases or escalations thereto on its portion of the real
property during the Term, except with respect to those allocations payable by
Tenant pursuant to paragraph 3(b) above.
2
<PAGE> 3
6. Landlord's and Tenant's Liability.
(a) Landlord will not be responsible for any damage to
Tenant's property, business, or agents or employees resulting from any
electrical power failure, fire, lightning, windstorm or Force Majeure Event, or
any other damage or loss not caused by the gross negligence or intentional
wrongdoing of Landlord or its employees. Landlord's liability to Tenant in the
event of any loss or damage to Tenant's property or the Leased Premises caused
by the gross negligence or intentional wrongdoing of Landlord or its employees
shall be limited to the cost of repairing or replacing such property, plus any
reasonable and necessary costs of removing and reinstalling such property.
Landlord shall not be liable for any loss of business, or for any consequential
damages whatsoever caused by gross negligence or the intentional wrongdoing of
Landlord or its employees.
(b) Tenant will not be responsible for any damage to
Landlord's property, business, or agents or employees resulting from any
electrical power failure, fire, lightning, windstorm or Force Majeure Event, or
any other damage or loss not caused by the gross negligence or intentional
wrongdoing of Tenant or its employees. Tenant's liability to Landlord in the
event of any loss or damage to Landlord's property or the Building caused by the
gross negligence of Tenant or its employees shall be limited to the cost of
repairing or replacing such property, plus any reasonable and necessary costs of
removing and reinstalling such property. Tenant shall not be liable for any loss
of business, or for any consequential damages whatsoever caused by gross
negligence or the intentional wrongdoing of Tenant or its employees.
7. Additional Construction. Any plans for alterations, additions,
improvements or any other additional construction and installation by Tenant
shall be submitted to Landlord for its approval in writing. Landlord hereby
agrees not to unreasonably withhold or delay its consent regarding any such
alterations, additions or improvements. No such approval is necessary for the
continued operation and maintenance of the equipment and facilities in place at
the time of the execution of this Agreement. The installation and construction
shall conform with all requirements imposed by the Federal Communications
Commission and all other federal, state and local governmental agencies.
8. Destruction of Premises.
(a) If Landlord's building is totally destroyed by wind,
explosion, fire, or other casualty of any kind, either Tenant or Landlord shall
have the option of terminating this Lease or any renewal thereof, upon giving
written notice at any time within thirty (30) days from the date of such
destruction, and if the lease be so terminated, all rent shall cease as of the
date of such destruction.
3
<PAGE> 4
(b) If Landlord's building should be damaged by wind,
explosion, fire or other casualty (or if totally and completely destroyed and
neither party elects to terminate this Lease Agreement within the provisions of
subparagraph (a) above), then in either event, the Landlord may, at its sole
cost and expense, restore building to a condition substantially similar to that
immediately prior to such destruction or damage. Landlord shall be entitled to
all proceeds of any insurance policies in the event it undertakes repairs. In
such case, all rents paid in advance shall be apportioned as of the date of
damage or destruction and all rent thereafter accruing shall be equitably and
proportionately suspended or adjusted according to the nature and extent of the
destruction or damage, pending completion of rebuilding, restoration or repair,
except that in the event the destruction or damage is so extensive as to make it
unfeasible for Tenant to conduct Tenant's business on the Leased Premises, the
rent shall be completely abated until building is restored by the Landlord. The
Landlord shall not be liable for any inconvenience or interruption of business
of Tenant or of any damage of any kind to Tenant's property or equipment
occasioned by electrical interference, wind, explosion, fire or other cause or
casualty of any kind not attributable to the Landlord. In lieu of restoring the
building as set forth in this paragraph, Landlord may terminate the lease upon
ninety (90) days prior written notice to Tenant.
(c) If Landlord undertakes to restore, rebuild or repair
building in accord with the provisions of subparagraph (b) above, and such
restoration, rebuilding or repair is not accomplished within two hundred seventy
(270) days from the date of the casualty, Tenant shall have the right to
immediately terminate this Lease Agreement by written notice to Landlord.
9. Use of Property. Tenant shall use the leased property
solely for the purpose of operating the Radio Stations and for no
other purpose whatsoever.
10. Termination. Upon termination of this Agreement, for whatever
cause, Tenant shall, at the request of Landlord and at Tenant's expense, remove
any equipment that has been installed by Tenant or its predecessors and shall
properly make such replacements and repairs as are necessary to conform the
building to its original condition, normal wear and tear and damage due to fire
or casualty excepted. In addition, Tenant shall disconnect and safely seal off
all wires, conduits, liens and any other devices or systems located within
Landlord's building that were installed by or for Tenant or its predecessors,
and used in connection with the operation of the Radio Stations and related
facilities and equipment. In the event of any removal of equipment, Tenant shall
not cause any damage to building, including the roof, and shall promptly repair
any damage to building that may result from the removal of the equipment, normal
wear and tear and damage due to fire or casualty excepted. All leased spaces
shall be left in their original condition, excepting ordinary use and wear and
damage due to fire or casualty.
4
<PAGE> 5
11. Landlord's Rights of Access. Landlord or its agent shall have the
right to enter the Leased Premises at all times in order to examine it or to
make repairs, improvements or additions to the Leased Premises as Landlord may
deem desirable. Landlord shall not in any event be liable for any inconvenience,
annoyance, disturbance, loss of business, or other damage to Tenant by reason of
making such repairs or the performance of any such work on or in the Leased
Premises, or on account of bringing materials, supplies, and equipment into or
through the Leased Premises during the course of such work, and the obligations
of Tenant in this Lease shall not hereby be affected in any manner.
12. Right to Assign and Sublease. Tenant shall not sublet the Leased
Premises or any portion thereof or assign or transfer its rights hereunder to
any third party unless Tenant shall first have obtained the written consent of
Landlord, except that Tenant may assign its right and obligations hereunder to
any buyer of a Radio Station(s) as contemplated by Section 2, in which event
Tenant shall be relieved of any further liability hereunder provided that such
buyer agrees to assume all of the duties and obligations imposed hereunder on
Tenant. Any attempted assignment or other transfer in violation of the foregoing
shall be null and void ab initio.
In the event Landlord should sell or otherwise transfer the Leased
Premises, Landlord shall have no further duties or obligations hereunder
provided that the transferee agrees to assume all of the duties and obligations
imposed hereunder on Landlord. Upon such a transfer, Tenant shall, for all
purposes expressed herein and incidental hereto, accept such transferee as its
lessor hereunder. Landlord may assign any or all rights, duties and obligations
created hereunder without the consent of Tenant.
13. Compliance With Laws and Regulations. Tenant, at its sole expense,
shall comply with all laws, orders, and regulations of all federal, state, and
local authorities and with any direction of any public officer, pursuant to law,
which shall impose any duty upon Landlord or Tenant with respect to the Leased
Premises. Tenant, at its sole expense, shall obtain all licenses or permits
which may be required for the conduct of its business during the term of this
Lease Agreement, or for the making of repairs, alterations, improvements, or
additions. Tenant further agrees to protect, indemnify and save harmless
Landlord from and against any fine, penalty or expense imposed or incurred,
including reasonable attorney's fees, for any violation of such ordinances,
rules, regulations, and statutes with regard to the Leased Premises.
14. Condemnation. If the building or any part thereof is condemned,
taken or ordered dismantled by any governmental authority, corporation or entity
having the power of eminent domain or condemnation, or other power to order
dismantling, so as to make the Leased Premises unusable by Tenant, then this
Agreement shall terminate from the time possession is taken by the condemning
authority, or dismantling is begun, as the case may be, and the
5
<PAGE> 6
parties hereto shall have no obligation hereunder with respect to any period
thereafter. Tenant shall receive a proportionate refund from Landlord of any
rent paid by Tenant in advance. All proceeds of any such condemnation award
shall be the sole property of Landlord.
Should any governmental authority order or direct Landlord to make any
alteration to the building, any delay, disruption or hindrance hereby caused to
Tenant, its broadcasting, radio transmissions or business shall not affect or
impair Tenant's obligation to make the payments provided for hereunder. A
prorated portion of the rent provided for herein shall be deducted if the site
is unusable by Tenant for more than 72 hours in the event of such an alteration.
Landlord shall make such required alterations as promptly as reasonably
possible.
15. Mechanic's or Other Liens.
(a) Notwithstanding anything to the contrary contained in this
lease, Tenant, its successors and assigns, warrant and guarantee to Landlord,
its successors and assigns that if any mechanic's liens or any other lien or
encumbrance of any nature or kind (including for unpaid taxes) shall be filed
against the building of which the Leased Premises forms a part, for work claimed
to have been done for, or materials claimed to have been furnished to Tenant, or
for failure by Tenant to pay or discharge any other obligation or liability, (i)
the same shall be discharged by Tenant, by either payment, by bond or otherwise,
at the sole cost and expense of Tenant, within fifteen (15) days of the giving
of notice thereof by Landlord, (ii) either a release or satisfaction of lien, as
the case may be, shall be filed with the County Clerk of the county in which the
building is situated within such fifteen (15) day period, and (iii) a copy of
such release or satisfaction, as the case may be, certified to by such County
Clerk shall be delivered to Landlord within five (5) days after such filing.
(b) In the event such mechanic's lien or other lien is not
discharged timely, as aforesaid, Landlord may discharge same for the account of
and at the expense of Tenant by payment bonding or otherwise, without
investigation as to the validity thereof or of any offsets or defenses thereto,
and Tenant shall promptly reimburse Landlord, as additional rent, for all
reasonable costs, disbursements, fees and expenses, including, without
limitation, legal fees, incurred in connection with so discharging said
mechanic's lien or other lien, together with interest thereon from the times of
payment until reimbursement by Tenant. Tenant shall, within five (5) days of
demand therefor by Landlord, pay to Landlord as additional rent, the sum of One
Thousand ($1,000.00) Dollars on account of Landlord's legal fees and
disbursements, but the foregoing shall not limit the extent of Tenant's
liability as set forth above.
6
<PAGE> 7
(c) In the event such mechanic's lien or other lien is not
discharged timely, as aforesaid, Landlord, in addition to all other rights
granted to Landlord in this lease and without limitation, may institute a
dispossess summary proceeding based upon such failure to discharge any such
lien. In the event Tenant fails to deliver to Landlord the certified copy of the
release or satisfaction required hereunder within the time period provided for
the delivery thereof to Landlord, Landlord shall have the right to assume that
such mechanic's lien or other lien has not been discharged and Landlord shall
have all of the rights and remedies provided for herein based upon Tenant's
failure to discharge any such lien.
(d) Tenant, at its sole cost and expense, shall procure
written waivers of the right to file mechanic's liens executed by contractors,
subcontractors, material suppliers and laborers simultaneously with payment for
the labor performed or materials furnished has been made to each contractor,
subcontractors, material suppliers and laborers simultaneously upon payment in
full for the labor performed or materials furnished by such contractor, material
supplier or laborer. Any failure or refusal on the part of Tenant to comply with
the foregoing shall be deemed a default under this lease.
16. Default. In the event Tenant, at any time during the term
hereof, shall default in the performance of any of its obligations under this
Agreement and such default shall continue for more than ten (10) days after
notice, either oral or written, of such default has been given by Landlord to
Tenant, Landlord, at its election, may terminate this Agreement. Such right of
Landlord to terminate this Agreement shall not be exclusive, however, and shall
not constitute or effect a limitation, restriction, or waiver of any other right
or remedy of Landlord provided by law and shall not relieve or release Tenant
from its obligation to indemnify Landlord and its tenants as herein set forth.
17. Notices. Any written notice or demand required or permitted to
be given or made hereunder shall be made by personal delivery, facsimile, or by
certified mail in a sealed envelope, postage prepaid, addressed as follows:
If to Landlord:
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
Attn: David J. Barrett
President and C.O.O.
7
<PAGE> 8
If to Tenant:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10019
Attn: Jonathan E. Thackeray, Esquire
Vice President and General Counsel
Either party may, from time to time, designate any other address for this
purpose by written notice to the other party.
18. Brokers. Each party hereto represents and warrants that it has not
dealt with any broker in connection with the negotiation or execution of this
Lease. Each party hereto agrees to indemnify and hold the other party hereto
harmless from and against any and all damage, loss, cost or expense including,
without limitation, all reasonable attorneys' fees and disbursements, incurred
by reason of a breach by the indemnifying party of the foregoing representation
and warranty, and such obligations shall survive the expiration or sooner
termination of this Lease.
19. Force Majeure Event. Any obligation of Landlord which is delayed or
not performed due to acts of God, strike, riot, shortages of labor or materials,
war, governmental laws or action, or lack thereof, or any other causes of any
kind whatsoever which are beyond Landlord's reasonable control (each a "Force
Majeure Event"), shall not constitute a default hereunder and shall be performed
within a reasonable time after the end of such cause for delay or
nonperformance. Tenant shall likewise not be deemed in default in the
performance of any of its obligations under this Lease (other than monetary
obligations) if it is unable to fulfill such obligations by reason of a Force
Majeure Event, provided that the foregoing shall not serve to relieve Tenant
from the timely obligation to pay Base Rent or any other charges due by it
hereunder or from the performance of any other financial obligation of Tenant
under this Lease.
20. Tenant's Early Termination Option. Provided this Lease shall then
be in full force and effect, and Tenant shall not be in default hereunder beyond
any applicable notice or grace period, Tenant shall have the right, at any time
during the term hereof, to terminate this Lease ("Tenant's Termination Option"),
provided that (i) Tenant shall sell the Radio Stations to a third party and (ii)
Tenant shall give notice to Landlord of the exercise of Tenant's Termination
Option (the "Termination Option Notice") not later than ninety (90) days prior
to the intended termination date (the "Early Termination Date"). If Tenant has
timely delivered the Termination Option Notice and continues to make all
payments due under this Lease and is not in default hereunder through the Early
Termination Date, then this Lease shall expire on the Early Termination Date
with the same force and effect as if the Early Termination Date were the
Expiration Date. In the event Tenant shall sell a Radio Station (rather than the
Radio Stations) then this Lease shall terminate only as to that portion of the
Leased Premises occupied
8
<PAGE> 9
by such Radio Station, provided the terms and conditions set forth above have
been complied with fully. The Lease shall, on or before the Early Termination
Date, be amended by Landlord to reflect, inter alia, the decrease in the amount
of square feet leased by Landlord to Tenant.
21. Construction of Language. The terms Lease, Lease Agreement, or
Agreement shall be inclusive of each other, and also shall include renewals,
extensions, or modifications of the Lease Agreement. Words of any gender used in
this Lease Agreement shall be held to include any other gender, and words of the
singular shall be held to include the plural and the plural to include the
singular when the sense requires. The paragraph headings and titles are not a
part of this Lease Agreement and shall have no effect upon the construction and
interpretation of any party hereof.
22. Governing Law. The construction, validity and enforceability of
this Agreement shall be governed by the laws of the State of Maryland, without
regard to its conflicts of laws principles.
23. Entire Agreement. This instrument contains the entire agreement
between the parties, and no statement, premise, inducement, representation or
prior agreement which is not contained in this written agreement shall be valid
or binding.
24. Amendment. No amendment, modification, alteration or revision of
this Lease Agreement shall be valid and binding unless made in writing and
signed by an officer of Tenant and by an officer of Landlord.
25. Binding Effect. This Lease shall be binding upon and shall inure to
the benefit of the parties hereto, their successors and assigns.
IN WITNESS WHEREOF, Hearst and Argyle have caused this Lease Agreement to be
executed as of the date first above written.
THE HEARST CORPORATION
ATTEST:
/s/ Jonathan C. Mintzer /s/ Jonathan E. Thackeray
- ------------------------------ -----------------------------------
Assist Secretary By: Jonathan E. Thackeray
Name: Vice President
[Corporate Seal]
ATTEST: ARGYLE TELEVISION, INC.
/s/ Teresa Lopez /s/ Harry T. Hawks
- ------------------------------ -----------------------------------
Secretary By: Harry T. Hawks
Name: Chief Financial Officer
Secretary & Treasurer
[Corporate Seal]
9
<PAGE> 10
EXHIBIT A
[FLOORPLAN THIRD FLOOR]
<PAGE> 11
[FLOORPLAN FOURTH FLOOR]
<PAGE> 12
EXHIBIT B
H E A R S T B R O A D C A S T I N G
EXPENSE ITEMS ALLOCATED TO RADIO
BASED ON 1997 BUDGET
UNIT: WBAL RADIO
<TABLE>
<CAPTION>
AMOUNT ALLOCATED/ ALLOCATION
EXPENSE CATEGORY/ITEM CHARGED TO RADIO PERCENTAGE
- ---------------------------------------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Accounting: Accounting Expenses $ 28,330 30.0%
Accounting Salaries 110,439 30.0%
Telephone: Equipment Charges 77,016 30.0%
Utilities: Electric 67,008 30.0%
Water & Sewage 1,860 30.0%
Gas 10,250 30.0%
Insurance: Libel 6,780 30.0%
Property 15,180 20.0%
Casualty 34,470 20.0%
Other 14,790 30.0%
Taxes: Real Estate Taxes 26,160 30.0%
Personal Property 58,070 15.0%
Other 18,075 30.0%
Building Services: 169,485 30.0%
Other Payroll: News 51,996 Flat Charge
Volpe/Bryant 34,112 Flat Charge
Telephone Operator 6,756 30.0%
Building Services 40,076 30.0%
Legal: FCC Retainer 8,040 34.0%
Miscellaneous: Other - Employee Outing 3,300 30.0%
Postage & Freight 13,670 Flat Charge
TOTAL: $798,863
</TABLE>
Note: (1) Radio Picks up $96,292 in Expense
For Detour Dave
02/28/97
12
<PAGE> 1
Exhibit 10.5
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is made as of August 29, 1997
by and between THE HEARST CORPORATION, a Delaware corporation ("Hearst"), and
ARGYLE TELEVISION, INC., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, this Agreement is being executed simultaneously with the closing
(the "Closing") of the transactions contemplated by the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") by and among Hearst, HAT
Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
Hearst, HAT Contribution Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Hearst, and the Company, pursuant to which the Company will be
renamed "Hearst-Argyle Television, Inc."; and
WHEREAS, Hearst and the Company each desires to make certain arrangements
for the provision of certain services after the Closing by Hearst to the Company
for the periods and on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
SERVICES TO BE PROVIDED
1.1 SERVICES. The parties agree that, subject to the terms and conditions
of this Agreement, Hearst shall provide to the Company the services described on
SCHEDULE 1.1 (the "Services").
1.2 COOPERATION. The Company shall cooperate fully and provide such
assistance as is reasonably required for Hearst to provide the Services. During
the Term, Hearst shall provide the Company with reasonable access during normal
business hours to the books and records of Hearst relating to the Services and
Hearst management and employees involved in providing the Services will be
available to confer with the Company. The parties agree to adjust the manner or
procedures for providing the Services hereunder in order to accommodate
necessary or appropriate controls required or suggested by the Company's
independent auditors or the Audit Committee of the Company's Board of Directors.
1.3 STAFFING. All Services may be performed by Hearst's employees and
Hearst shall not be required to hire any persons other than its own employees in
connection with the
<PAGE> 2
performance of the Services. Hearst, however, shall be entitled to obtain such
Services from a third party. Hearst agrees to consult with the Company
concerning obtaining Services from a third party and if Hearst obtains Services
from a third party exclusively for the benefit of the Company, Hearst agrees to
obtain the consent of the Company, such consent not to be unreasonably withheld.
In the event that both Hearst and a third party provide Services to the Company,
the Company shall bear all out-of-pocket costs and expenses associated with
obtaining Services from a third party ("Third Party Costs"). Additionally, the
Service Costs set forth on Schedule 2.1 shall be adjusted to reflect Hearst's
outsourcing to a third party, Services which had previously been directly
provided by Hearst.
ARTICLE 2
SERVICE COSTS AND PAYMENT TERMS
2.1 COST FOR SERVICES. The fees to be paid by the Company for each Service
(the "Service Costs") shall be a monthly amount equal to the sum of a monthly
allocation (calculated based on twelve months) of the total fixed annual fees
and the monthly variable transaction fees as set forth on SCHEDULE 2.1 hereto.
The Company acknowledges and agrees that the Service Costs set forth on Schedule
2.1 reflect Hearst's good faith efforts to estimate such Service Costs as of the
date hereof, and as such, the Company agrees that such Service Costs shall be
subject to adjustment annually, beginning the calendar year 1999, to reflect
changes in costs or other assumptions used to establish the Service Costs.
Hearst and the Company agree that if during the Term the Company either acquires
or divests a television or radio station, then the Service Costs shall be
adjusted to reflect such transaction. Hearst agrees that any adjustment in the
Service Costs shall be consistent with adjustments made in costs charged to
other Hearst divisions and any adjustments in Service Costs for Services
provided exclusively to the Company by Hearst shall only be by the mutual
agreement of Hearst and the Company.
2.2 PAYMENT. The Service Costs will be paid as follows:
(a) Monthly Invoices. Within 15 days after the end of each month
during the Term, Hearst will provide to the Company an invoice for the Services
of Service Costs therefor for the month just ended, plus any Third Party Costs.
At the Company's direction, Hearst shall deduct the amount shown on each such
invoice 15 days after the date thereof from the Company's cash management
account if maintained by Hearst. In the event that the Company's cash management
account balance is insufficient to cover the monthly invoice or the Company does
not direct Hearst to deduct the Service Costs from the Company's cash management
account, the Company shall pay the amount shown on each such invoice within 15
days after the date thereof by means of a Company check. The Service Costs for
any Service that is provided for only part of a month shall be appropriately
prorated.
(b) Other Documents. Hearst shall provide to the Company upon
reasonable request any reports or summaries relating to the Service Costs, which
the Company may need for preparing financial statements, tax returns or
otherwise.
2
<PAGE> 3
2.3 INTEREST ON LATE PAYMENTS. Any monthly payment of the Service Costs
that is not paid on or before the thirtieth day after the date of an invoice
pursuant to Section 2.2(a), shall bear interest from the thirtieth day after the
date of such invoice until the date paid at the lesser of (i) an annual simple
interest rate equal to the prime rate of interest announced by Chase Manhattan
Bank at its principal office in New York, New York as its "prime rate," plus
1.5%, or (ii) the maximum amount permitted by applicable laws. Hearst agrees
that interest will not be charged on any portion of the monthly Service Costs
contested in good faith by the Company.
2.4 TAXES. Any transaction, excise, sales or other tax imposed on or
measured by the rendering of a Service shall be the responsibility of the
Company.
ARTICLE 3
TERM AND TERMINATION
3.1 TERM. The term of this Agreement shall commence on the date first
written above and shall continue through December 31, 1998 (the "Initial Term")
and thereafter shall renew for successive one year periods unless and until
terminated as provided in Section 3.2 (together with the Initial Term, the
"Term").
3.2 TERMINATION. After the Initial Term, this Agreement may be terminated
(i) by Hearst, on written notice given to the Company at least six months prior
to the proposed termination date or (ii) by the Company, on written notice given
to Hearst at least six months prior to the proposed termination date; provided,
however, if this Agreement is terminated by the Company, the Company shall pay
to Hearst the reasonable and direct out-of-pocket costs incurred by Hearst
associated with such termination. During the Term, if either party shall breach
in any material respect any of its obligations or agreements under this
Agreement, including but not limited to, the failure of the Company to make
payments (other than those contested in good faith) when due, and said party
does not cure such default within 30 days after receiving written notice thereof
from the non-breaching party, the non-breaching party may terminate this
Agreement by providing written notice of termination given at least 60 days
prior to the proposed termination date. Upon such termination, Hearst and/or the
Company shall promptly return any and all property of the other party used in
connection with the provision of the Services.
ARTICLE 4
LIABILITIES
4.1 LIMITATION OF LIABILITY; CONSEQUENTIAL DAMAGES. In providing the
Services, Hearst shall not have any liability hereunder except to the extent
that Hearst shall be finally judicially determined to have engaged in gross
negligence or willful misconduct. In addition, Hearst shall not be liable,
whether in contract, in tort (including negligence and strict liability), or
otherwise, for any special, indirect, incidental or consequential damages
whatsoever (including, but not limited to, lost profits), which in any way arise
out of, relate to, or are a consequence of, its performance or nonperformance
under this Agreement, or the provision of or failure to provide any Service
under this Agreement.
3
<PAGE> 4
4.2 INDEMNITY. (a) The Company hereby agrees to indemnify and hold
harmless Hearst, and its affiliates, their respective officers, directors,
employees, successors and assigns and agents and each other person, if any,
controlling Hearst, or any of its affiliates (Hearst and each such other person
being a "Hearst Indemnified Person") from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) related to, arising out of or in
connection with the Services provided pursuant to this Agreement, provided,
however, the Company shall not be responsible for any losses, claims, damages or
liabilities (or expenses relating thereto) that result directly and solely from
the gross negligence or willful misconduct of any Hearst Indemnified Person.
(b) Hearst hereby agrees to indemnify and hold harmless the Company, its
affiliates, and their respective officers, directors, employees, successors and
assigns and agents and each other person, if any, controlling the Company, or
any of its affiliates from and against any and all losses, claims, damages or
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that result directly and solely from the gross negligence
or willful misconduct of Hearst in connection with the Services provided
pursuant to this Agreement.
4.3 INDEMNIFICATION PROCEDURES. The party making a claim under this
Article IV is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article IV is referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article IV
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of such
claim and demand) (the "Claim Notice"); provided, however, that any failure to
give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party shall have the right
to control the defense of such claim or demand and shall retain counsel (who
shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party and shall pay the reasonable fees and disbursements of such
counsel with regard thereto; provided, however, that any Indemnified Party is
hereby authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose fees and
expenses shall be at the expense of the Indemnifying Party, to file any motion,
answer or other pleading and take such other action which it reasonably shall
deem necessary to protect its interests or those of the Indemnifying Party until
the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party.
The Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one counsel for the Indemnified Party (except to the extent the
Indemnified Party retained counsel to protect its (or the
4
<PAGE> 5
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim or demand which the Indemnifying Party defends. A claim or
demand may not be settled by the Indemnifying Party without the prior written
consent of the Indemnified Party (which consent will not be unreasonably
withheld) unless, as part of such settlement, the Indemnified Party shall
receive a full and unconditional release reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party elects to defend a claim or demand,
the Indemnified Party shall not pay or settle such claim or demand without the
consent of the Indemnifying Party. In each instance, the Indemnified Party shall
have the right to be kept fully informed by the Indemnifying Party and its legal
counsel with respect to any legal proceedings.
(b) In the event any Indemnified Party shall have a claim against
any Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party.
ARTICLE 5
MISCELLANEOUS
5.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by Hearst
or the Company without the prior written consent of the other party, except as
provided in Section 1.3 with respect to Hearst's ability to retain third parties
to provide services and except that either Hearst or the Company may assign its
right and obligations hereunder to one of its wholly-owned subsidiaries, and any
attempt to assign any rights or obligations arising under this Agreement without
such prior consent in violation hereof shall be null and void.
5.2 GOVERNING LAW. The construction, validity and enforceability of this
Agreement shall be governed by the laws of the State of New York, without regard
to its conflicts of laws principles.
5.3 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:
(a) If to Hearst:
The Hearst Corporation
959 Eighth Avenue
New York, New York 10010
Attn: Victor F. Ganzi
Telephone: (212) 649-2000
Telecopier: (212) 649-2035
5
<PAGE> 6
(b) If to the Company:
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
Attn: Dean H. Blythe
Telephone: (212) 649-2307
Telecopier: (212) 489-2314
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.
5.4 NO WAIVER. The failure of either party at any time to require
performance by the other party of any provision of this Agreement shall in no
way affect the right of such party to require performance of that provision. Any
waiver by either party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself or a waiver of any right under this
Agreement.
5.5 SEVERABILITY. All provisions of this Agreement are severable and any
provision which may be prohibited by law shall be ineffective to the extent of
such prohibition without invalidating the remaining provisions of this
Agreement.
5.6 ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS. This Agreement
(including the Schedules hereto) and any other agreements executed and delivered
by the parties contemporaneously herewith constitute the entire agreement
between the parties concerning the subject matter thereof and supersedes all
prior agreements and understandings, both oral or written, between the parties
with respect to the subject matter hereof.
5.7 INDEPENDENT CONTRACTOR STATUS. Hearst shall be deemed to be an
independent contractor to the Company. Nothing contained in this Agreement shall
create or be deemed to create the relationship of employer and employee, and no
party to this Agreement shall, by reason hereof, be deemed to be a partner or a
joint venturer of any other party hereto in the conduct of their respective
businesses and/or the conduct of the activities contemplated by this Agreement.
5.8 BINDING EFFECTS; BENEFITS. This Agreement will be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Nothing contained in this
6
<PAGE> 7
Agreement, express or implied, is intended to confer upon any person other than
the parties to it and their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
5.9 SURVIVAL. In the event this Agreement is terminated pursuant to
Section 3.2, this Agreement shall become null and void and of no further force
and effect, except for the provisions of Sections 4.1, 4.2 and 4.3.
5.10 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way control the meaning or
interpretation of this Agreement.
5.11 FORCE MAJEURE. Hearst shall be excused from performing the Services
under this Agreement and shall have no liability to the Company for any period
it is prevented from performing the Services, in whole or in part, as a result
of delays caused by an act of God, war, civil disturbance, court order, labor
dispute, machinery breakdown or other cause beyond its reasonable control,
including failures or fluctuations in electrical power or telecommunications
(the "Force Majeure Period") or, in the event that Hearst obtains any Services
from a third party, the failure of such third party to provide such Services, or
the misconduct or negligence of such party in providing such Services. In the
event the Force Majeure Period continues for six consecutive months, either
party may terminate this Agreement on written notice given by the terminating
party at least five days prior to the proposed termination date. Also, if during
the Force Majeure Period, Hearst outsources to a third party any Services
provided by Hearst hereunder, the Service Costs set forth on Schedule 2.1 shall
be adjusted to reflect amounts paid to such third party.
5.12 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall constitute an
original, but all such counterparts shall together constitute one and the same
instrument.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE HEARST CORPORATION
By: /s/ Jonathan E. Thackeray
-----------------------------
Name: Jonathan E. Thackeray
Title: Vice President
ARGYLE TELEVISION, INC.
By: /s/ Harry T. Hawks
-----------------------------
Name: Harry T. Hawks
Title: Chief Financial Officer, Secretary &
Treasurer
<PAGE> 9
SCHEDULE 1.1
SERVICES
1. Corporate Accounting. Provide or assist in providing accounting services
relating to corporate accounting, cash accounting, intra unit and inter company
accounting, consolidation and reporting.
2. Accounts Payable. Maintain on its computer system the Company's accounts
payable system and provide or assist in providing accounts payable services.
3. General Ledger. Maintain on its computer system the Company's general
ledger and provide or assist in providing general ledger services.
4. Payroll Services. Provide or assist in providing payroll services.
5. Legal. Provide or assist in providing legal services.
6. Treasury Support. Provide or assist in providing treasury support services,
including, but not limited to, cash management, tax return preparation and
payment and corporate insurance administration.
7. Employee Benefits. Provide or assist in providing services related to the
Company's employee benefits, including, but not limited to, pension, 401(k),
medical, life and long-term disability insurance and supplemental pension plan.
8. Travel and Entertainment. Provide or assist in providing travel and
entertainment services.
9. Fleet Car. Provide or assist in providing fleet car services.
10. Networking Capabilities. Provide or assist in providing network services.
11. Internal Auditing. Provide or assist in providing internal auditing
services.
<PAGE> 10
SCHEDULE 2.1
ANNUAL SERVICE COSTS
See Attached.
<PAGE> 11
SCHEDULE 2.1
HEARST ARGYLE TELEVISION, INC.
SERVICE CENTER CHARGES
<TABLE>
<CAPTION>
HEARST STATIONS PAYROLL~CHECKS ACCOUNTS PAYABLE GENERAL LEDGER TRAVEL & ENTERTAINMENT
PROCESSED VOUCHERS PROCESSED TRANSACTIONS PROCESSED CHECKS PROCESSED
Volume(1) Cost Total Volume (1) Cost Total Volume (1) Cost Total Volume (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KMBC-TV 4,494 4.73 $21,257 4,056 3.72 $15,088 11,390 0.82 $9,340 500
---------------------------- ----------------------- --------------------- ----
WBAL-TV 6,508 $30,783 5,034 $18,726 8,998 $7,378 500
----------------------------- ----------------------- --------------------- ----
WCVB-TV 10,162 $48,066 10,590 $39,395 20,536 $16,840 750
----------------------------- ----------------------- --------------------- ----
WDTN-TV 3,944 $18,655 4,856 $18,064 9,900 $8,118 500
----------------------------- ----------------------- --------------------- ----
WISN-TV 5,494 $25,987 6,996 $26,025 9,492 $7,783 500
----------------------------- ----------------------- --------------------- ----
WTAE-TV 6,240 $29,515 6,290 $23,399 10,380 $8,512 500
----------------------------- ----------------------- --------------------- ----
Subtotal 36,842 $174,263 37,822 $140,697 70,696 $57,971 3,250
------ -------- ------ -------- ------ ------- -----
</TABLE>
ARGYLE STATIONS (3)
KHBS?CHOG-TV
KTTV-TV
KOOO-TV
WAPT-TV
WLWT-TV
WNAC-TV
Subtotal
Total Service Charge to Hearst-Argyle
<TABLE>
<CAPTION>
MANAGED UNITS
<S> <C> <C> <C> <C> <C> <C> <C>
KCWB-TV 366 $1,731 1,766 $6,570 6,844 $5,612 100
----------------------------- ----------------------- --------------------- -----
WPBF-TV (3)
----------------------------- ----------------------- --------------------- -----
WWWB-TV 1,032 $4,881 2,454 $9,129 3,706 $3,039 100
----------------------------- ----------------------- --------------------- -----
WBAL RADIO 1,300 $6,149 2,852 $10,609 9,322 $7,644
----------------------------- ----------------------- --------------------- -----
Total 2,698 $12,761 7,072 $26,308 19,872 $16,295 200
===== ======= ===== ======= ====== ======= ===
RADIO
WISN RADIO 768 $3,623 1,648 $6,131 8,728 $7,157
----------------------------- ----------------------- ---------------------
WTAE RADIO 1,176 $5,572 1,902 $7,075 9,902 $8,120
----------------------------- ----------------------- ---------------------
Total 1,944 $9,195 3,550 $13,206 18,630 $15,277
===== ====== ===== ======= ====== =======
</TABLE>
(1) Volume based on first 6 months of 1997 annualized
(2) Estimated Volume
(3) No volume currently available
(4) Financial Office Services include the administration of the following
areas: Insurance, Banking and Finance, Pension and Investments, Employee
Benefits, Tax, Consolidation and Reporting and Internal Audit
<PAGE> 12
<TABLE>
<CAPTION>
FLEET TOTAL COLUMBINE WIDE AREA FINANCIAL LEGAL TOTAL
ADMINISTRATION SHARED SERVICES NETWORK OFFICE (4) PROCESSING CHARGE
Total
<S> <C> <C> <C> <C> <C> <C>
$3,750 $1,500 $50,935 $22,000 $68,007 $38,640 $180,582
- ------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $62,138 $22,000 $96,066 $58,935 $239,139
------ ------ ------- ------- ------- ------- --------
$5,625 $1,500 $111,425 $22,000 $189,842 $218,035 $539,103
------ ------ -------- ------- -------- -------- --------
$3,750 $1,500 $50,087 $22,000 $38,262 $25,267 $138,616
------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $65,045 $22,000 $68,124 $65,817 $219,985
------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $66,676 $22,000 $98,569 $44,306 $231,551
------ ------ ------- ------- ------- ------- --------
$24,375 $9,000 $406,306 $132,000 $558,870 $451,000 $1,548,976
- ------- ------ -------- -------- -------- -------- ----------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$55,000 $22,000 $57,520 $46,722 $181,242
------- ------- ------- ------- --------
$5,000 $22,000 $5,234 $4,214 $36,448
------ ------- ------ ------ -------
$160,000 $132,000 $167,330 $135,900 $595,230
-------- -------- -------- -------- ----------
$566,306 $264,000 $726,200 $586,900 $2,144,206
======== ======== ======== ======== ==========
$750 $14,663 $14,663
- ---- ------ -------- ------- -------- -------- -------- ---------
$25,000 $22,000 $26,144 $21,241 $94,385
- ------- ------ -------- ------- -------- -------- ------- -------
$750 $1,500 $19,299 $22,000 $26,144 $21,241 $88,684
- ------- ------ -------- ------- ------- ------- ------- -------
$24,402 $16,000 $22,333 $17,333 $80,068
- ------- ------- ------- ------- ------- ------- ------- -------
$1,500 $1,500 $83,364 $16,000 $44,000 $74,621 $59,815 $277,800
====== ====== ======= ======= ======= ======= ======= ========
$16,911 $16,000 $22,333 $17,333 $72,577
------- ------- ------- ------- -------
$20,767 $16,000 $22,333 $17,333 $76,433
------- ------- ------- ------- -------
$37,678 $32,000 $44,666 $34,666 $149,010
======= ======= ======= ======= ========
</TABLE>
<PAGE> 1
Exhibit 16.1
October 16, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 of Form 8-K dated October 16, 1997 of Hearst-Argyle, Inc.
and are in agreement with the statements contained in the first sentence of
paragraph 1 and the statements contained in paragraphs 2 and 3 on page 2
therein. We have no basis to agree to disagree with other statements of the
registrant contained therein.
Very truly yours,
/s/ Ernst & Young LLP
